May ended with the portfolio up 4.76% on the year, with the S&P up 3.18% for the year, for an over-performance of 1.58%. Better than where April ended.
The main positions from the last blog post have been close, Yahoo, the 10-year ETF (TLT), Baidu, and the YUM short all worked very well. The portfolio was back up to an over-performance of around 2.5% until the last days of May, when United Rentals tanked. Unfortunately, instead of selling at a small gain at the start of the day, I traded into the selling and that emotional slip did a lot of damage.
I am overweight international equities but I am wavering on that position. I said at the start of the year the rest of the world will be worse, and I believe it. But the long term trend of “cheap money” as Europe, Japan, and China all beginning to print money will boost their equity markets. The Greece situation is problematic as the non-significant E.U. member is hammering my Europe positions with every debt shenanigan. I’m hoping for a bounce, then I’ll trim until Greece finally exits the E.U., which I believe to be a certainty over the next year. That occurrence will create a significant pullback and begin a buying opportunity. In other words, I’m watching carefully, waiting for a big up day (probably when another debt deal is done to kick the can down the road), to re-balance and wait for the Greek exit to re-enter.
Current short term positions are:
- Michale Kors: overcooked, they are at all time lows and trend lows. Everything tells me that I can expect this to bounce back to 48, and probably to 50.
- The Airlines: I’m expecting the entire sector to bounce back. The entire group is oversold.
- Twitter: Small call position, this thing just zig-zags. The possession arrow says zag.
- I have some short positions. Nothing major except for Avago, which is just too hot.
- I’m cash heavy I’m expecting a pull back here, plus I have a lot of volatility in the portfolio via the options in the above short term trades named above.
I’ll be re-assessing after June. My start of the year thesis has been OK, the S&P has been crawling upwards, the strong U.S. dollar is a problem, commodities are still weak (although they’ve strengthened), and I’ve been incorrect on bonds & yields… although they seem poised to bounce IF my thesis that the FED won’t raise rates until 2016 remains true. However, the headline risk of the FED rate hike is adding volatility to the bond markets… which means that I think I’m right and the FED won’t hike rates and therefore bond prices should be higher than where they are now, but the prices won’t reflect it, so I’m not touching it unless for a short term trade.