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Toss "buy and hold," market mechanics, and all the conventional investment strategies, it's much more fun to use "Paris Hilton" tactics ... it's expensive, you have to like lapdogs, and underwear is optional...
The last ten days had me polishing my education on shorts; the week before last was shorting the Big Stuff, the last two weeks I've been observing how the industry shorts behave. All quality education is expensive, and learning how these act (and react) was no different.
Disclaimer: I violated all the rules outlined in my previous post intentionally. Investing in shorts that I didn't know intimately, chasing market ups and downs, and ignoring diversity, all sins committed in the name of Science, perhaps one day I'll be forgiven.
The ProShares website offers these ultra-short industry options, and with the market up 300 one day and down 300 the next, there was ample opportunity to try some of the below, and lose a hell of a lot of money quickly.
As a fisherman, you have to wade aggressively even in unfamiliar water, so I tossed my rulebook and adopted the "Paris Hilton Investment Model." It's a simple strategy really, you discard your underwear, carry a small dog, point at different stocks, and say "that's Hot."
After the contest I'll make millions promoting the strategy..so what's a little loss now?
Yes, I lost money, but the education was priceless. Industry ultra-shorts behave like single stocks, their swing in price can be sudden and violent. I was expecting a slower "Index fund" behavior, and I was often very wrong. It's not uncommon to have a ProShare Ultrashort swing $5 - $10 multiple times in a day, so if you fiddle with these make sure you're prepared for a wild ride.
If you keep an eye on JAudio's portfolio, you can see how wild. A 200-300 point move in the market upward and he's down 70-100K, a similar move on the downside, and he's suddenly in first place...
The "Implements of Mass Capital Destruction" are listed below, along with their ticker symbols.
UltraShort Basic Materials SMN
UltraShort Consumer Goods SZK
UltraShort Consumer Services SCC
UltraShort Financials SKF
UltraShort Health Care RXD
UltraShort Industrials SIJ
UltraShort Oil & Gas DUG
UltraShort Real Estate SRS
UltraShort Semiconductors SSG
UltraShort Technology REW
UltraShort Utilities SDP
The Google Finance site has an industry indicator, it's rudimentary and is delayed 20 minutes - but it's enough of an idea for the Paris Hilton Method. I tried SRS, DUG, SKF, SMN, and the China short FXP over a 10 day period and hit paydirt one and a half times. On the Fannie and Freddie announcement I had shorted Real Estate (SRS) and Financials (SKF) and both went up nearly 11 points during the days trading. With the overall market down 230 points for the day, my portfolio was up by $22,000.
But let's not dwell on the single success story, it's more fun to share the misery...
I assumed that industry shorts would be a Roulette bet; rather than picking 16-Black (individual stock) I would bet Black (Index). On the surface it sounds much easier, perhaps in a sustained market it is, but with a market as volatile as this one - people pile into and out of industries just as fast as individual stocks.
Armed with a 20 minute delay, no underwear, and a flatulent dog - I was in a world of hurt.
Orders for these fill at different speeds; SKF and SRS were filled quickly and sold fast, SMN would take 20 minutes or more to fill an order of 1000 shares, and would take another 20 minutes to sell ... a bad choice in a fast moving market.
I found shorts strangely dilutive - as a rising tide does not lift all boats. With my newfound knowledge I could buy a stock that I thought would go up (normal style investing) or I could buy a short in an industry that wasn't following the rest of the market upward. I wrestled with this constantly during my test - as I was trying to learn shorting, and if the market went up a couple hundred points I was disappointed ... Now I know why I can't stand stockbrokers, likely they're always angry at something.
Friday I surfaced a new glitch, I purchased an UltraLong (the opposite of UltraShort) and was charged a fictitious price that was 15 points higher than the security achieved all day. Some type of Marketocracy bug, so I decided to end my education - an instant $15,000 loss had me opting for the GED rather than a diploma.
I really enjoyed myself, moreso than any other facet of the contest to date - the bitter lessons learned will likely be used many times in coming decades, and during all the "bubbles" that follow. By then Paris Hilton will be an afterthought - and I'll re-invent myself as Dr. Strangelove - the guy yelling from the Atomic Bomb as it drops..
As always, luck to you - and let's be careful out there.
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Comments (6)
Bard-ON,
Are you going Kim Koamando Commando-style on us, again? Maybe you're Free-Balling as your underwear got Wet while Fishin' with a -
Fishing Pole & BAIT - whatever they are.
Try Naked Fishing - like St. Pete ( John 23 )-
you won't have to worry about Panty Lines,then.
7 Stars - *******
Keep up the good J'(w)erk !!!!!
VikingWarrior
PS - LapDogs were bred for a Special Porpoise - to attract the Lice & Vermin off the folks at a time when " Cleanliness was NOT nex'ta GodLiness". Didja know THAT ??????????
PPS - Here's a Short fo' ya' - SHORT SDS.
PPPS - Don't wear Tight Panties, either - they get your Tizzy in a Snit & ruin your Pocket Pool short GAME - VW
Posted by don ferk | December 1, 2007 10:40 AM
Key-wiff 'n Poof,
You should have tossed out that Rubber Fishing Ruler of yours - It's the basis for some of your Tall Tails & Short Stories.
Don Ferk ( aka VikingWarrior )
Posted by | December 1, 2007 10:44 AM
Keith,
The Atom-Bomb Bull-rider was Slim Pickins; he was a FAN of the B-52's. Slim Pickings is what you get when you don't read & understand VW's recent Blog about STAND, stand, Standing.
OK, NOW - you're a GED Genius.
Here's your Sign - L7
here's your Serial # - 1D10T
More Later... I'v got to Hack on Duff for a while - it's Fun to do - like being on a SLO Train to Nowhere. It's a TUFF & Durty Job - but someONE's gotta Do It.
VikingWarrior
Posted by don ferk | December 1, 2007 10:54 AM
Us fishermen are used to the "idiot" label, we see it as a merit badge. Who else stands in freezing water all day while getting rained on?
...and we like it, that's the real crime!
KB
http://singlebarbed.com
Posted by Keith Barton | December 1, 2007 11:00 AM
KB (17P) Holmes Komet Flamer,
Wait until the water FREZES, hack hole in the ICE - Put a WARM SHAQUE w/ Roof on it. Drop a light down to attract the fish ( or Seals ), then Stab 'em with a PichFork or Shoot'em with a GUN. What IS this BAIT stuff anyway. It's a Stinking Idea, I say.
IDjit.
VW
Posted by don ferk | December 1, 2007 11:33 AM
Hey KB, this wild ride has been a doozy.
After coming back strong, I faded last week during the rally. The high risk game is a fun one, especially with "fake money". You want to talk swinging gains and losses? On my worst day I had 6% of my NAV evaporate, and on my best a little over 5% gain. I spent my last dimes on RXD, the Ultrashort Healthcare. Many view healthcare as a brightspot in these troubled times, but looking at the charts of RXD, it isn't immune to getting hammered with everyone else. I really wish the game lasted longer so I could sell some positions and buy more RXD, but the game is what it is.
Great post, and here's to a hard charging sprint to the finish.
--Jonathan
Posted by Jonathan Coyle | December 5, 2007 10:16 AM