The Short Stock Story

Yesterday we moved our short stock positions on the Marketocracy tracking site to 92 percent of equity and are keeping our short gold position at 72 percent of equity.  Adding in our long dollar position we are leveraged to 174 percent of equity.  This is about half of the 3.0 to 1.0 maximum leverage level we use, so we are kind of bearish on asset values.

At a time when market pundits are talking about strong earnings and high retained cash levels in the S&P 500 the bear story has to obviously be based on something else.  For me the long-term austerity movement is the key factor.  McDonald’s stock price appears to be the leading indicator on this issue.  A second factor that will drain some of the professional enthusiasm for stocks is the fact that QE3 is off the table and the markets are now taking over interest rate direction . 

So we are early, we always try to be.  A look at our returns in our tracking portfolio shows what a contrarian performance profile looks like:

                                                                      Eureka Portfolio                       S&P 500

                                        Since 3/31/11           160 %                                        5 %

                                        Since 6/30/11           119 %                                        6 %

                                        Since 9/30/11               3 %                                      23 %

                                        Since 12/31/11          – 9 %                                       11 %