Friday, September 11, 2009

The Party Rolls On

The Dollar breaks to new lows, the $VIX breaks to new lows and the stock market seems to have an endless supply of bulls to keep the game going. Though I know the ultimate outcome is way down for general U.S. stock indices (to new lows below the March lows), watching has not been fun for this equity bear.

When I started my campaign to "conquer the markets," I decided to put much of my money into physical Gold and use the rest to trade stocks with an emphasis on Gold stocks. Let's just say that based on my trading performance the last 6 months that I am glad I kept a large chunk of my investment money in physical Gold.

I believe the themes will be proven right but the time frames have been wrong and this has cost me a lot of money. This bear is demoralized and has been gored into submission by the bulls. I need to learn to be a better trader and improve my risk management. This is my new quest. Knowing what the markets are going to do in the longer term and making money on this knowledge are not the same thing.

My physical Gold will be held until the Dow to Gold ratio reaches 2 and probably until it reaches one (I will re-assess at 2 and see how things look). This physical Gold is a long-term investment thesis that I believe in and refuse to trade. However, I need to start accepting my limitations as a trader and improving upon them. I think going long here in anything, including Gold and senior Gold miners, is absolutely nuts. However, the next time I start a short position I need to do a better job of executing my trade, managing it and choosing the appropriate time horizon. I have been frustrated in my trading efforts lately.

I know in my heart that I should just buy Gold stocks on the next panic sell-off and hold for the longer term. The lure of "the big" bear market was irresistible to me. I still believe we are in the middle of the nastiest bear market any of us will see in our lifetimes. I still believe an S&P 500 level below 500 is not only possible, but it is the most reasonable and likely outcome.

But I had to vent and apologize to anyone following some of my shorter term charts. I also want other stock bears out there to know that they are not alone in getting creamed trying to short this market. I am uber-bearish but have strangely depleted much of my speculative capital at a time when I know it is needed most. Everyone I read and looked up to as I started to learn about markets and economics explained how difficult it is to trade a bear market. I have paid the price to learn that they were right.

Mea culpa.

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