December 31, 2010

2010 Market wrap-up

Pretty much everything with the exception of bonds ended on the highs for the year.  Final 2010 results for the wealth fund vs. the investment fund:

Asset Start Current Change
Gold 1348.59 1420.95 5.37%
Silver 24.80 30.86 24.44%
DBC 25.69 27.55 7.24%
Dow 11215.13 11577.51 3.23%
Nasdaq 2540.27 2652.87 4.43%
S&P500 1197.96 1257.64 4.98%
Wealth Fund $12,000 $13,328.44 11.07%
Investment Fund $12,000 $12,505.82 4.22%

Year-end marks will have distorted the above figures somewhat, but at this time, the wealth fund is up almost 7% over the investment fund.  That is a huge difference for two months worth of trading.  The outright move of just over 11% is a bit on the insane side, as that projects out to nearly 70% annualized.  If one goes back to when QE2 started to get priced into the market at the beginning of September, the numbers are even more insane.  In short, this kind of trend is likely to be unsustainable, at least at this velocity.

This would be an excellent time to buy some downside protection on one's assets, if one hasn't already.  I like the June 1100 S&P 500 puts for protection, which cost around 2.5% of notional assets for 5.5 months of 'insurance'.  That being said, if the Fed keeps destroying the dollar, this trend could continue, even at this (or much greater, in the event of a currency crisis) velocity.  That's why I prefer puts as a hedge as opposed to futures, and also why I don't want to be in cash.

Anyway, hope everyone enjoys their $3+ / gallon (and rapidly increasing) gas in the coming year.  Keep focusing on gays in the military and the size of Brett Favre's peen, as that seems to be the most effective way to deal with the serious issues facing our country (eye-roll).  For the new year, I'll be giving the new Congress about one month to get serious (which they won't), then I'll be writing off politics (and the political blogosphere) for good and playing 'every man for himself'.  Good luck to all, because we're sure as shit going to need all the luck we can get.

Posted by: Hermit Dave at 02:01 PM | No Comments | Add Comment
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