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I have to take some profits

Sometimes I reluctantly reduce my positions, having regret that I will miss out on future gains. But this is not one of those times.

Over the last 3 trading days, I sold across the board except for my community bank and gold stock positions. Everything else I either reduced or removed entirely. I am much reduced on most of my speculative plays. I also added to my index shorts, which I believe will make me roughly hedged (its hard to say). I took a position in PSQ to go along with RWM, HIX, and HIU.

I am also fully unhedged on my US dollars.

I don’t know if this is the top or whether the market keeps going for another month. But its been a very good 30 days and it would just be bad management to not take the gains I think. Pigs get slaughtered right?

Gold is up a lot today and looks to be breaking out, and it hasn’t really participated in this move, so I will hold those positions and have added a couple more (I added back ROXG for one).

The community banks have done well, but other than Silvergate, which has gone stratospheric (I sold the rest this morning), they aren’t particularly expensive. They certainly aren’t in a bubble, which cannot be said for some other sectors. So I have kept the banks as well.

The truth is, I am pretty darn lucky with the timing here. As is my usual tact, I would have been selling all the way up if it hadn’t been December. But because I knew that if I held on just a little bit longer I could defer tax gains for a year, I waited it out. That I made it all the way to the 30th (last day for tax selling was the 29th) is sheer luck.

So it turned out well. No need to overstay my welcome. We’ll see what the market does next.

7 Comments Post a comment
  1. Eric Guo #

    Hi, new reader here, thanks for your posts. Why is your last day for tax selling 29th? Are you based in Canada? (I’m confused, since you also hold USD.)


    January 4, 2021
    • Yes I don’t know about the US but in Canada it is the day the trade settles, which is generally or maybe always 2 business days after it is made. For example in this article:

      The last day to tax-loss sell Canadian-listed stocks is Dec. 29. Trades executed on Dec. 30 and 31 will settle on Jan. 4 and 5, 2021, respectively — making them ineligible for tax-loss harvesting in 2020. (On another note, Dec. 31 is the last day to make a donation to registered charity that can be claimed in the 2020 tax year.)

      January 4, 2021
      • Eric Guo #

        Makes sense, thanks

        January 4, 2021
  2. jcf #

    Hey Lane,

    I love the blog as always. In the past you’ve discussed some of your thoughts re hedging. I was curious if you could speak more to your current hedging strategy. Has it evolved? IIRC, one of your principal goals was to handicap daily upside/downside to, resp, 1%, so I can’t really tell if it has per your holdings.

    Also, as to the rubber meeting the road, what drives you to be partially vs fully hedged vs somewhere in between?

    In any case, thanks for your wonderful blog, your time and Happy New Year!


    January 5, 2021
    • There is not much to it really. I am not systematic or anything. I just buy positions in HIU (which is the Canadian exchange version of SH), PSQ and RWM to offset some of my long exposure, and then I take some really small, like 0.5% or less, positions in single name shorts that I think might go down. There is also this other one HDGE that I was thinking about adding but not sure yet.

      But I am almost always net long. Right now if I add up those inverse ETF positions they are around 2/3 of the longs I have on the US side. So they will help in a correction and if I’m good at my stockpicking they will offset the decline all together. I don’t feel like I have to be fully hedged b/c so much of my longs are banks right now and those don’t seem to be as volatile as the micro-caps I usually own.

      January 6, 2021
    • As for your other question, about what drives me to be hedged? I want to answer this because I think it is interesting. I am hedged because of where I am in life. I’ve done well enough that I am more concerned about not losing what I have than eking out a little bit extra. So even if it seems likely the market will go up, I’d rather lose that 5% on the hedges and protect myself against a big drawdown if something happens. I didn’t do this 10 years ago, when I was starting out. But as time goes on your priorities change and you are more interested in protecting what you have worked hard for.

      I think its a different mindset when you are just trying to manage your own money for your own needs versus doing this as a fund and as a business that you are trying to grow. I don’t need to outperform anyone or beat a benchmark to prevent redemptions. But I do need to be able to sleep at night and make sure I never have to tell my wife I made a big mistake.

      January 6, 2021
      • jcf #

        Both of these were replies were exactly what I was looking for! Thanks so much for taking the time to answer.

        Also, I can’t relate enough to not having to tell my wife that I’ve made a big mistake. Never goes over well.

        In any case, thanks again!

        January 7, 2021

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