Staying On The Short Side

Greetings from my family room couch, where I am lying on my back, laptop propped up, typing away with a snoozing Kobe at my side. I’m quite weary, so I figured I’m do this post horizontally. See, I woke myself up at 2:45 this morning. I had no idea what on earth I was doing becoming conscious at that hour, but as is my habit, I grabbed my iPad, glanced at Kitco, and checked out gold. My stomach went into a knot when I saw it was down about $25.

As almost all of you know, my religion and warped personality compels me to short almost everything under the sun and avoid going long anything. However, the charts of GLD and GDX were compelling to me yesterday, and I bought them both. Indeed, even though they were only 2 positions, they represented about 14% of my portfolio. GLD all by itself was about 10% of my positions, even though there were 80 short positions (all of them obviously small) on the other side.

But with GLD and GDX clearly heading for a miserable open, and the ES barely down at all, I was facing a terrible situation: one in which my two long positions would kick me hard in the cajones and yet be aided hardly at all by my shorts. Indeed, given what has happened very day this month, I figured the ES would manage to surge deeply positive, resulting in a one-two punch of losing on both the long and short side of things. I didn’t go back to sleep at all. I even did a post around 3 in the morning.

So I had a lot of time to think, regret, agonize, and worry. I decided a couple of things. First, I decided I was going to get the holy hell out of my two long positions the moment the bell rang. Yes, I hated myself for going long (me, of all people), but there was no point in beating myself up for the next five years. I was going to get out and be done with it. And second, I was going to continue to judge my shorts on their own merits and try not to let the losses for precious metals poison my day.

We all know what happened to precious metals today. As I promised myself, I got the hell out. There was a little pop after the open, but as the day ground on, silver, gold, and miners all continued to get monkey-hammered, and I saved myself from an even nastier loss.

What helped was that my 80 shorts were solid enough that they beat back the wretched big red numbers from GLD and GDX and, about ninety minutes into the day, had me into the green. I was heartened by this, and I continued to look for more good shorts. Of course, in my head, I was constantly adding back about $6,000 in extra profit that “would have been” had it not been for these stupid longs, but I just kept forging ahead, adding good-looking shorts.

When the day was done, my portfolio was up percentage-wise as much as the market was down, which for me is a good day. My percentage would have been twice as good without precious metals, but I’m proud of my little champs (that is, all these teeny-weeny shorts) for being weak enough to overcome the scourge of precious metals and provide me a respectable profit for the day. And let me tell you, within moments of dumping GDX and GLD, I felt a 300 pound weight lift from my chest.

Looking back, I don’t fault myself for being a bad analyst with respect to gold. The chart truly looked like a good buy. I was shocked and how swiftly it crumbled in the nighttime session. I suppose the lesson for me is that, in times like these, one cannot expect any asset to be safe overnight. The kooks must be pulling their hair out that, after trillions and trillions of fiat have been printed out of thin air, gold is still pooing all over itself and not zooming to the once-certain $5,000/ounce.

We have to keep our wits about us. Next Wednesday is going to be absolute insanity. I’m glad today worked out well, but these are dangerous markets, and sometimes even the best charts simply will blow up in our faces. For myself, I’m going to continue focusing on the short side of things. My adventure into bull-land was a catastrophe. Thank you, little shorts, for healing the wound.