Monday, March 8, 2010

Running on Empty

Last week the Ithaca Experiment portfolio got crushed. Most of the damage was in the the Direxion Small Cap Bear 3X Shares (TZA) because of the major move in the Russell 2000, but the ProShares Ultra Short S&P 500 (SDS) also went down significantly. Remember these are leveraged and short positions, so if the market goes up, my holdings go down - big time. This week is the one year anniversary of the market hitting it's March, 2009 low and because it's climbed a wall of worry for 12 months, I took some time to reflect on my investments this weekend and have decided to stay the course even though I've considerable paper losses on a percentage basis. I still firmly believe we are due for a major correction. If I had a magic wand or a genie in a lamp, I'd start the correction immediately because this market is trading on inertia, but I'll just have to be patient for the time being. As I've stated before and I'll say again, I'm taking big risks here, so following my portfolio advice is not recommended for most retail accounts.

Because David Walker's Comeback America was praised by Paul Volker, I took a flier on it last week and have decided not to review it even though it is an economics book. Mr. Walker is the former comptroller general of the United States and although he has written a good book, there isn't very much investing information in it. He seems to keep repeating the same themes over and over and as he states: "By now you recognize my mantra. The expansion of the government over time, excessive spending, and the continuing cry for tax relief have been driving us towards bankruptcy.". This is quite evident to most Americans except for those on the far left and to go into detail about Mr. Walker's views would be sidestepping the main focus of this blog which is to track the Ithaca Experiment portfolio and to discuss my reasons for being short the market (for the time being). Because of that, this will be a very small installment this time. However, on the docket is The Quants by Scott Patterson and from the first few chapters I can already tell there will be plenty of fodder for my next posting.