Saturday, June 13, 2009

Investing Update

Some of you might know that one of the things I like to do is investing. It's a lot of fun, and if I had enough money and enough guts, I would turn it into a living. It's also quite dangerous, of course, if you don't know what you're doing. I like to think that I do know what I'm doing, although whether I have true wisdom or merely youthful arrogance remains to be seen. One friend warned me to be careful recently. I feel very touched by his concern!

I've been doing it for quite a while though. I first started back in junior year of high school, not with stocks like most people, but with silver. Yes, the shiny metal. Bars of it. I converted most of my savings in high school into silver bullion, and I still have a fair amount of it (safely stored away; if you want money, go rob a bank). College made going out and buying bars of metal rather difficult, so I spent most of college merely watching the investing world on the sidelines. More recently, I decided it was time to get back in the game; I had been watching long enough, so I opened an online brokerage account.

You can think of investing as putting into action what I believe about what's going on in the economy and world. There's no reason why I shouldn't take the opportunity to make some money off of it. I've always had a pretty pessimistic view of things (that's just my personality I guess), but to me, my pessimism is the result of my realism. I have the grim satisfaction of first learning way back in 2004 that the huge rise in housing prices was unsustainable. By 2006, it was plainly obvious that the housing market would crash; it was only a matter of predicting when.

Knowing something like this doesn't require any special talent or superior intellect, though of course that would help. But the two main factors in predicting things like this and profiting off of them are the ability to make logical conclusions based on the evidence, and the ability to stay rational and withstand peer pressure even when everyone around you has drunk the Kool-Aid and tells you vehemently that you're wrong -- and that is one of the most difficult things in the world to do. It's a rare ability, and it's something that I'm still working on.

With that in mind, I've already written pretty extensively on what I think about the economy and the future of the dollar. Some people have said that I'm being overly pessimistic. I'm just telling it how it is.

What do I think about the markets in general? To put it in a nutshell: In the short run, things can change very quickly, but right now I'm bullish on Treasuries and the dollar; bearish on gold, silver, oil, and the stock market.

In the long run, though, I'm bullish on gold, silver, and oil; bearish on the dollar, stock market, and Treasury bonds. Follow that advice, and you'll be prepared for what's ahead.


I titled this entry "Investing Update" because I mean to give an update as to how my investment decisions have turned out.

I transferred my money to my brokerage account a few days before my birthday, and I made my first trade a few days after my birthday. Somewhat surprisingly to me, my first trade was shorting stock. Details below:

Closed Trades
1. SHORT Saks, Inc. (SKS)
Sold short 50 shares at $4.72; bought back 50 shares at $3.60; gain of 23.7%; held for 19 days.

2. LONG iShares Silver Trust (SLV)
Bought 242 shares at $12.29; sold 242 shares at $14.90; gain of 21.2%; held for ~43 days.

3. LONG ProShares Ultra Silver (AGQ)
Bought 25 shares at $42.76; sold 25 shares at $53.38; gain of 24.8%; held for 28 days.

4. LONG ProShares Ultra Silver (AGQ)
Bought 10 shares at $56.62; sold 10 shares at $48.22; loss of 14.8%; held for 4 days.

(For trades 3 and 4, I was stopped out early, so I wanted to get back in partially, which turned out to be a bad idea; the weighted exit price of the two trades is $50.02 for a weighted gain of 17.0%.)

Open Trades
1. LONG ProShares Ultra Short S&P 500 (SDS) (effectively SHORT)
Bought 5 shares at $67.14; currently at $52.63; loss of 21.6%; held for 49 days.

2. LONG Direxion Daily Financial Bear 3x Shares (FAZ) (effectively SHORT)
Bought 325 shares at $7.77; currently at $4.35; loss of 44.0%; held for ~46 days.

3. SHORT PowerShares DB Crude Oil Double Long (DXO)
Sold short 106 shares at $4.66; currently at $4.73; loss of 1.5%; held for 2 days.

4. LONG Direxion Daily 30 Year Treasury Bull (TMF)
Bought 15 shares at $33.33; currently at $35.49; gain of 6.5%; held for 2 days.

No comments: