Drifting lower, Grade incomplete, C- for year

It was a bear year. My trading account -11.5%. I took almost five full weeks off from trading. Markets mostly drifted lower. Precious metals had a minor rally to get gold to near unchanged for calendar 2022. Here are some ETFs for 2022:

2.4% SLV silver
-0.8% GLD gold

-19.5% SPY SP500
-22.4% EEM emerging mkt
-21.6% IWM Russell 2000

-32.8% TLT US20 yr
-33.1% QQQ Nasdaq 100

These percentages might be slightly different from other sources, as I don’t include dividends, but are close enough for an overview. Compared to SPY or QQQ, -11.5 doesn’t look terrible.

Last year, I drew some criticism for not being up as much as the indexes. This year, I had slightly more in index investments and that was a bad place to be. My biggest losers included SPY QQQ. What I thought to be a safe position VCSH Vanguard short term bond etf was another big loser. As for individual tickers, AMZN, NVDA, META lead the loss parade.

Winners were small. Delta hedging worked out okay in AAPL and TSLA. Stupid trade of the year was messing with RSX, Russian stock etf. Trading is still halted. If and when it reopens, a 90%+ loss is anticipated.

Silver and cash equivalents were among the few winners for the year. However, GLD and SLV did not meet their intended purpose, which is to keep up for with inflation. Over many years that may smooth out, but this year wasn’t a good one.

Happy New Year to all. Hope 2023 is better than 2022.

 

Modest rally off the lows, Grade C

Most markets stage a modest rally off the lows. I am taking a month long break from trading. I will start back in slowly after the third week of December option expiration.

Here are some etfs year-to-date:

GLD gold -4.8%
SLV silver -10.5%

SPY SP500 -16.6%
IWM Russell 2000 -17.4%

EEM emerging mkt -22.1%
QQQ Nasdaq 100 -28.4%
TLT US20 yr -32.8%

My trading account down about 10%. US bonds the biggest loser on the list. Not one of the ETFs is positive on the year, so any long term investors that have a gain are doing well.

It’s been a difficult year for most. I played defense most of the year. Didn’t do much right, but avoided another catastrophic year. 

It is the season to be thankful. Keep in mind that about 40 percent of Americans have no savings, so anyone with money to invest is doing relatively okay. Be thankful. Bless what you have, and it will multiply. Again, I’m taking a month long break from trading. Will reenter slowly after the third week of December.

Another dip grade C

Most major US stock indices make new lows for 2022. There was a relief rally this past week, but the year-to-date percentages are ugly. My self grade for the trading month is C.

GLD gold -9.8%
SLV silver -17.4%

SPY SP500 -21.2%
IWM Russell 2000 -22.4%

EEM emerging mkt -27.8%
QQQ Nasdaq 100 -30.8%
TLT US20 yr -37.1%

My trading account down about 12% for calendar 2022. That’s bad, but looking at the etfs numbers above, not bad in comparison.

If someone asks, I say I am about 50% invested, so about half the losses in SPY/QQQ is where I might expect to be. I plan to shut down for the month leading up to December expiration, so the -12% is going to be close to a year end number for me.

The back breakers for many are the -30 and -37 for Nasdaq100 and 20 year Treasuries. The conservative 60/40 or 40/60 stock/bond portfolios have had a terrible year. The tailwind of a secular bull market in bonds has turned into a storm, wrecking many.

My market timing remains mediocre at best. For the nimble and correct, there have been some opportunities. However, my long history shows that I am neither, and most of the time I won’t try to time the short term moves.

As always, I try to remain grateful, to do what I can, to understand the probable vs the possible. Thanks for reading.

Bear returns grade C

Markets move lower as the bear mood returns. My self-grade for the trading month is C. Like I’ve been saying, I am about half invested. For the year my trading account is -10%, which is bad, but look at major ETFs isn’t terrible.

GLD gold -8.8%
SLV silver -16.4%

SPY SP500 -18.8%
IWM Russell2000 -19.5%
EEM EmergingMkt -22.6%

QQQ Nasdaq 100 -27.3%
TLT US20 yr -27.7%

It is stunning to see all minus signs. The safe haven of Treasury bonds down more than the aggressive Nasdaq100. Cash and near equivalents have been the only place to hide. With a high inflation rate, a person sitting in cash is losing purchasing power.

I have been delta hedging (eg: buying 5 shares, selling a 5 delta call) and bought a few protective puts. All the September puts I bought expired worthless, but hedged against an even worse down move. 

When volatility is high, I like to do back ratios for a credit (eg: buy SPY Nov 340 put, sell 2x SPY Nov 320 puts). A person can choose the strikes and expiration to do this for credit or debit. Significant collateral and account approvals are needed. The back ratio does best with a measured down move, makes a tiny bit on a flat or up market, and can suffer in a crash.

I don't see this as a time to try to be a hero. I’m sure a few have done well this calendar year, but far more have lost big. MOre than a few have been completely wiped out. I have limited my trading activity and may shut it down for a short time come November/December.

Good luck to all. I continue to be grateful. Having money to invest means an American is in the upper half because 40% of the population has near zero savings, zero investments.

Relief rally grade C

Stock market has a relief rally. About half of 2022’s losses, were recovered before a weak Friday close. My account was up over 4% for the trading month, which sounds great, but lags the rallies in major indexes. Still, a gain, is a gain. For 2022, my trading account is down about 6 percent. Grade is C because there seemed to be so many more opportunities.

My -6% compares to major ETFs:

GLD gold -4.8%
SPY SP500 -11.1%
IWM Russell 2000 -12.5%

QQQ Nasdaq 100 -18.8%
EEM emerging mkt -18.3%

SLV silver -20.1%
TLT US20 yr -23.7%

It is notable that TLT hasn’t rallied off the lows, and that all these major ETFs are down for 2022. Diversification didn’t work as intended. Bond investors have suffered worse than stock investors.

If people ask about how I am doing in the market, I summarize by saying I am about half invested, and down about half as much as the market. No need to get into all the fancy option stuff that I do, unless someone shows interest and knowledge.

At some point in the fall, I plan to take a full calendar month off from trading to clear my head, and clear any potential wash sales. My physical and mental health have been more of a priority in 2022. I am sure some readers have their own struggles. While net worth may seem the be all and end all, it means near nothing if a person suffers from poor health.

Turtle mode, grade C

Stock market rallies off its lows. I muddle through. I did some back ratios as a protective measure. For example buy SPY 380 puts selling multiple 340 puts in ratio. For the most part it was a wash. My trading account down about 9.9% for the year, up slightly for the trading month. Self-grade C.

I am more of a slow moving turtle trader than a quick and nimble type. This market has been more suited for the nimble. I am more likely to be whipsawed than ride the ups and downs correctly.

Some etfs:

GLD gold -7.0%
SPY SP500 -18.9%

SLV silver -20.1%
EEM emerging mkt -20.9%
TLT US20 yr -21.6%

IWM Russell 2000 -22.2%
QQQ Nasdaq 100 -26.6%

Basically everything is in the toilet, except gold which is still down for the year but down less. Factor in the inflation and most investors are down quite a bit in terms of buying power. Again my trading account, down 9.9%.

Sometimes a person has to survive the storm and rebuild, rather than going out into the storm. Is the market storm over? No one knows. Be prepared for anything. This might be the start of a secular bear with markets making new lows for years on end. Young people have never seen this. The dips have been short and sharp and buy the dip has been a winning strategy since 2008.

Markets sometimes change. When they do, the winning strategies of the past may stop working. Where does that leave us? Again, be prepared for anything. The nimble have an advantage as the winds of change blow. The turtles can survive better and still be in the game, because guess wrong a few times and losses can spiral.

I’ll be traveling a bit. My trading activity is already subdued. Enjoy the summer.

New Lows after a failed rally, grade C

 A nine percent rally fails and most US stock indexes make new lows for 2022. I navigate the storm seas, losing a bit more, but less than SPY and QQQ. I am down about 11.8% for calendar 2022, down another 1.4% for the trading month.

Here are some ETFs, the damage is wide and severe for 2022:

GLD gold 0.2%
SLV silver -7.1%
EEM emerging mkt -18.8%
SPY SP500 -22.9%

TLT US20 yr -24.4%
IWM Russell 2000 -25.7%
QQQ Nasdaq 100 -31.0%

Perhaps even more stunning than the bear market in US stocks is TLT’s performance. Bond investors are down even more than SPY, thought not as bad as QQQ. I didn’t see this coming, but down 12% is a lot better than -23% or -31%. The only winner on the list is a tiny gain in gold.

To add insult to injury, inflation is high. Prices at the local coffee shop are up up over 35% for 2022. Priced in coffee servings, an index portfolio is down over 50% in coffee purchasing power.

All things are possible. I remain cautious, with decent buying power reserves. I am still losing though. Monday is a stock market holiday. I hope all the readers are finding shelter from the economic storm. 

Stay grateful. If you have money to invest you are in the upper half of the US population. Many are living week to week. Many are falling behind. Many are experiencing severe economic hardship. At some point the pain stops, but the current light in the tunnel looks to me like another train, not an exit.

The steamroller, Grade C-

The steamroller catches up to me. I saw big declines in TGT, WMT, COST on weak retail sales data. These add to the 2022 list of loser that includes AMZN, FB, NVDA. Overall my trading account is down about -10.4% for calendar 2022. Grade C-. For added perspective, my conservative retirement account (no options, no short term trading) is down a similar percentage, -10.7%, for 2022.

For those not familiar with the steamroller reference, the strategy of selling way out of the money puts, is like picking up pennies in front of a steamroller. Once in a great while, a person or the market might slip and get flattened. My saving graces include small position size, large cash reserves and taking losses instead of taking assignment.

For example, I was selling puts on FB and NVDA at least a hundred points higher. While I have a decent size account that kind of loss would still be significant.

Here are some etfs ytd:

GLD gold 0.6%
SLV silver -6.7%

EEM emerging mkt -15.8%
SPY SP500 -18.0%
TLT US20 yr -20.0%

IWM Russell 2000 -20.8%
QQQ Nasdaq 100 -27.4%

Bonds haven’t provided shelter. Gold is the only gainer and had a down month. I have been building a tiny position in TLT, using delta hedging. This might involve buying 2 shares and selling a 2 delta call option way otm.

I hope the readers have survived the storm. It remains to be seen when the indexes will make new all time highs.

I’ll repeat a lesson learned from my dad. He started investing in 1966/67, near all time record highs. The vicious bear markets of the oil shock 1970s made for paper losses of 70%. It wasn’t until 1982 that the market made another all time high in nominal terms. There was high inflation during many of those years, so a nomimal high on the DJIA still meant years on a road to no where in real financial terms.

Thankfully, my dad was able to keep investing during the down years and came out way ahead when the bull roar returned. I’m not predicting another 15 years before new all time highs, but it is a possibility. The country of Japan has experienced more than 15 years of a stock market to no where, after their bubble market in the 1980s. Most young investors have only seen higher highs, higher lows and believe it is inevitable. They don’t understand that nothing is guaranteed.

While the 1970s era bear markets are listed as shorter than the 15 years, there were no new highs, during the short bull moves. Some people that were unlucky enough to go all in at the all time highs, couldn’t keep investing, or had to sell due to job loss during the lean years.

I have to remind myself to remain grateful. Here in Southern California there are homeless people on most areas. Some areas are now third world style shanty towns, with homeless living in tents and crapping in plain sight. We are fortunate to have money to invest, and all our other blessings. Might be cold comfort during tough markets, but it is comfort.

Treading water, Grade C

Stock market is closed for Good Friday. Happy Easter for those who celebrate. Markets tried to rally, but the rally has failed. The long term chart on SPY might be interpreted as ominous. I suffer minor losses for the month, now down -3.7% for the year.

A few bright spots are tiny positions in CHV XOM TWTR HPQ. The big stinker for the calendar year remains FB (Facebook aka Meta). 

Here are some ETFs:

SLV silver 9.9%
GLD gold 7.7%

EEM emerging mkt -7.1%
SPY SP500 -7.8%
IWM Russell 2000 -10.6%

QQQ Nasdaq 100 -14.9%
TLT US20 yr -18.5%

My trading account -3.7%. Not great but my head is above water. Some chastised me for lagging the indexes in the up year 2021. It goes both ways, lower risk tends to mean lower rewards. An exception in 2022 is bonds. Actually much worse than stocks so far for 2022. Precious metals are leading after being laggards for 2021. 

It is difficult to accumulate wealth investing in precious metals. They are more about preserving wealth. Wealthy Russians with physical metal have something. Those with stocks, bonds, real estate, yachts, sports teams, have seen much of their wealth taken away. I suggest a tiny allocation to physical metals for those with substantial wealth (2 to 3 percent for those with substantial wealth). One shoe box full of gold might be enough to start life over, if all else is lost.

Investors as tracked by the AAII are bearish. Some may see this as a contrary indicator, however, the old heads that tend to be AAII members were bullish for much of the long up move. 

As always, predictions are for entertainment. I continue to trade cautiously, and take tiny positions in special situations such as Twitter TWTR or Hewlett Packard HPQ.

Stupid games, stupid prizes Grade C

Markets end the option cycle with a relief rally. The subject line refers to my misadventures in RSX, a Russian equity etf. I sold strangles on RSX. I got assigned on one put, lucked out on the other. I hold 100 shares of RSX which is in limbo. Thank goodness the position is tiny. Someone used the phrase, play stupid games, win stupid prizes for those that traded RSX options and other Russian related options.

Elsewhere, I do okay, now down -3.3% for calendar 2022 in my trading account. This is about half as bad as the market overall. I take tiny positions in CHV, LMT, XOM, long after the train left the station. Still doing my delta hedging. An example might be long 5 shares of FB, short the 5 delta call. This didn’t help much during the sharp decline, but way better than some other bull market strategies.

Here are few etfs, year to date, not including dividends:

SLV silver 7.0%
GLD gold 4.9%

SPY SP500 -6.4%
IWM Russell 2000 -6.8%
EEM emerging mkt -7.1%

TLT US20 yr -10.0%
QQQ Nasdaq 100 -11.7%

Silver moves up to the pole position. Nasdaq100 cuts losses for the year in half. Treasuries continue to languish. Those seeking shelter in long term bonds have gotten rained on. So much for the old conventional wisdom of the 60/40 equity/bond portfolio.

As I have been writing, the new normal for me, is less trades, less risk. I’m sure a few traders are having a great year so far. Just as I am sure, some of the more aggressive traders have suffered terrible losses. I could roll out more cliches, but will spare you. 

Flat land with waterfalls, grade C

Markets go up then down, for a flattish month. There are some waterfalls declines. I get caught in FB Facebook, losing 2% of my account on FB earnings. Overall grade for this option cycle is C.

Here are a few ETFs year-to-date 20222:

SLV silver 4.0%
GLD gold 3.6%

EEM emerging mkt -0.3%
TLT US20 yr -6.7%

SPY SP500 -8.6%
IWM Russell 2000 -10.3%
QQQ Nasdaq 100 -14.2%

My trading account -5.0 for calendar 2022. Not great, but ahead of all the US stock indexes. Many would like market returns without market risk. Unless a person is a wizard, it doesn’t tend to work that way. Lower risk usually translates into lower returns. That means lagging during bull moves, and less of a hit on declines.

Facebook was a big hit. I made some adjustments just ahead of earning, which increased my risk. Oops. I took most of my lumps during the first half hour in the morning after earnings. Thank goodness I am not that stubborn, as FB continued mostly lower. Those that bought that dip saw another big leg down.

Of course we all wish we could time the ups and downs, but it tends to be a few lucky or extremely talented traders that can do that.

A side note, markets are closed on Monday for President’s day. My favorite president is Thomas Jefferson. He wrote the Declaration of Independence, was president, founded the University of Virginia, was a musician. Of course all public figures have flaws. Jefferson tended to spend his money, leaving his heirs next to nothing.

As for the markets, I often say that predictions are for entertainment. While the indexes are not yet in bear market territory, many former high flyers are down more than 50% off their highs. A few large cap tent poles such as MSFT AAPL BRKB are holding up the tent. I continue in what is my new normal of cautious trading, sometimes delta hedging.

An example of delta hedging is owning 5 shares of FB and selling 5 delta calls against that. The small premium isn’t much comfort during a big decline, but better than some other strategies.

Last shall be first, grade C

Last year’s laggards move to the front as the Nasdaq100 and Russell 20000 enter 10% correction territory. I open the year with an ugly -3.9% However, the SPY about doubles that decline, and IWM, QQQ are nearly triple. Considering we are only a few weeks into the new year, that’s ugly. 

Self grade is C.

Here are a few ETFs year-to-date 20222:

SLV silver 4.0%
EEM emerging mkt 0.3%
GLD gold 0.1%

TLT US20 yr -3.1%
SPY SP500 -7.8%

IWM Russell 2000 -11.4%
QQQ Nasdaq 100 -11.6%

Last year’s laggards have moved to the front, though US bonds only offered modest shelter during this storm.

Is this the big one? Ursa Major? The start of a secular bear market? We will only know in hindsight, but best have a portfolio that can weather a big storm if it comes. For my life situation, caution is the word of the day. I’m not about to take any big swings, because my history indicates that I tend to whiff a lot.

I dodged a bullet in NFLX. I sold Jan 400 puts and got out with a nice profit before the freefall after the earnings report. Obviously, if I knew, I would have bought puts and made bank. Timing is always difficult in real time, easy in hindsight.

Be careful out there. Happy Lunar New Year. It is going to be the Year of the Tiger. Let’s hope for a profitable year.

Year end wrap up, C+

My trading account is up 16.4% for calendar 2021. After -37% in 2020, a half a loaf gain is welcome. SPY and QQQ both were up much more, so the performance doesn’t feel great, so the self-grade is C+. The new normal is more cash reserves, smaller positions. Again, if someone had offered me +16 on January 1, 2021, I would have taken it. I’ll take the deal again, but as long time readers know, nothing is guaranteed.

Here are some etfs and their 2021 performance:

SPY SP500 27.0%

QQQ Nasdaq 100 26.8%

IWM Russell 2000 13.5%

GLD gold -4.2%

EEM emerging mkt -5.5%

TLT US20 yr -6.0%

SLV silver -12.5%

Again, my trading account +16.4%. It is worth nothing that precious metals, emerging markets, and 20 year Treasuries all had down years. Diversification didn’t help returns.

For those that believe markets in the “everything bubble,” some day they will likely be correct. But not this year. Their “safe” assets of bonds and gold didn’t do so well.

I wish I had something profound to write, or some boldly accurate predictions. Happy New Year one and all. Let’s hope it’s a good one.