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Cause I’m Free, To Do What I Want, Any Old Time

It’s occurred to me that a portfolio is similar to a marriage.  Sure there are green P&L days, happy, honeymoon-like days. But in this economy, there are lots of days of deep red P&L, knock-down-drag-out fighting type days.  When I took down my portfolio last week, little did I know it would be this liberating.  No pressure to add into positions I don’t like anymore, no mathematical back flips to figure out the perfect hedge for the current stock mix.  Just freedom to trade what I’m seeing at the moment, looking for clear entry and exit points.  How did I ever handle the daily fear of the dreaded all assets sell off  program?

Tomorrow I will come in with only $180,000 worth of positions.  That’s flat compared to my usual $5,000,000 book.  But if the market gives me a chance, I will build my book back up, big, in anticipation of a late month run.  Why, you ask, go back into bondage?  Is it because I’m a sadist? Because I’m comfortable with the old ball and chain?  Nahhh.  Because I love making money. Oh, and in case I gave you the wrong idea, I love my wife.  At this moment. Alone with my computer and futures montage.


Today’s Aprox P&L:  $11,000

MTD Aprox P&L:       $103,000

Opening Credits Of My Movie, Monsey NY filming

Can You Keep A Secret

Lets move through this next part of my movie relatively fast. Think of it as that part of the movie where we see credits or titles after a 10-minute opening sequence. Title of movie - “Work in Progress”, Producer – Overnight Films, Director – G-d, Star – Me, etc. etc., another 20 different production company titles flash on the screen. They all seem to be the Schools I attended, the Firms I worked for, friends and family. Everyone seems to want a credit.

Next, we see one of those aerial shots looking down on New York City. We travel quickly up the east side and cross the George Washington Bridge. Hang a right onto the palisades parkway. Palisades parkway to NY state thruway to exit 14b, Airmont road. Monsey NY. Hang a right at the light. Better if at this point we switch from aerial view to quick shots of roadside scenes, like in the opening credits of The Sopranos.  Very normal looking, suburban houses, shrubbery, a seven eleven, local dry cleaners, some sort of constructions sight, putting up some strip mall. Beneath the surface of this very plain looking suburb lurks a twisted world of hypocrisy, extremism, and every so often deviance and aberrance. I don’t mean to imply that there wasn’t a great deal of good honest hard working family people. But they were living in a bubble. A bubble where they believed their town folk don’t commit crimes, their married couples don’t cheat, get caught and get divorced. They believed their kids don’t do drugs or have premarital sex. They believed a man with a title of respect always deserved this respect even in the face of flagrant transgressions that people would rather turn a blind eye to. Meanwhile beneath the surface, Wall Streeters were scheming and scamming, arsonists were burning down warehouses for insurance scams, politicians were cross dressing, kids were dealing dope, a vacation for parents meant a home filled with “kids behaving badly”, psychotic teachers who might take a slug at a kid and every so often a local night club owner would get murdered. Yes, you read all that correctly. I will address the murder in a later blog along with a couple of drive by shootings that happened while I was a freshman in high school.

What happens in Monsey stays in Monsey

The camera pans over the elementary school. For a while it was named Hebrew Institute of Rockland County (HIRC), then they ran out of money, so a family named Schreiber gave some dough, built a gym and the school became the Adolph Schreiber Hebrew Academy (ASHAR). A couple of points here. The following is an excerpt from the schools history, published on its website.

“First housed in Monsey’s Community Synagogue on Cloverdale Lane, the school was originally called the Hebrew Institute of Rockland County (HIRC). Although other day schools and yeshivas existed, it was this need to incorporate Ahavat Yisrael into their children’s education that inspired a handful of parents to establish a school that provided a religious Zionistic environment mixed with a strong general studies curriculum.

In 1956, Rabbi Irving Levy, the first Chairman of the Board of Education, encouraged Rabbi Nachum Muschel to join the Monsey community and HIRC. Over the course of more than four decades, Rabbi Muschel led the school through tremendous growth and success. During his tenure as Principal and later Dean, Rabbi Muschel created a groundbreaking Jewish Studies curriculum that continues to  anchor our limudei kodesh program and remain  a model for numerous other institutions.  In his current position of Dean Emeritus, Rabbi Muschel’s daily presence and devoted guidance serve as  a constant source of inspiration.”

I asked for an onion bagel

It was obviously a Hebrew school, sort of, I guess we called it Yeshivah, but there was another type of Jewish school that “really” was the yeshiva. Then what was my school you may ask? Well it was more like a modern orthodox Jewish school that tried to teach much of what was taught in yeshiva but do it in a way in which the kids who would one day leave the school and go out into the real world, might ultimately be able to socially straddle two cultures, the religious and secular. For me it was an utter experimental failure and today it is a full-blown ultra orthodox Yeshiva. I believe they still may whack around a kid every so often though. Quite frankly the place was a lunatic asylum and the head Rabbi was a psychotic warden, the vice principal who was quite the eccentric. Truth be told the school was the natural reaction to a whole generation that was making the break from their Jewish, eastern European, Shtetl, small one oxen town, closed and isolated world.  They were attempting to adapt to the modern age here in America, many having escaped the Holocaust, and to this day over half a century later are still not much closer to resolving many of the fundamental problems resulting from assimilation. Perfect example, the uproar at the announcement of a same sex marriage in the Jewish Standard (A local publication) and there subsequent pathetic apology.

The way my grandparents lived

Editorial from the Jewish Standard

Published: 04 October 2010

“We set off a firestorm last week by publishing a same-sex couple’s announcement of their intent to marry. Given the tenor of the times, we did not expect the volume of comments we have received, many of them against our decision to run the announcement, but many supportive as well.

A group of rabbis has reached out to us and conveyed the deep sensitivities within the traditional/Orthodox community to this issue. Our subsequent discussions with representatives from that community have made us aware that publication of the announcement caused pain and consternation, and we apologize for any pain we may have caused.

The Jewish Standard has always striven to draw the community together, rather than drive its many segments apart. We have decided, therefore, since this is such a divisive issue, not to run such announcements in the future. “

50 years of progress, set back with one retraction.

Monsey Movies

This is just a taste of complex and sometimes disturbing cultural issues that have evolved from towns like the one I grew up in. As a side not, the entire town has changed over, and is now an ultra orthodox and extremely religious environment. Housing prices have dropped dramatically and I am not sure if the 7/11 made it. It is practically a foreign country, which oddly enough is how I viewed it as a kid, but I was always a bit of a forward thinker.

Kosher Kitchen

“They call it the holy shtetl” Gitty Grunwald - July 08

Monsey NY

To be Continued………………

Financials, Financials, Financials

These people are only half right.  John remarks that the Dow Jones was only up ten points during today’s session.  What he has failed to realize is that the market rallied approximately 140 points from its lows at 10 a.m.  Today’s action in the market was unlike many of the days we have seen over the course of the past two weeks.  First, today was one of the few days in recent memory when we opened in the red and were able to consistently make higher highs and higher lows throughout the day.  This contrasts to our recent trend of selling every rally and buying every dip.  Next, technology and financials, the two most economically sensitive sectors, led the market throughout the entire session.  A topic of debate on the Frommer Channel has been our degree of exposure to the financial sector which has been markedly weak.  The strength in this sector coupled with the weakness in the basic material space backs our thesis that money has been rotating rapidly throughout the sectors; a factor that has led to lack of follow through in any particular space.

Maude’s comment also holds elements of truth but fails to realize some important factors.  Given the historical pattern I described above, one would be led to believe that the market would have a difficult time holding onto its early gains and manage to rally though out the afternoon.  In fact, between 10:30 and 1:30, the market traded in a gruelingly tight four handle range.  The ability to predict the direction to which we would break was nearly impossible.  When the market did finally break out to the upside following the release of the Fed’s minutes, we decided to cut our long positions and flip our book to the short side; a decision based on probabilities given the late-day reversals we have observed in the market.  Next, despite her accuracies, Maude’s comment falls on deaf ears when it came to individual names.  Strong names stayed strong throughout the day and weak names stayed weak.  By deliberately picking and choosing our trades, our firm was able to increase our profitability on the day.  A trader could have bought financial names such as AXP and BAC at practically any point today and made money.  Going forward, we need to continue to watch if the money flow into this sector was a fluke or a sign of renewed confidence.

Are You Prepared?

Do the young guns around the desk understand the work and planning it takes to trade and be profitable…to be really profitable?

Let’s look at professional football.  From the time the bus drops the team off after Sunday’s game, the coaches spend every moment scripting the plays the team will run the following week.  They work throughout the night and sleep in the office.  When the players return to the training complex they have film sessions where every good and bad play they made during the last game is dissected.  Then they are handed a book of new plays they will be running against the next opponent.  That is followed with intense study of their rival; tendencies, plays they’ve run against other teams, how they’ve reacted in specific scenarios, weaknesses.  In fact, the team barely practices on the field during the week.

A football team puts in thousands of hours preparing each week, and they only play for 60 minutes.

 We trade five days a week, for six and a half hours each day.

Neophyte traders, if you truly desire to run a portfolio where you can generate returns that make your manager, boss, investor, pay you the money you dream about making, then dedicate yourself to preparation.  Each day review the good and bad trades from the last session.  Analyze every data point you can get your hands on.  Create the perfect game-plan.  Then do it again tomorrow.

How to Outperform the Market

Today was a banner day for the firm as our P&L closed up over $50,000 with the S&P finishing down two handles.  To put this in perspective, last Friday our P&L topped $50,000; however, the futures were up over 20 handles.  This feat was a combination of several factors coming together to create the perfect storm of P&L.  First, our trading of the hedge was spot on.  In the overnight session we laid out 15 contracts between 1144 and 1147 and were lifted on all but two futures.  This allowed us to begin our day up $8,000 in the hedge book with the futures flat.  Furthermore, we were able to cover a number of contracts near S3, which happened to be the lows of the morning.  This created several thousand dollars of additional alpha. Next, the names in our portfolio finally performed in the manner we had been expecting.  Some of the names that had been weakest over the past several days were the names that topped out biggest winners list today.  RIMM, CREE, ATLS and WDC all performed quite well and we were able to recover a good portion of the losses we have incurred in these names waiting for a day like today.

There has been a great deal of debate between Jeremy and I regarding which names we should be trading intraday.  I insist that we should be building our size in the strongest names on the belief that money will continue to flow into proven winners throughout the day session.  He believes that it is important to buy weaker names as investors will be looking for bargain stocks when the market begins to move up rather than chase the stronger names.  I believe there is validity in both of these arguments.  Today we saw the battered financial sector catch a significant bid during the middle of the day as strong names like ATLS and SNDK continue their rallies throughout the session. In order to identify which names are strong and which names are weak we employed a new strategy.  We put out bids and offers away from the market on our entire portfolio.  By tracking which offers were lifted and which bids were hit we were able to see which names showed relative strength and weakness.  Overall, a tremendous day for the portfolio…excited to follow it up.

Risk, Pain, and Sweat Equity

Since Schwartz has been out of the country, I have been put in charge of executing in the futures account and sending out large orders within Jeremy’s book.  Today we put on a trade that involved running TWAPs to sell the entirety of our long positions throughout the remainder of the day.  My stomach wrenched as I clicked the “submit” button, knowing that an error at this juncture might result in selling the entire book at the market, costing thousands in commissions and slippage.  To compound the intensity of the afternoon, the other side of the trade involved bidding to cover our entire hedge against S4.

Our bids were hit; suddenly we were long $5 million and short next to nothing.  It felt like the “commando” days of early May, days of heavy winded sighs, days that truly tested one’s threshold for pain.  Shortly after covering the futures the market rallied back up to S3 for a gain of four handles.  The relief was short lived as sellers used the rally as another opportunity to reload and push the market back down to S4.  With Jeremy off the desk and the other traders huddled around the television to learn the new website I found myself as the sole arbiter of $5 million worth of risk.  With no stop outs in place, it felt as if the beads of sweat rolled from my forehead, down my arm, all the way to my trigger finger.

Yesterday, I told our prospect that the market is designed to inflict the maximum amount of pain.  Today he was able to observe that lesson first hand.  When the situation appeared most dire, the market once again decided to change course and rally back up towards S3.  This time, the futures pushed up through the level of resistance providing an opportunity to rehedge the book and lock in some well deserved P&L.  When all the dust had settled, we were able to recoup approximately $18,000 in gains.  I have learned a tremendous amount in the past three days but it has come at the cost of a few hairs from the top of my head.

HFL Portfolio Recap: 8-26-2010

The day started out strong for the Hedge Fund Live portfolio but the R3 sell signal held true and the market bleed lower throughout the day until we closed just off the lows.  Although, the book made a complete 180 from the open we were able to outperform the S&P 500 and the Russell 2000 closing down 40 basis points as the indices closed the day down 77 basis points and 74 basis points, respectively.

The top five winners were all small today, four of them being shorts.  KR, BG, and ATHN all closed the day down about 170 basis points.  IMAX one of the few names to close positive on the day was up 51 basis points and was our fourth biggest winner.  GE rounds out the group closing the day down 48 basis points slightly outperforming the S&P.

The biggest loser on the day was the spooz.  We were short futures going into the day but started to cover our hedge as we sold off into the number, we ended up getting long right after the number on the belief we would grind higher.  We ended up fighting the down trend all day and took a beating in the trade.  As usual, CREE and AAPL failed to put two strong days together and closed down 2.74% and 1.07%, respectively.  ATI was a position we established today at what turned out to be unfavorable levels and cost us slightly over $1,000.  MA didn’t have the best of days today closing down 1.42% at 203.17.

We went out with another $300,000 of long value taking our net exposure at 10%.  We also took the books gross exposure up to 43%.

HFL Portfolio Recap: 8-25-2010

The Hedge Fund Live portfolio closed the day up but did underperform the major indices.  We closed the day up 17 basis points lagging the S&P 500 which closed up 33 basis points and the Russell 2000 which closed the day up 1.51%.  Although we underperformed the market we’re satisfied with the results given the fact we are in a transition period and the firms gross exposure at 34%, not to mention we are net flat.

The top winners on the day were BKS, AAPL, MA, IMAX, and TOL.  BKS was up 4.3% a day after earnings and closed the day as the top P&L gainer in the book.  AAPL finally showed some strength after two terrible days.  AAPL railed into the close to end the day up 1.23% and above the $240 level.  MA showed strength today closing up 1.78% while V closed flat.  V and MA keep playing the credit card shuffle the last few days as they alternate outperformance daily.  IMAX showed a rare day of strength closing up 2.44%.  TOL continues to rally off terrible, but expected housing numbers closing the day up 5.87%.

The top losers on the day were all shorts: SMRT, SPG, ATHN, KIM and KR.  SMRT rallied today closing up 4%.  SPG was up 1.35%, KIM was up 2.60%, and KR was up 78 basis points.  ATHN closed the day up 1.72% at 28.34, we currently have a fundamental short thesis on ATHN which can be found at the following ATHN Research.  

Day Trading May Be the Best Strategy at This Point

Great day for the firm today.  The first part of the day provided ample trading opportunity and we were able to take advantage of the action.  I felt conviction in the early to middle part of the rally in the positions in the Consumer/Health Care book as I noticed that most of our shorts were working in our favor as well as our longs.  To recap, the short positions currently in the Consumer/Health Care book are: SMRT, WHR, F, SPG, KIM, DEXO, BG, KR.  Particularly unusual for our firm portfolio was that at one point in the day, every single book was green, including our futures account, which we use as our hedge book.  I took a screenshot to document this pretty much unprecedented event:


Anyway, enough about our firm’s performance.  The market today traded on legit volume for an August day (and was higher than Monday and Tuesday’s volumes).  With the markets closing up small, the daily chart in the Spooz is shaping up to look like we are about to make one of those “fake out” moves higher, meaning we’re bound to see another substantial sell off after the rally.  Clearly, the market is still on shaky legs.  An interesting comment from John Stoltzfus, market strategist at Ticonderoga, that the market is being dominated by a “What have you done for me lately?” attitude: “We live from economic data point to economic data point.  That will probably continue at least until the end of the summer as we wait for some kind of catalyst that would give the market better definition.”  That is precisely what we have been seeing lately.  Market predictions, especially shorter term ones, have been difficult lately amidst the choppiness and we have voiced on this desk multiple times that day trading just might be the best strategy at this point.