What a difference a month makes…..

Posted on 08/10/2011

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In early/mid July when I decided to launch a market-centric blog and attempted to weave addict behavior analysis and recovery lessons into the mix……little did I know how quickly some of my long festering market concerns would manifest themselves.

For example, on July 12th I alluded to a growing sense of contagion in the financials (https://mrktjunkie.wordpress.com/2011/07/12/tomorrow-morning-could-be-interesting/ ) . I also compared the recent behavior of the XLF (S&P financial fund), which had begun to breakdown, to that of everyone’s “favorite” Netflix, which had recently announced earnings as well as (considerable) price hikes for the second half of 2011 (and briefly breached the $300/share level).

One of my very first recommendations involved getting long the VIX (or volatility in one way or another) because I firmly believed the market was far to complacent and grossly underestimating (mis-pricing) “tail risk”.

From 7/12 post:

If there is an ‘actionable’ point, I would take a look at exiting half the long vol position from early last week if the Sept. S&P futures test 1300. I would expect the cash VIX to be somewhere between 21 and 23 depending on the velocity of the move (June high ~ 23). If they cascade through the round number, all eyes will be on the 200 day moving average (cash = 1272) which held during two June tests.

Things could get ‘interesting’ in a hurry if equities break through that support, which has held since we broke out last September after the Jackson Hole speech.

It’s amazing how quickly sentiment can shift and once again, I must point out, markets go down WAY faster than they go up. Most market participants are “natural, passive longs” and in situations like this…..the “funnel” gets very tight on the way down.

This is NOT an attempt to pat myself on the back. I’ve had countless terrible ideas in my years trading. I’ve been stubborn to the point where it cost me job(s) (ingrained addict behavior……I’m working on it!!!), but I’ve also learned a great deal.

In recovery circle, you hear a lot about addicts with “one foot in the past, one foot in the future, while they piss on the present”.

Today is ALL we have. We can’t do anything about the past and there is no guarantees there will be a tomorrow. Make the most of all your todays and you will likely be a very happy person.

Well…..today the financials are taking it on the chin, Netflix has lost much of it’s luster (closer to $230/share than $300), and Apple is the “biggest” company in America (surpassing Exxon yesterday in terms of market cap).

Today I also accepted a job with an new, exciting private equity firm based in Chicago. I feel energized and inspired and I’m really looking forward to this new opportunity. As such, I will have less time to spout off about the markets, but I will make every effort to do so when time permits.

Couple random thoughts:

Count your blessings. Grateful people are more fun to be around.

Grow a beard at least once in your life. (Excluding women who are not angling for a circus gig).

America is still AWESOME, but we have a LOT of work to do to right the ship. You should vote.

Risk is NOT a 4 letter word (well obviously it is, but it isn’t Plutonium). There is, however, justifiable (smarter) risk and dumb risk. If  you avoid the latter as much as possible…..you’re doing well.

On that topic, I read about a restauranteur yesterday that said, “if you wake up and feel like throwing up, you’re taking on too much risk. If you wake up uninspired, you’re taking too little risk. If you wake up ready to make the most of the day – you’re taking just the right amount of risk”.

I’ve had stretches where I put my feet on the ground and felt the need to throw up (that need was often compounded by the previous night’s debauchery) and it’s NOT GOOD.

I’ve also had stretches where I’ve felt completely unmotivated and that too is not advisable.

Right now, I’m excited about every day and I can’t wait for the next opportunity. This blog has helped me stay engaged and creative, but sobriety has been and will be the lynchpin to my long-term actualization. I’m profoundly grateful to my family and friends for their unwaivering support.

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