Shoot me if I’m wrong
As of today I am almost completely out of equities. Even sold 75% of my convertibles in PA Resources, hoping to be able to buy them back in a few weeks at a lower price (I still believe in the company). I’ve also sold EWM, EWZ and FXI since I think the emerging markets are going to crash along with the financial sector in the US and Europe.
I also switched investing vehicle for gold (I am still long) from futures to the SPDR Gold Shares ETF (GLD). Much easier management of investment and low costs.
So what have I bought? Well more inverse ETF’s actually, took (large) positions in Direxion Finacial Bear 3X (FAZ) and ProShares UltraShort S&P 500 2X(SDS). So far this looks to be the right move, but even if the market stops falling this week I very strongly feel that the bear market rally now is dead and that we are going to see a real drop all over the board. I expect the S&P 500 to drop at minimum 30%, but more likely more that 40%. The Financial sector is going to lead the way.
Last fall, when the markets crashed, the USD and EUR strengthen against the smaller currencies (I care mostly about the SEK and NOK) and I expect this this time also. Since the Fed started pressing new dollars I’ve been short in the USD, but I will now step out of this position. I will not intentionally long the USD, but most of my investments now are in ETF’s at the American exchanges so I will ride the USD upwards in those positions. The Fed will continue issuing more and more dollars to cover the programs it has started to recover the markets (TARP, PPIP and so on), but the mighty greenback will still be able to hold it’s position since basically all other currencies are in for the same deal (ECD are just starting).
So, basically I’m now a complete bear, and I’ve took the most bearish of positions possible, and I’m just shy of All-in. If I’m wrong I will lose alot of money. Let’s keep our thumbs.
The risks I see that could stop the crash is the US governments tampering with the markets. But I really don’t think they can do much. People are starting to realize that the crowd is moving towards the door, and some of them are already running. Soon the stamped is a fact.
So, do other bloggers agree with me? Some do:
http://seekingalpha.com/article/137355-stock-markets-reversal-time
http://seekingalpha.com/article/137401-how-low-can-global-economies-go
http://seekingalpha.com/article/137234-credit-card-receivables-even-moody-s-thinks-the-fed-s-adverse-case-is-a-joke (Tyler Durden is very productive and always offer great insights)
Also there’s a interesting graph at dshort.com. Nothing new perhaps, just a new presentation:
http://dshort.com/charts/total-return-bear-comparisons.html?total-bear-comps-2007-1929
