The model portfolio managed to survive today's QE announcement.  It wasn't pretty, especially with the heavy reversal of the banks and the collapse in volatility, but it survived.  However, this is just too much work to put into a blog that nobody reads.

The truth of the matter is that when you have a market that is trading at valuation extremes, based strictly upon the Fed debasing the currency, you have to be extremely proactive in portfolio management.  This is one hell of a lot of work to do for no reward.  If I really wanted to do this kind of work, I'd try to go back to Wall Street and make some money at it.

That being said, this was a good exercise for me.  It got me back in touch with the markets and shifted my thinking from the realm of theory into the realm of practice.  There is no good way to do this witout having something on the line, even if only fake internet dollars and the chance of looking like a complete fool.  Final statistics:

So, not terrible, but hardly impressive.  Two and a half weeks is a blink of an eye in the bigger picture, but the early performance trend (vs. benchmarks) isn't encouraging.  As the portfolio would need massive post-QE announcement changes and serious daily maintenance, and I'm not going to put in that kind of effort, it's best to just shut it down.

My biggest mistake was overhedging.  During my trading days (in a previous life) I ran long-short books with little net exposure, but I also spent 80+ hours a week doing so and had the ability to react instantly when things started going against me in the markets.  I also had the benefit (or curse, when losing money) of massive leverage.  Running that kind of a portfolio is completely different than managing a wealth preservation portfolio and I simply didn't adjust my positioning enough.

So, what's a person with wealth to preserve to do?  I'll have some thoughts on that when I post on today's Fed announcement.  Short answer:  silver, gold and oil, baby.

Posted by: Hermit Dave at 03:43 PM | No Comments | Add Comment
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