This Changes a Lot of Things…….with update
While looking back, it would have been nice if we had gone to all cash when our portfolio NAV hit an all time high on election day, but I was to euphoric to pull the trigger. What has occurred since however, changes the scenario for us in major ways. My biggest concern on November 4th was the decline that I expected in the first quarter after Obama took over the reins. This mix of panic and fear that has erupted since then is a godsend for the new administration. Yesterdays blowoff in T-bonds was the best indicator yet of really deep panic.
This panic is for all the right reasons, bubbles have turned into puddles with the combination of a lame duck President and a Treasury Secretary that was at the core of the risk derivative adventure. At the time of his appointment, In knowing who Hank Paulson was, I saved the June 12, 2006 Business Week with the cover that said, “Mr Risk Goes to Washington, Why Paulson will make a difference at Treasury, Inside Wall Streets’s Culture of Risk” and the rest is history. The fox is watching the henhouse and we don’t have to worry about the Obama Administration spreading the wealth, the investor class did to themselves already by dumping their portfolios in the panic.
This raises our reaction rally point back to 1250 on the S&P, we are doubling our short t-bond position this morning to 1o percent from the current 5 percent, and we are watching gold closely. While we still want to be a buyer at the 550 level, it didn’t go down during the oil panic and that may be telling us something. The gold inflation story will win out in the end.
8:32 AM CST
Update at 11:26 AM
We have increased our long stock positions a lttile in the last hour, we are now at a leverage ratio of 0.6 on the Conservative Portfolio and 1.25 on the Aggressive Portfolio.