Since my last post on April 1st, I have been adding shorts to my portfolio (SDS, DOG, SKF, SCC, SZK) little by little and liquidating my long stock positions. I sold GOOG at $533 on the 18th and AAPL today at $161 ahead of the earnings. I think the short-term rally we have seen in the recent weeks is coming to an end as investors start to realize the good 1st quarter earnings are not necessary a reflection of things to come. Regarding AAPL specifically, I think that the analyst consensus has moved too quickly to Apple beating by a huge margin the expectation, and most of these expectations are built into the price. This is the only reason to me that can explain why a single downgrade to NEUTRAL by AMR was enough to take more than 4% in one day off the recent high reached yesterday. Everyone is expecting a big profit jump and any piece of bad news may have a huge impact. I’m expecting good results but a conservative view of the rest of the year, i.e. Apple will say that they are not recession-proof, which is precisely what I believe is priced in right now. In other words, I think the risk of going down (to $140/$130) is much higher than the chance of going up ($170/$180) tomorrow. Depending on what I read, I may decide to re-establish my long position in AAPL, but for now, the dowside risk is too high.
I share MacroMan thesis of long large caps, short mid caps, to the extent that large caps are typically those making a lion’s share of their money outside the U.S., and I am planning to adjust my mix of shorts accordingly. I’m also looking into buying a Brazilian stock ETF to bet on the continued growth, leverage of the commodity boom, and overall decline of the dollar. I will try to buy in the lower $80 of EWZ if the end of the short-term U.S. rally takes with it EWZ.
I’ve also restored a position in IAU (Gold) and FXY (Yen) as the dollar fall seems to never end and I’m starting to lose completely my naivety, and starting to accept that the Fed or Teasury or any other Bank in the world is just completely powerless against what I can just describe as a growing global belief that the U.S. has lost its shine, and it will take long, very long, or an industrial miracle, before it wins it back, if it ever does.
I am now ~22% shorts, 13% cash (Yen), 47% Cash (USD), and 18% Gold. My portfolio is overall +8.11% YTD in USD and before taxes, -0.45% YTD in EUR. Pretty sad…