What to do…

Since I’m in short positions all over the board today’s markets is a bit worrisome. The OMXS30 closed up 1.21% after trending around opening price most of the day. The move upwards came when the NYSE/NASDAQ opened and started trading with small movement (now they’re both up at about 1%). I took a large position in XACT Bear early in the morning that I decided to have over night. I’ve put quite tight stop-loss orders in place at 4% down.

The US Financial sector is recovering today, I am sorry to say. My position in SKF is taking some damages, but I will stick with it for the time being. The Short term trend is still down. SDS is doing better for now and I am definitely staying for the week. I’m putting a stop-loss at 10% on both SKF and SDS. Early in the trading today I sold of the FAZ I bought yesterday at a small loss of 1%. The 3X is just to agressive to have when the markets are going the other way (even if it’s just for the day).

Since I’m travelling from Bremen, Germany to my home in Skövde, Sweden tomorrow I am a little bit worried about my positions, but I am trying to convince myself that the stop-loss’es will save me some of it if the upwards movement continues.

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

So, I finally got around yesterday to do as I say (and have written about) and started shortening the US financial sector. My vehicle of choice is ProShares Ultrashort Financials (SKF), a 2X inverse ETF. I was pondering the Direxion 3X inverse (FAZ), and in retrospect it would have been better, because the banks started gliding yesterday and continued today (so I would have made approx. 50% more with FAZ). I wanted a ETF that I’m comfortable holding for the week thou, and a 3X is terrible if the markets whipsaw a bit (2X isn’t good either thou). I might switch if the trend is sustained during the week.

Results so far is 10.4% up on Monday and 8.0% Tuesday as of this writing (thou the day isn’t over yet).

Just found a blog from J.S Kim (very sound opinions in the past) that makes my move feel even better, although I did it some 30 hours before reading this. Lets hope we’re both right: http://seekingalpha.com/article/137132-u-s-bank-shares-pump-almost-over-get-ready-for-the-dump

I’ve also sold of all Swedish equities short of PA Resources convertibles and a small post in Malka Oil (quite the lottery). Still holding Avanza Zero (OMXS30) but if the trend continues another day it is gone (OMX closed down 1.79% today). I want to have cash when the serious blowback starts.