Red Monday…Even Nibbling [email protected]$&*ng Hurt!

My vacation mostly ended yesterday in Florence.

I manage other people’s money and therefore I am on call. Luckily, I have a fanatstic room at The St. Regis in Florence and the wifi was great.

Yesterday and now this morning in Europe, there is Blood Red trading screens. Robert Sinn has aptly called today ‘Red Monday’

For the last week, I have been very light and urging caution. I am proud of my blog posts and super, duper proud of the stocktwits stream for focusing on IDEAS and GAMEPLANS.

To be honest, there was no news that mattered yesterday. The market wanted lower. Obama does not have a magic bullet. He does not know what one looks like which is what’s truly troubling the markets now. The S&P of course mattered, but it’s a free country, and attacking them at this point was not something traders were interested in.

The gameplan I urged in my blog posts was to stay on the sidelines. On the stream I am chronicling buys and sells because of my large cash position, but I have been urging people to get off margin and trade/invest from strength in equity value. I saw @ritholtz and @reformedbroker go 100 percent cash on Tuesday for clients. I saw @jfahmy do the same with @upsidetrader – all guys on Stocktwits ‘Suggested Stream’. I don’t follow everyone, but Phil Pearlman and crew will be shouting out some more of the cautious winners. Peter Brandt was the ‘Grand Pooba’ of nailing it on the short for his readers on Stocktwits and I was pointing him out all last week.

The one putz yesterday was me. I blame it on 13 years of buying down 600 days, but I really started nibbling a little Friday and as I learned today, even nibbles can cost you 2 percent of your portfolio in a crash. I have only had a handful of market related 2 percent down days in my portfolio from stock positions. I have never had one with so little stock exposure. Really it’s maddening and always a little frightening to see equity disappear in speed.

Right now I am owning a lot of $goog at a $568 avergae price (started way too early), a lot of $amzn at $194 and change and a bunch of $aapl at $357 average price. Too much for how we closed. I was also selling some $SPY premium that is making my heart patter at the $115 level that I started at $123 thinking….’layup’! Rackspace $RAX is quickly on it’s way to zero and I started buying 5,000 on each pont at $33 and a lot of $ARMH in the semiconductor space in the $23’s average price. I own these stocks as well at much lower prices so the prices in the above paragraph are from my buying the last few trading sessions.

These are my five best techtrend ideas. I did not foray into $LULU or coffee with $GMCR or IPO’s with $LNKD. Biotech, which led us out of the abyss in 2008 has been bludgeoned…take a look at $IBB which I stopped out of before Italy. $IBB is the biotech index which was at all-time highs just a few weeks ago (with component stocks that led the Market rally since March 2009) and now the INDEX is down a whopping 25 percent from those highs. Unprecendented moves.

Right now, I am just running scenarios. I may just cut and run and I may dig in to trade around the positions. I have a neatly outlined piece of paper with what I may do at different levels and I know how much more capital I am willing to deploy to trade my way out or deploy as investments in these same stocks if we stabilize and dare I say rally.

No matter what the market does on the downside, I won’t ‘bet the franchise’ because prices get to a certain level or the $VIX gets to 50 etc…I dont have that mentality. I pick a percentage of losses that I can live with from stocks and I manage around it.

I am bummed when I get it wrong, but overall my advice for the majority of people that follow me was that August 1 was the time to be selling and getting off margin. I hope you did not have too much damage to your confidence or portfolio. Investing is a marathon, not a race so pace yourself.

This morning in Florence I am also wondering about the collateral damage that will take place with cancelled and delayed IPO’s and how Venture Capitalists and Angels will respond 6 months out funding startups if the markets remain weak.

The markets are mood rings and a red market is a black ring.

3 comments

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