Sunday, November 28, 2010

T20YM Update: Emerging Markets and GLD

What a strange, strange week.

If you were looking for volatility, you got it. Up one day, down the next. Mr. Market is one fickle son of a bitch. The selloffs, by my calculations, were overblown. An Irish debt crisis… how long have we known that this was coming? Other than driving the price of the dollar through the roof, this has very, very little effect on US equities. The total GDP of Ireland is equal to the state of Nevada. In the grand scheme of things, this is a drop in the bucket. When/if we get to Spain, then we can start to get worried. The idea that the world stock market is selling off because of Ireland is ridiculous. People need to put on their big boy pants and stay in the game.

The second big worry we have was North Korea shelling a South Korean island. Again, I think the markets’ reaction to this noise was overblown. This happens on a monthly basis in Korea. This type of border clash is not war; it’s the North Korean’s form of negotiation. Even IF there was full scale war on the Korean peninsula, this would not be a reason for every market in the world to tank… The conspiracy theorist in me thinks this was just an extension of the US/China trade war. China politely asks North Korea to fire a few shells at the south, the Asian markets tank, the US Dollar sky rockets and Helicopter Ben and the whole QE2 experiment turns into a gigantic waste of time and money.  This is classic Cold War politics. If the President Obama wants a trade war with China, he will quickly realize they won’t be playing by the same rules. If this is truly a start to a Trade/Cold War with China, then we will have something to worry about. As I see it now, both our economies are too intertwined to isolate the other.

Over reaction to macro events is often a strong sign at a 'top' of a market. I'm not saying this is a long term top, but a small pullback prior to year end is in the cards. 

I have been looking for an entry point to add some Emerging Market exposure to my portfolio. Last weeks volatility offered me a few decent entry points. I started some small positions in some broad based foreign ETF’s. I chose to put some money to work in China, India, Brazil, South Africa, Turkey and VWO. My current portfolio is as follows:


Symbol
Qty
Price Paid
Market Value
DVY
50
$47.97
2,409.00
EPI
75
$25.31
1,845.00
EWZ
30
$74.62
2,244.30
EZA
20
$69.98
1,355.80
FXI
50
$43.76
2,160.00
IAU
100
$12.64
1,329.00
IDV
50
$33.12
1,607.00
JNK
50.70756
$39.57
2,013.09
PFF
50.55118
$39.58
1,987.67
PGF
111.2868
$18.07
1,989.81
TUR
20
$71.16
1,361.80
VWO
50
$46.11
2,280.00
GLD Dec 18 '10 $134 Call
10
$2.61
1,800.00
SLV Dec 18 '10 $26 Call
10
$1.11
1,100.00

As you can see, I have a few some short term option plays on Gold and Silver. I am down on the GLD position, flat on the SLV. I am having trouble pegging the moves in gold. It seems to have a mind of its own. One thing I do know is that it likes to go higher. This is a perfect environment for GLD, it either tops here or pushes to 1500. Two weeks for me to find out.



So what now? I should have a decent portion of money coming my way in Dec do to ESPP and Year End Bonus, etc. I plan on putting this money to work into individual US equities- as I am considerably under invested in that market. Again, I will be picking 4-5 long term dividend paying stocks. I have been analyzing stocks and narrowing my list for the past few weeks. There are at least a dozen that I have interest in. Picking individual stocks is my favorite part of investing. I’m looking forward to picking some horses and rooting them on.

On the trading front, I have toned things down for the time being. The GOOG loss took a lot of wind out of my sails. Once I rebuild my cushion you should see me actively trading again. Until then, I will lick my wounds, reflect, and move on.

I realize it’s been a slow month on the T20ym front. I have been overly busy transitioning into a new position within my company, midterms, and of course, the holidays. Hopefully December will be a little less crazy and more exciting on the blog.

Thanks for reading. I hope your Thanksgiving was a filling one.

Best,

CM



1 comment:

  1. The only emerging market thats attractive right now is china.

    ReplyDelete