Was that it?

A brief strategy update

Was that it?

I will be brief this week as, to be honest, stocks and money aren’t top of mind given the events this week.  Personally, I thought there was an extremely low chance Russia would do anything more than support the two separatist regions they already control.  Similar to the comparison we made with the Iraq ground invasion in March 2003, the market bottomed the morning of the news.  Market sentiment has been awful, positioning negative including CTA’s 100% net short at the lows and price exhaustion was close to signaling a buy (Demark technical service we use).  Having said all that, this bounce doesn’t have the same character of 2003.  The Fed is tightening, whether slow or fast, inflation may have peaked but remains painful, and the economy according to the Atlanta Fed will only show 1% GDP growth in this first quarter.  It is just tougher now than it has been in a long time in the markets.

Last week we applauded our readers who have avoided the numerous landmines in the market with many stocks down 50% plus in the past 3 months.  Our investment style is to focus on risk/reward and valuation while managing risk through options strategies, at times.  As we said last week, we would be fully invested in some mega cap names (by puts being exercised on us) which were hitting valuations that discounted much of the possible bad news ahead.  At one point on Wednesday, we would have been fully long Microsoft, Paypal, Qualcomm, AMD and the others we mentioned.  Fortunately, the market rally allowed us to collect the premium and we start over from here.  We sold about 1/3 of our weekly premiums Friday where we would get long $GOOG, $MSFT and others about 5% lower next week, if it were to occur.  To remind, if we were put the stocks we mentioned, we would own them and turn into a covered call seller against the portfolio for weekly premiums.  This is just not the time to be a hero, but rather preserve capital and bide time as the market digests all of the factors, economic and the quick moving geo-political macro events.