<short the general market, hedge that short with some energy long, keep a little mining to spice things up, and keep a healthy dose of cash to limit risks.>
Generally good advise. Of course I differ on the energy degree (I'm loaded) as this cycle has been particularly well set up: an exceptional perfect storm as opposed to a typical boom - bust. The cat is really out of the bag. I'd key on rigs getting over 1000, as that might help stabilize production some LATER. I think they will have to go offshore though to get larger production output, and we haven't seen signs of that yet. If offshore picked up meaningfully, I'd immediately adjust and temper things going forward, but until then, it's a continuing series of energy train wrecks coming. I'm very worried about Iraq and energy, as any further decline in supply will be a disaster of epic proportions. Finally I'd like to see a week go by without some TOHOE calling for $20 oil after Iraq, before I'd lighten up. The best bearish argument (there is no real supply argument now) on energy relates to a demand collapse coming off these high prices. There hasn't been much focus here on that, but should be.
As you may know, I haven't been shy about shorting stocks in the last couple years. It's been a turkey shoot in fact. Having read your stuff (good IMO), I can see your worldview and philosophy is similar to mine. But, I am worried about how aggressive short sellers and bears have become. In some cases it smacks of manipulation.
Message 18614325
I still like to be short the credit industry (MBI, RDN, CFC, MER, GS, MTG, FNM) but covered most (except MTG, RDN) last week. I'd be a little cautious on short selling until the sentiment indicators swing to better levels (VIX below 30, Rydex Ursa over .35, put calls under .65).
As they used to say on Saturday Night Live, "Baseball (substitute gold) has been bery good to me". Sometimes I have to remind myself that gold doesn't know I own it. The move to 390 was excess in my view, and I saw your warning as correct. I think it's a consolidation phase now, and my approach is more bottom up, geared around company specifics: discovery and possible takeouts. There are some excellent (even if obscure) plays left in that sector. |
