Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Textual Intercourse

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This week is only three days old, but it feels like an eternity.

I came into the week 115% committed with a split of about 85/15 between bearish and bullish positions. Monday was a good day (obviously), and it seemed that things were starting to finally crack.

Ha!

The S&P downgrade can now be added to a long, long list of "this time for sure!" events that have been squished like a grape. The Dow is at a new recovery high, and all the after-hours activity is bullish again.

So while Monday was terrific, and Tuesday I gave up just a portion of those profits, Wednesday flat-out stunk. I was only 82% committed, but the portfolio was purely shorts, and I got stopped out left and right. I spent the day endeavoring to even out the portfolio with bullish positions to achieve more of a 50/50 split. The risk of the S&P bolting to 1430 is simply too great, and I don't get my jollies out of being smacked across the face with a ball peen hammer.

Suffice it to say that waking up to an /ES that was 17 points higher was just as unsettling as waking up to an /ES 17 points lower was exhilirating. As I sit here now, I am far more comfortable with a 50/50 portfolio of carefully-selected stocks. I don't have a single general equity ETF (like SPY, DIA, etc.) in either direction.

Of course, the downside of a totally balanced portfolio is that any moves are going to be completely muted. If we soar 150 points up (or down) tomorrow, the best I can hope for is a small profit (intraday ETF trades notwithstanding), since the only thing that prevents the positions from totally cancelling each other out is – – God willing – – that the selections are good enough so that the longs are a little stronger than average and the shorts are a little weaker than average.

But the market seems to be switching direction every couple of days, and I'm not comfortable being totally bullish or totally bearish right now. I am also very, very "light", with a big chunk of the portfolio in cash.

The point is that having such a portfolio coming into Monday (or Wednesday, for that matter) would have greatly reduced my portfolio's volatility. One would love to be totally long on up days and totally short on down days, but as long as you are fantasizing, you might as well imagine Gong Li giving you a vigorous massage with essential oils while you monitor your positions.

At present I've got 27 longs and 24 shorts. That's right – I have more longs than shorts. A few of the longs include CAVM, FNSR, GOOG, MA, MIPS, and VMED, and a few of the shorts include CQP, GS, HRB, NTAP, RADS, UAL, and XRTX.

One final word to those precious metals bulls out there who are setting the world on fire. I know exactly how it feels to be "printing" money just about every day. In the blessed months of late 2008 and early 2009, it seemed like I could do no wrong. Almost everything I did seemed to make money. That must be how you are feeling right about now.

Enjoy it while it lasts. Take those profits and have a treasure bath. But be really mindful of your mindset when it ends. And I know you don't believe me, but it will end someday, and years from now people will marvel at a chart like SLV and wonder what on earth people were thinking. I don't know when the party in precious metals will end, but it's easy to lose sight that markets don't usually throw giant sacks of cash at people like this. You have my fondest hopes of maximizing your profits and making an elegant exit. But take it from someone who knows how it feels to do everything right – – and who also knows how it feels when it seems he does everything wrong – – it ain't gonna last forever, as much as you hope it might.

News/Equities Correlation

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As a public service, I offer an updated guide to news events, their correlating effect on equity markets, and the longevity of aforementioned effects:

Event: Calamitous nuclear plant catastrophe following epic earthquake and deaths in five figures

Equities: Down 5%

Longevity: 2 weeks

Event: Severe follow-up 7.4 earthquake in beleaguered worldwide economic power

Equities: Down 0.5%

Longevity: 12 minutes

Event: Worldwide nuclear war

Equities: Down 7%

Longevity: 5 weeks

Event: Five-mile wide asteroid impacting earth, destroying all life forms

Equities: Down 12%

Longevity: Permanent, but only because computer systems obliterated

Event: Steve Jobs seen walking down street without extreme signs of physical distress

Equities: Up 30%

Longevity: Indefinite

No Fear

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I've been kind of irked lately at all the hand-wringing, particularly here in California, about the radiation coming from Japan. I'm a cautious chap, but it seems to me people get in a tizzy over the most irrational things. I shall cite a few examples from my own experience in years past.

Twenty years ago, there was a fire in the hills near Oakland, California. It was a pretty big fire, and it lasted a couple of days. I found out later than a friend's mother doused her roof with water as a preventative measure.

If this mother lived in the midst of the fire, sure, I could understand the precaution. But her house was at least ten miles away, as indicated by the arrow below:

0319-moraga

So I was bugged on two levels: (1) by the sheer stupidity of trying to prevent one's house catching on fire when the likelihood of a meteor striking the house was greater than the very distant fire spreading that far; (2) the waste of water. Stupid, stupid, stupid.

Since we get earthquakes here from time to time, another pet peeve of mine is the aftermath of a moderate earthquake. Invariably, two things happen:

(1) Utter morons call 911 to ask if there was an earthquake; I fervantly believe there should be a $75 surcharge, charged directly to one's phone bill, for making a 911 call that isn't an emergency. Simple, effective, and revenue-generating.

(2) The next day's newspaper is filled with accounts of what people said the earthquake felt like. "It was a jolt"……….."First it was a shake, then it was a rolling motion"………."It was like my wedding night." I mean, for God's sake, I don't need to read what an earthquake feels like, anymore than I need to know that a hurricane is windy and rainy.

I remember back in 1995, my wife and I were in Hawaii, and an earthquake struck in the Western Pacific. The tidal wave sirens shrieked, and everyone waited for the very specific time that the tidal wave came to obliterate the coastline. The appointed time came………everyone was on the high ground……….and the tidal wave came. It measured, I was told, at three inches high. How they could discern this from the regular wave action is beyond me, but thank God we were spared the ravages of a three-inch tall tsunami.

This all came to a head for me when I heard a friend had taken his entire family to "high ground", away from Palo Alto, because of the incoming tsunami. The arrow below indicates Palo Alto's location relative to the Pacific Ocean – – it's about twenty-five miles or so. Added to which, there are 1500 foot tall hills between here and there. I suppose if a 2,000 foot high wave were coming, evacuation might make sense, but in this case – – how shall I say this kindly? – – the act was unnecessary.

0319-bayarea

And the latest, of course, is the mania over iodine, which people are satisfying by buying out whole inventories of salt. This is a whole new level of idiocy. Unless you are right there in the midst of the radiation, and unless you consume huge quantities of salt, it's not going to help you. And even if it does, it only addresses a very specific kind of cancer. It's not like eating lots of salt prevents you being affected by radiation.

I'll wager that there will be hundreds of deaths – maybe even thousands – from hypertension-induced heart attacks caused by wolfing down all this salt – and not a single, solitary human life will be saved due to its intended medicinal effects. Isn't that ironic? People are literally killing themselves in order to give themselves a misplaced sense of security. I suppose people yearn to feel proactive.

Do you want to be safe? I'll tell you how to be safe. Look both ways before you cross the street. Don't drink and drive. Keep a close eye on your kids when they're swimming. Don't go out driving on New Year's Eve. Don't keep loaded firmarms in the house. Stay away from bad neighborhoods. Avoid walking alone.

But spritzing your roof for a fire that's not within eyesight? Going to higher ground for a 5-foot wave that's thirty miles from here? Choking down salt that won't do you any good? No.

That’s What I Said

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On Wednesday of this week, I said a number of things in my market video:

+ "Some goofy nonsense will come from {the powers that be}….to help their bullish buddies out"

+ "I could see {the Dow 30} beating its way back to 12,000; were that to happen, stand out of my way, because I am going to short everything with a ticker symbol"

+ "The VIX has skyrocketed, which is another reason I'm not jumping up and down; it has to relax; it will get down to the low 20s again"

+ "Clearly some bounce is going to happen"

Well, all of this took place. By Friday, the Dow got to 11,972; the VIX got down to 23; the powers that be definitely intervened. And I shorted the market with both hands.

It's all perfectly easy, like on Wednesday evening, to say such things. After all, the wind was blowing our way. It's quite another thing to actually do something about it when the market is rocketing higher. Putting on a brave face during such events takes a certain disposition and no small amount of faith in one's methods.

The bottom line is that what I said would take place took place, and what I said I would do, I did. We'll see next week if I look like a genius or a moron.

If God is checking the blog, I'd prefer we skip the moron part. I've done my share of that role already.

0319-spx

Paralyzed with Fear

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This market has done a real number of my brain. When I look at QQQQ, for example, it is screaming, yelling, and proclaming that it should be shorted to pieces. It is on its knees, begging me to sell my house and put all the cash into QQQQ puts. It has a sword pointed at its gut, and a countdown timer behind it is down to 3 seconds.

But I won't pull the trigger.

Don't get me wrong. As I said, I'm short the market. But I'm only 56% committed right now, for safety's sake.

0307-QQQQ