San Diego Housing Bubble News and Analysis

were you the guy who shorted oil a few months ago when it was at around $65?

were you the guy who shorted oil a few months ago when it was at around $65?

Yes, he was. Specifically, I believe the purchase was not "shorting oil", but buying DUG inverse shares in energy companies when the price was mid 40ies if I recall (not the same thing as really shorting oil)

Notice people only talk about their hits ?

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----- Sour grapes for everyone!

First shorting oil, now fighting the Fed. After that, what's next ? Putting what's left on the Padres to win the World Series ?

I did short oil, too early, at about $90/bbl. Within 45 days I was up 25% on that position, net, but that was thanks to the overall decline in the stock markets of about 20%. I should have sold that position THEN. FYI, it wasn't technically a short oil position but more a short position on the Oil & Gas Index, as I bought the ProShares short ETF, "DLG" which is 2X leveraged for inverse gains against the Oil & Gas Index.

Now with oil having touched $120/bbl, i'm getting my butt kicked by still holding that DLG position. Of course, I'm not stupid. I never put more than 10% of my portfolio into that risky bet.

HOwever, oil has fallen $10/bbl in the last few days. Let's hope that trend continues. There are A LOT of people much smarter than I who are experts on the oil sector and who are currently talking SPECULATIVE BUBBLE in oil, and are shorting oil.

I don't think that buying Puts right now is a bad bet. Rather than sticking my neck out I am just rebalacing into a larger cash position. This takes some of the risk out of my overall portfolio. It is also in line with the likes of Bob Rodriguez of FPA.

I did short oil, too early, at about $90/bbl. Within 45 days I was up 25% on that position, net, but that was thanks to the overall decline in the stock markets of about 20%. I should have sold that position THEN. FYI, it wasn't technically a short oil position but more a short position on the Oil & Gas Index, as I bought the ProShares short ETF, "DLG" which is 2X leveraged for inverse gains against the Oil & Gas Index.

Now with oil having touched $120/bbl, i'm getting my butt kicked by still holding that DLG position. Of course, I'm not stupid. I never put more than 10% of my portfolio into that risky bet.

HOwever, oil has fallen $10/bbl in the last few days. Let's hope that trend continues. There are A LOT of people much smarter than I who are experts on the oil sector and who are currently talking SPECULATIVE BUBBLE in oil, and are shorting oil.

I think he meant "DUG", not "DLG". DLG doesn't exist.

Second, there are smarter people "shorting oil" in the strictest sense.

But buying DUG shares is hardly shorting oil,the commodity.

With DUG, you're betting against the profitability of oil and energy companies that produce the end product. I think this was extensively mentioned here by others as well, some actually being pro commodity traders.

Consequently, I don't think you can say that DUG and crude oil prices will always move in lock-step. The later has a portion depending on other things, such as profit expectations on wall street.

In fact if there's any indication, with oil still be high, we see some energy companies like Exxon/Mobil getting blasted in the short run for coming short on profit expectations. Hence why I think DUG has risen 9% from $29-30 over the past couple of days, which I'm not complaining. But DUG is hardly a "short" crude oil position, no more so than is VGPMX (vanguard precious metal and mining) really tracking price of gold.

Now, if only Steve Balmer would hurry up and walk away from that deal, I'd be a happy person to watch MSFT go up from the $28 level and to see Yahoo crater to the low twenties again (no I'm not shorting the later nor do I have  a financial position in the company. It's just personal).

selfportrait

----- Sour grapes for everyone!

Stocktradr,

You seem to be the perfect contrarian indicator. People can make a lot of money by doing the opposite of what you do.

Please post more often.

In early May you can see I advised buying put options on the NASDAQ and S&P500. (I did by the way load up on those options myself)

The S&P 500 has fallen 10% since I wrote those words. And we're down 18% since I was giving that same advice earlier back in Oct '07.

Yes, I still have my minor short postion on oil industry sector stocks; however, I've made so damn much on remaining 90% of my portfolio (short the overall market), that I could care less about oil...except that I plan to now make money on that position as well. I'm now going to double-down next week and cost-average my short oil positions. I think oil prices are due for a nice correction very soon. It all has to do with the timely onset of the recession beginning to reduce global oil demand.

Now, various forum trolls, yes please do reply your usual tired old flame responses ridiculing my market calls. Give me some more material I can make fun of six months from now when I show you my predictions again came true helping me make loads more money....OR, alternatively, you might climb on board place your bets and make some money betting on these falling markets (oil, and overall).

We are only maybe halfway through a long painful market decline. My mouse finger wil not get itchy to click sell-to-close existing short positions until we get below 1100 on the S&P 500....and oil hits about $70/bbl (just guessing on that last one)

It is sinful to make this much money on falling markets, but I'm happy to do it!

Congratulations on your success!

As to shorting oil, why throw good money after bad? Stating that you plan to make money on your oil position demonstrates an emotional need not to lose (one that we all possess) and that left unchecked will generally lead to substantial losses in the markets. The reluctance to take a loss on a investment/trade, holding on until breakeven, or far worse, averaging down is the Achilles heel of most investors. In the future, you should strongly consider cutting your losses at a fixed percentage or hedging your exposure.

Assuming oil is the bubble you think it is, then what makes you think you know when the top will occur? Bubbles experience parabolic moves that will not adhere to fundamentals and can continue far longer then anyone expects. As a reader of Piggington's, you should be initimately aware of that.

Did quite well shorting this year (finally!). But covered most now. It is not easy as I described before in my article.

Regarding shorting oil, I don't think I would do it considering the risk. As a better strategy, I would consider going long on companies whose input costs depend strongly on oil. That way, if oil goes down one can make a good profit on the long side. And if it doesn't, one can still collect some dividends or hope that the company passes on the higher costs well. I would be looking for example at Dow Chemical (DOW). They just increased their prices a lot, and I doubt they will lower them if oil comes down.

But I am happy for any other ideas.

How about thinking along the lines of Tire companies or Kimberly Clark. I believe that diapers are mostly derived from Oil products. Huggies and Goodyear would be big beneficiaries of lower oil plays.

For very risky bet on falling oil try the airlines. Small drop in oil will easily double the prices. Cautious investors like Stuart Schweitzer of JPMorgan Private Bank have started buying distressed debt, companies that wont go under like (my guess) GM or WAMU.

stockstrdt: What factors convinced you to go short, technical ones? The VIX is not surging (only in the low 20's as opposed to midthirties back on black Stearns day) which is typically very bad for bulls. The 50 day EMA and 200EMA last crossed earlier this year and this is also bearish. With the dow and S&P 500 near strong resistance at 20% off peak, we are near crucial junction. We could get slow painful decline aka 2001-2002 or my prediction that 90% odds in pres election years the market will rally from July-Oct. The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?

VIX vs SPX
http://bigpicture.typepad.com/comments/2...

The low vix is what scares me. The market is almost parabolic in its downtrend yet there is no fear. Downtrends like this don't end until fear comes in.

I believe the lack of fear in such a strong downtrend is odd and my guess is that when fear comes into play we will see some big down days as soon as the S&P takes out 1250. Circuit breaker type days. Then we will see the vix in the 30's or 40's.

John

"The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?"

Good point. But exactly what are all the stops they are going to pull. An emergency rate cut, a bailout of LEH (when that point comes). The FED is boxed in here...I mean really boxed in. If you ask me the FED slashing rates to 2% was the party in charge pulling all the stops. That was the lube along with the stimulus package that was going to be just enough to get us past the election. Then came $140 oil. Ooops! It backfired which is so unlike the current perceived party in charge. jficquette made a good point, the VIX is low and the market is going into a No Mans Land. If oil does pop it is going to be met with some violent short squeezes that will only add anxiety to the markets. The only catalyst I can see for a rally is a huge circuit breaker drop. So I guess in theory we could see a big rally in July-Oct just from what level it starts is the question.

>>As to shorting oil, why throw good money after bad?

That's a fair question. I was being more dramtic than serious in my follow-up post "I'm going to double-down my oil bets"

I think there are better bets. God only knows how high oil will climb before we see a significant correction. Maybe $200/bbl.

I've been watching the Shanghai index again. It has fallen from 6,100 down to 2750, and has now recovered a tiny bit. Back in May '05 it was at 1,000 and I was in China visiting in laws and begging my wife (who is Chinese) to help me find a broker and open an account in her name so I could buy the Shanghai index. We visited a few brokers, but in the end she refused because her family felt the Chinese stock market was too risky. Well they are right about that, but I was smart enough to see that 1,000 had to be near the bottom. After that the index went up 6X in 2 1/2 years and I didn't make a friggin' dime on that.

So now with that Index crashing again, my second chance may be coming up. However, I want the Shanghai index to go lower than 2,700, certainly below 2,000 before I start buying.

I've heard there are now some funds or ETF's that westerners can buy that have exposure to the Shanghai exchange, but I'm not sure of the specifics.

stocktradr: if you are really that smart (as you try to make others to believe), would you honestly share with us how much you made last year and how much you made this year, in terms of percentage point of your total portfolio? I just want to make sure that you are not a dead clock.

Seems like stocktradr left a trail to be calle don and at least this time it was right. May 1 post said market going lower. What has the market done. Gone lower. That is one example of being right.

Someone complains...

Seems like stocktradr left a trail to be calle don and at least this time it was right. May 1 post said market going lower. What has the market done. Gone lower. That is one example of being right.

OK, let's recap.

:-)

Before it happens I tell you the market will fall 10%. I offer this while the market's still on an upswing (instead of calling a downtrend after it has already resumed). Then the inflection point (downtrend resumes) follows my prediction by only two weeks.

I even tell you exactly what to buy, and had you bought those options you would be now up over 50%, and right on schedule.

Have I not made it easy enough for yah?

:-)

What do you want? Do you want me to put large stacks of hundred-dollar bills directly into your open palm? How about Fed Ex'ing bars of gold to your home? Would that work better for you?

I love you guys who always gotta post the flamer posts.

Stockstrader,

With all due respect, you definitely talk as if you're an expert considering you're really no different the the rest of the other "engineers" on this board that work in a completely different field. I think where inquirying minds want to know is that if you're really so good as you say you are and are making as much money as you say you are

1) Why do you still depend on an engineer's employment, considering it is a well know fact that engineering pay relative to other professions, is, well, um sh!t? (yes, I know what i'm talking about)

Wouldn't it make more sense for you to quit your day job and become a financial expert?

2) Why do you only constantly post on down days and talk about your correct-in-time speculative bets but never talk about the bets you were wrong on?

3) Are you still concerned about affordability of homes in your market? I thought you were "making so much money".

Just curious.

short term the market is random. there is no sense to any of it. no one can predict anything short term. long term, we're all dead...