On Friday, I just shorted the stock markets via QID and SDS which should cover about 12% to 15% of my long positions. Stock markets just broke thru the necklines on a head-and-shoulder chart formation. It’s quite bearish, even with 0.75% interest rate cut coming in two weeks.

I don’t know whether I will be wrong again last Thursday. Precious metal markets didn’t meet my expectation of exceeding $1000 gold, and I also sold another 10% of my precious metal holdings.

The markets are gyrating in a big time. It’s quite likely that I will be wrong again. But the more important thing is willing to admit that you are wrong right away. I realized that in the past, a lot of my trading mistakes are because I hang onto my mistakes only about 1 day too long. And that has been just too costly.

Only nimble traders can survive in this market environment. I think if you want to trade based upon my posts which are always at least 1 day old (because I pre-write my posts usually 1 or more days earlier), you may be easily in the rough water. I will be flipping my bullish/bearish stand in a minute, and before you know I will be selling or buying big time. Certainly, I won’t have any time to post my real-time move during my trading activities.

My current view of the markets is that the general stock markets are about to begin a big move down. If not, then there may be a short rally of 2 weeks, and then down. Either way, January lows won’t hold. On precious metals, energy, and commodity markets, they are probably very over-bought. My current guess is that they will be turning down, and join the entire markets in a swan dive. Long term wise, both precious metals and energy are still very bullish. If you don’t care the short-term swings of 20+% in these markets, I believe they are good investments for the long term.

Best luck.

Frugal at My 1st Million At 33 .com

I seldom recommend specific stocks for buys or sells. The only reason is that there is simply nothing that can guarantee you, my readers, 100% certainty with profits. The other thing is that while I can suffer huge percentage losses without disrupting my daily financial matters, you may not be able to take such big volatility in stride. But for the very few occassions that I (not including my partner ML’s recommendations) do recommend, here are the performances:

1. I recommended silver on May 4th, 2006, and Aug 22nd, 2006 if you just have $100 to invest. These are long-term recommendations. 2008 year-to-date is 14.25%, but silver only returned 28.5% since May 4th, 2006. I bought my first silver coins for $10 in 2006 January. Now it’s $18 roughly, a 80% total return (less if annualized).

2. I recommended Bershire Hathaway’s shares if you only have about $1000 to $10K to invest on Aug 29th, 2006. This is a long term recommendation. The return since Aug 29th, 2006 would be 4648/3200 -1 = 45%, roughly.

3. I recommended Conoco-Phillips COP on Aug 28th, 2006. That is a return of 80.61/66-1 = 22%. I did issue a potential sell (which I actually sold for $83 on Jan 14th) . The stock dropped to $67.46 this January and came right back up to $80.61. So you could have pocketed almost the same return, if you were able to buy the exact low.

4. I recommended ADM on Jan 31st 2007. The title of my post was “The coming headline in 2008″. I was prescient of the market by almost 1 full year. What do we have now? ALL agricultural products have risen like crazy. Wheat is almost doubled now. Didn’t I tell you that a year ago? If you had invested in ADM, you should have returned about 41.5% since Jan 31, 2007.

5. I recommended UNG on Jul 24th, 2007, and natural gas sectors in general. UNG should have returned 20+%, but due to the inefficient tracking to the spot market price, its return is barely positive. Of course, natural gas sectors have been going gang-buster in the last 30 days. Many names were up by some 20% in a very short time, even better than oil sectors.

6. I recommended purchase of mining stocks on Jun 13rd, 2005. I hit the jackpot and that was the day of the lowest point. I’m a long term investor, and have been holding most of those shares since. My last check with the latest prices, those purchases had a total return of about 77%. The two still losing bets were GFI and KRY among those. But I’m satisfied with a 77% combined (total non-annualized) return.

7. My last recommendation (unsure about the price level however) was JOYG. You would have returned about 12+% if you had bought. The price right now is $68.

I hope you have profited from reading my blog. Probably 95% of the blog or websites that you read, you don’t get to see their performance at all. I always have doubts about them. They can talk big, but nobody knows the actual trading performance. But I’m posting my daily performance/net worth faithfully on my blog. I simply can’t stand un-truth, especially if it’s coming from me.

I do wish that I can recommend more. But this treacherous market is extremely dangerous right now. I recommend cash and possibly gold. The bear market has just shown its force. Investing going forward is a very tough business.

Usually I do a monthly review on my networth, but I have been too busy to do this (and anything else). So I will just keep this short as a quick update.

So what has happened to my net worth (from Feb 14 closing to Dec 31st 2007 closing prices)? Bad news first.

First, let me say that my home value has gone down significantly (10% to 20%). That has not been reflected in my net worth page. When I get some time, I will start to mark it to market, and smooth out the losses in several chunks.

Now the really bad news, even worse than my home value going down is that my company options have pretty much gone into nothing. I’ve suffered close to 90+% in this category. Year-to-date (since Jan 1st) the value of my company holdings have gone down by 59.4%.

My net worth has gone down by 7.43% (without counting the dropping home value) mainly because of the huge loss in my company stock.

My own investment however has fared much better. My total stock portfolio has gone down by 3.44% (about 30% of which is contributed by my money manager), while including cash, my cash+stock portfolio has gone down by 1.86%. This compared to a gain of 3.6% in HUI index, 10.9% loss in OIH, 8.4% loss in XLE, 7.6% loss in SPY, 14.2% loss in QQQQ. I guess a loss of 3.44% is probably satisfactory, given that I have incurred some small trading losses, plus some hefty losses in junior mining stocks. Certainly, my cash+stock portfolio compared to the overall market is doing pretty okay, since my loss is less than 2%.

Unfortunately, I simply have not taken enough hedges against my company and real estate holdings. Those positions are so out-sized that I’m usually afraid of taking a big bet. My inaction has certainly caused my overall net worth to suffer tremendously.

In any case, what’s gone is gone. I’m pretty sure that given enough time, I can make those money back. It’s just going to cost me 10 to 15 extra years of my working life, yak!

I was going to do a year-end review for 2007, but it’s probably too late to be meaningful. I know my portfolio was up about 16%, but my net worth was pretty much flat, due to a huge loss of 50+% in my company stock options. I’ve made up quite a bit of those losses through investment gain and savings for the entire year. However, if I count from the peak, I’ve only made up some 40% of the losses in company stock options.

Actually, come to think of it, I probably should start account for the capital gain taxes that I need to pay on my investment gain. I haven’t counted those, but the amount of capital gain tax that will be due is getting so big that it’s actually going to affect my net worth. I would never imagine that this is going to be an issue when I started logging my net worth on this blog (only 2 years ago). For now, I’m just going to leave it at that. I just have too much that I need to take care and I don’t have time yet to account for everything in the last details.

I’ve sold some significant percentage of my energy holding.

I also sold a few deep-in-the-money naked call, since I’m expecting a fall in stock market in the first quarter.

Maybe I’m too scared. Or maybe I’m not scared enough. We shall see.

Holding onto almost all of my precious metal companies however.

I’ve also exchanged my AUD cash back to $US temporarily.

This year will be a roller-coaster ride.

I do intend to eventually increase my energy holdings back into about 50% of my portfolio value.

I think I’m totally lost at this point by this market. Seriously, I never have thought that I would make so much money from my stocks in such a short time. Gold is at $835 now. Maybe it is time to sell some.

On the other hand, I’m totally disgusted by the fall of $US now. Against my two favorite currencies, Australian and Canadian dollars, $US has fallen more than 20% year-to-date. It’s simply unbelievable that $US is declining 1% every four days against Canadian dollar just in the last 60 days, for a total of 14.7%.

I have been preparing to load up more PM shares and bullion. But this seems to be a runaway PM bull. My cash level is so high such that I can double my stake in PM if I choose to. Too bad that I got scared on Aug 16 and didn’t put my cash to use. My portfolio was truly bleeding at that time, with most of my stocks falling 7% to 22% in that single day.

I have been selling a few of my stocks. Certainly, for all those shares that I’ve sold I cannot buy them back mostly. And my short positions are again hurting me somewhat. Without all the shorts that I’ve done, I would have done even slightly better.

Now that I have bragged about my performance, I hope it’s time for PM to fall. Otherwise, I simply don’t know where to put my cash. I’m starting to consider going back to my dividend stocks in this volatile time.

I will do a review of my net worth & portfolio in the first week of December. This month has been too crazy. I don’t want to put up a post showing those terrific but may be transitory numbers.

Let’s see if after this month, stock markets get back to a more normal state. Of course, I probably don’t know what’s normal anymore.

Just as a review on my own investing, I checked the gain & loss on my current open positions. I used a loss of 13%, or $500 as a threshold, and came up with the following list of losses:
-24%
-17.29%
-62.18%
-35.77%
-31.34%
-$807
-$551.75
-28.51%
-$852.49

Many of the above losses results from my venture into mining juniors, and some are just bad timing.

And then I used a gain of 17% as a threshold, and I came up with the following list of gains (not annualized):
17.25%
17.63%
17.95%
18.81%
19.08%
19.19%
19.93%
20.72%
21.90%
22.62%
23.25%
24.00%
26.21%
27.41%
33.55%
33.91%
34.45%
37.91%
38.40%
38.91%
39.40%
40.37%
44.42%
44.57%
46.91%
48.63%
48.76%
50.13%
50.57%
51.21%
55.61%
62.57%
62.91%
68.54%
71.28%
74.44%
87.13%
88.79%
91.60%
95.25%
108.18%
109.24%
114.58%
120.60%
125.07%
133.35%
134.96%
136.51%
147.63%
156.52%
160.05%
229.54%
234.86%

Both lists are not annualized, and not adjusted by paid dividends. However, most of my gains come from the fact that I tend to hold them for an extended period, and a little bit due to a good buying entry point. Of course, investing in precious metals and energy stocks have helped a lot. Most of my stocks, maybe 70+% of them are from the HUI, XAU, OIH, XLE components or related mutual funds. You can simply google them up, and pull up the charts. Most of them had outstanding performance for the past 3 years. However, past performance is no future guarantee. Invest at your own risk.

Not sure if stock markets will reverse at this moment. If it does, the performance numbers may go down quite fast.

For the month of September from 9/1/07 to 10/1/07,

1. Net worth is up by 10.66%.
2. Value of my company holdings is up by 19.28%.
3. Everything else excluding my home and cash is up by 16.40%
4. If including cash in #3, it’s up by 11.43%.

This month obviously everything seemed to be working extremely well, almost too good to be too scary. Precious metals & markets have gone up a lot. It almost appears that the past troubles are all gone.

I’ve recently finished refinancing. My cash position has increased without a change in my net worth. I’ve also spent about $26K for a new mini-van. All of these items have changed and will continue to change my cash positions going forward. Eventually both my net worth and cash will truly reflect the correct impacts of these items. Of course, if I cannot find any good opportunity to put some of these cash into good use, I will pay back my debts. Too bad that I couldn’t get some of these cash before $US embarked the seemingly endless fall.

Although it certainly appears that PM is rocketing to the moon without any pullback, such thing rarely happens in a straight line, especially for an index. Who knows? Maybe it will. Either way, I’m going to sit really tight and see how markets unfold going forward.

It has been two months since the last net worth review. I finally got some time to go over my finance. I have been spending almost 70+ hours every week on my day job for the last two months. My blogging activities obviously have been down.

For the month of July from 7/1/07 to 8/1/07,

1. Net worth is up by 6.18%.
2. Value of my company holdings is up by 35.00%.
3. Everything else excluding my home and cash is up by 0.44%.
4. If including cash in #3, it’s up by 0.22%.

For the month of August from 8/1/07 to 9/1/07,

1. Net worth is down by 1.33%.
2. Value of my company holdings is up by 11.77%.
3. Everything else excluding my home and cash is down by 10.61%.
4. If including cash in #3, it’s down by 7.43%.

My company holdings trailed the market by a lot earlier this year, but finally made a huge comeback the last two months, compensating my big loss in my own portfolio. So overall I’m still doing okay.

Last Friday, I hesitated to sell near the 50 days MA. I thought market seemed to be showing strength, especially with the technical charts from OIH and XLE still healthy. Certainly they have been the market leaders, and you want to see them continue to lead. I have been wanting to comment on Shanghai market, but still haven’t found the time to do it yet. I think it may go to 6100 before a bigger correction. Regardless, the intermediate picture for USA market I believe is still going to trend down. I still plan to lighten up later.

Again, the best way to check on my stock market moves is still thru my networth page. I almost always update my portfolio everyday at the end of market close. There were only few days so far that I didn’t update within the same day where the change took place.

In any case, market timing is always not easy. The past two months prove again that asset allocation is often more important. And therefore, when I try to time the market, I will only do that with a portion of my portfolio instead of everything.

Last night, we found that the supposedly “contained” subprime problem had spread to BNP Paribas, a large French bank. Early this month, Macquarie bank of Australia admitted losses in two funds due to fallouts from the subprime sector. Enquiring minds want to know here: all this “toxic waste” originated in the US, notwithstanding Bear Stearns and several hedge funds that imploded, how come we haven’t yet heard of any US banks taking big losses? Are US banks that much better at risk management, or are they simply less forthcoming?

The other bogeyman today was quant funds that are liquidating positions after an awful July, such as the Global Alpha fund from Goldman Sachs. Apparently the blackbox models were not stress-tested with the volatility we’re seeing now. Details are not that important, suffice it to say that we are in the middle of a pretty serious dislocation in the credit market. I have been approaching this by separating the credit event from what’s happening in the real economy. I believe the market will solve the liquidity issue, although rates on risky loans will certainly rise. For now I’m more concerned with the underlying economy. Buried in today’s headlines were some lackluster retail sales figures for July, which cements the view that a recession in the US is likely by Q1 08.

All said the S&P finished the day sitting perilously above its 200 day moving average which for many people defines the long term trend in the market. It has dipped below the 200 DMA in Apr-May 05, Oct 05 and May-Jul 06, and recovered all three times. I’m currently using it as a secondary indicator. When the S&P dips below the 200 DMA (which occured last Friday), I hedge or close 25% of my domestic equity exposure. Likewise, when and if the S&P moves above the 200 DMA, I’ll remove the hedge/re-establish longs. I don’t do it on the day of the crossover, rather I tend to ease into/out of positions in the week after. The other 75% is controlled by a primary indicator which has not issued a “sell” signal yet.

I’m by no means recommending this approach, but I think it’s important to have a plan so you protect your assets and not scared out of your positions at the worst time.

For the month of June from 6/1/07 to 7/1/07,

1. Net worth is down by 3.83%.
2. Value of my company holdings is down by -12.05%. My asset allocation strategy using the assumption that my company would positively and strongly correlate to the general stock market is obviously breaking down. The losses from two consecutive month in this category are now at almost 25%.
3. Everything else excluding my home and cash is also down by 3.63%, with the PM market taking a heavy toll at the end of the month.
4. If including cash in #3, it’s down by 2.54%.

Well, but this review is already 9 days late (unintentionally). And PM markets had the biggest July rally for quite a long time, returning ~8% in just 9 calendar days. My company stock went up too, and both probably made up most of the losses if not more.

Looking forward, I am preparing my shopping list for more energy (uranium and natural gas) and precious metal stocks (mid to junior, and possibly indexing ETF), in the hope that the correction will materialize. I have sold out all holdings that correlates to the general market this month. Of course, the correction is still nowhere to be seen. If the bull market continues, I will be simply time-averaging back into the market with selected picks. I have been itching to buy several names. Unfortunately, they are running away in price, and I often barely have enough time to watch their prices once a day.

Special note: returns were calculated by subtracting 3.00% APR return of my cash position.