Home » Economy, Investing, Market Analysis

The Market Can Be Irrational Longer Than I Can Stay Solvent

16 September 2009 One Comment

This stubborn market continues to stay high despite what I believe is a broken economy.  Sure we have some better numbers due to government programs and inventory cycles, but I believe the economy is broken.  We are too dependent on consumption and consumption isn’t coming back.

Despite this fact, some awful sectors such as commercial real estate and retail continue to go up, and at the same time, they continue to kill my portfolio.  I’ve been short for some time, and anyone without a serious level of conviction would have gotten out of these positions.  I have conviction here.  But, maybe I have too much because some of these positions I’m down over 50%.  At least, I was smart enough to hold enough cash to prevent my broker from chasing me out of these shorts.  Or maybe, that would have been a good thing.

Either way, I believe we’re near the top of this rally (I’ve been saying this for months now), and I’m holding these shorts.  The bottom line is that we have way too much retail space in this country especially when it becomes evident that consumption is NOT coming back.  Heck, I still have my job, and I’ve cut way back on my spending.  I just bought a pair of jeans for $50, where I used to spend $150 or more.  I don’t eat out at lunch every day anymore.  I brew my own coffee each morning.  I’ve easily cut my monthly spending half, and I’m in a decent financial position.  How many others are out there like me?  And these are the EMPLOYED people.

On any corrections, I will be looking to lighten my positions at least somewhat so that I can reduce my risk.  But, for the most part, I’m looking for the big correction.  My only fear is the printing press.  Can the printing press prevent the correction that should most definitely take place at some point?

No matter what happens, I sure have learned a great deal about the market and especially trading on the short side.  Hopefully, any losses I suffer now will help me invest more wisely in the future and the future gains will outweigh any losses today.

Short SPG, M, VNO, WSM, BC, COF and a few others…

Interesting note… credit card defaults are back to the highest levels since the start of the recession.

One Comment »