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What to do now?

Portfolio Performance

Thoughts and Review

“Everyone has a plan until they get punched in the face.”  – Mike Tyson

Leading up to this correction or panic or collapse or whatever this is becoming, my only plan was – ‘Do not get punched in the face.’

So far I haven’t gotten punched in the face.  I hope that I can continue to say this after today.

I’m purposely trying to write this before the open of the market because I suspect once the market opens I will have different thoughts.  Depending on when I publish, I might even write a second half post-mortem.  With the S&P poised to open -7% I suspect that market moves will be impacting my mindset today.

Going into the open, I think I’m okay.  I’ve tried to do everything to protect my portfolio – as I wrote at the beginning of February, I have reduced all but my most core positions, hedging with inverse ETFs, shorted oils and airlines (can’t do that in the practice portfolio but I’ve noted it on a bunch of past posts).  Keeping positions that have lots of cash (ie. my largest long has a market capitalization that is ~95% backed by cash on the balance sheet).  And maybe most importantly – being a Canadian invested in US dollar assets (the Canadian dollar is down 1.5% this morning).

If there was one smart thing I did last week, it was that I sold my FXC.  That is a USD/Loonie currency hedge.  I was about 50% hedged on my US dollars and now I’m not.  While I did not expect OPEC to crumble this weekend, it seemed like this market would likely not be friendly to the Canadian dollar.  This was really a bit of a lucky move but its going to pay off today.

If there is an Achilles heel to what I have left, it would be my gold stocks.  I own a few and they do not seem to care much what gold does right now.  I am reluctant to sell them because they remain very cheap, gold is holding up, and gold and gold stocks have proven in the past to be the first movers when the smoke starts to clear.

I remain hopeful that one of these days the gold stocks will start the day down and rise (they kind of did this on Friday) – which would finally demonstrate and end to the selling pressure which I believe is based mainly on fear.  I mean, the main reason I’ve heard to be worried about gold stocks is because they might have to shut down their mines if the virus gets really bad.  My response to this is that if its gotten that bad that remote mines are shutting down, then we are in big, big trouble.

I was going to write a what now part to this post, but to be honest, I’m still not sure.   I will cover some energy shorts soon, and maybe sell some inverse ETFs.  I’m still inclined to buy large caps like Facebook and Google but honestly, this is so far beyond my pay grade I’m tempted to just continue to sit it out.

One thing that surprises me is how stressful this is even though I’ve tried to do everything to limit exposure.  I’m still not sleeping great, still anxious.  Its crazy.  I remember in 2008 a friend of mine, who was smartly hedged (I was not), saying it was wearing him down.  I didn’t understand that and now I do.

Portfolio Composition

Click here and here for the last ten weeks of trades.