I can hear you out there, all zero of my readers.  "If you're such an economic whiz, Hermit Dave, why don't you put your fake internet money where your big, obnoxious mouth is?"

OK, even though things are about as uncertain as they can be, and I'd just love to be able to do the financial equivalent of hiding under the bed, I'll bite.  So, I'm going to start 'trading' and tracking a model portfolio, for the amusement of myself and my zero readers.  If I do well, I get to gloat.  If I stink up the joint, nobody will ridicule me, because no one reads my drivel.  Come to think of it, it's kind of a win-win.

A few simple rules:

• My benchmark will be the Standard and Poors 500 Stock Index.  Obviously, I'd like to make money, but in the current environment, capital preservation is the most important thing.  So, if the market is down by 50% and I'm only down 10% I still get to gloat.  
• My thing is macro economics, so don't expect me to pick stocks.  I might use a stock (or more likely a sub-index that represents an industry group) to bet on a larger macro-economic concept, but it's generally safe to assume that I know jack shit about company-specific fundamentals.
• I can go short as well as long, with the exception of options.  I can only buy, not sell, options.
• I don't get to use leverage.  If I'm shorting, it must be for the full notional value of the short.  If I'm going long, I can't use margin.
• To keep me from gaming short-term price volatility, all 'trades' will be done at end-of-day prices.
• I can use index values as my 'investments'.  In the real world, there are equivalents for all these indexes, whether through futures, ETFs, or direct trading of stock baskets.  Using the index value is a convenient shorthand, and has very little effect on real-world returns.  
• Both transaction costs and taxes will be ignored.
• All positions will be marked at the end of each week, and I'll post the current results.  For shorts that have gone against me, I either have to post additional funds (whether from cash reserves or by selling another position) to get back to full notional value, or I have to buy the short back and take the loss.
• I can keep any or all of my money in 'cash'.  Cash earns zero interest but has no direct risk.  
• I start with $100,000 certified fake internet dollars.

That's more than enough rules, I think.  Still, one last thing must be said:  This is not trading advice.  This is a moron jacking off on the internet.  Anyone who tries to use any of this crap in the real world deserves to lose all their money and have to eat out of a dumpster for the rest of their short, miserable lives.

My starting position:

• $10,000 long gold (as measured by the COMEX close) -- current mark of $1,371.10 / oz.
• $25,000 short banks (as measured by the KBW Bank Index) -- current mark of 45.24
• $15,000 short NASDAQ  -- current mark of 2,468.77
• $15,000 long S&P 500 -- current mark of 1,176.19
• $35,000 cash

This is a conservative starting position, as weekend risk is quite high at the moment.  The US Dollar seems oversold right now, so a largish cash position is reasonable, plus just holding cash is less risky than making a foreign exchange trade.  These bets offset to some extent -- what I'm attempting to do is capture value from where they differ.

This should be entertaining, as my ass is swinging in the breeze for all to see.  I hope I don't fuck up too badly.

Posted by: Hermit Dave at 08:54 PM | No Comments | Add Comment
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