Up my energy holdings towards closing
Posted by Frugal on July 13th, 2006
Things are changing so fast. Just last night, I replied to ML in my post of “Market Watch: It’s a Live Bull (Only in the PM & Energy)“. I was worried that rise in crude oil may cause a rout in the stock market. Man, it happened today. Unfortunately, this may not be the last day of such episodes.
I won’t put out any specifics of what I think, since very likely I will be wrong later, and looked stupid. In the short term (1 month timeframe) and in general, I believe S&P 500 seems to have failed the stretched bull case. Crude oil is probably going higher too. Anyone smarter than I, would you please explain it to me that why USO is so much lower than the crude oil number at $77 today. Is $77 the futures market number? It has always been lower, and because I don’t understand why it’s lower, I hesitate to buy something that I don’t understand.
Anyway, I increased my energy holding today, plus added a water company for a very long term holding (probably 1/2 year plus). I’m hoping to sell the energy stock in a 2 to 3 months trade, assuming that the general market makes a solid bottom somehow after 2 to 3 months.
Today it’s one of those SELL ALL day. Gold & crude oil both closed higher, and yet gold stocks & oil stocks both ended lower. Fear is everywhere.
By the way, my update to the networth page will happen later, probably tomorrow morning.
It almost looks like everytime when I use the word “hope”, it will turn out NOT to be the case. Hope is a bad word in stock market. Don’t cling to hope. Face the truth as it is.
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July 13th, 2006 at 11:13 pm
What I don’t understand is why silver is not outperforming gold at a time like this. Anyhow, I agree that energy and PM is the place to be now.
July 16th, 2006 at 2:22 am
You probably should have both gold & silver. I don’t know of any good ways to predict out-performance of silver. I only believe that in the long term silver should out-perform. And my long term are 5 years plus.
July 18th, 2006 at 10:27 pm
I know PM is supposed to be volatile, but this is ridiculous…
July 18th, 2006 at 11:53 pm
Well, that’s how it is. One of the important factors that you need to consider in investing is how much volatility you can stomach. Let’s say PM can go down by 50% (which it does almost every year), you should calculate your allocated downside from that risk. If you only want to have 5% hit just from PM, you should only invest 10% of your portfolio in PM, since 10% times 50% downside will give you 5%.
There is a mixture just for every individual’s taste on the risk. Tailor it to your liking or rather disliking.
Yeah, I definitely hate to lose money, and most likely I’m losing quite a lot more money than you do because of my concentration. But just hang in there.
It’s all about expectation. It can be several months, or several years, before the investments work out for you. Investment is about both conviction and diversification. When you’re not sure, you diversify. When you’re somewhat sure, you should make the proper tilt in your porfolio correspondingly. And don’t forget that cash is also one kind of position.
Best luck.