buying SRS, straddling TCK, ACC, UNG, sold FAZ & DDRX for roughly -10% on each.

On April 22 we wrote that "our 'bottom' call of March 9 remains our current thinking, however we feel we'll first see a drop of 5-10% before the rally resumes..."

Our timing was poor as this drop didn't come until June, and afterwards the rally did indeed resume. We're still happy with most of our open positions entered in '09. These are shorts which have luckily exhibited significant relative weakness versus the rise in the general markets, with one exception.

We remain more comfortable short than long, especially so given the recent market action and continued deterioration in real economic indicators vs. the misleading "top line" numbers.

We feel that the rally since early March, or at least the bulk of it, is over. General markets may certainly rally higher, but we feel that increasingly even if that is the case some sectors will diverge. Note that there are currently no technical indicators to support these views - we can only rely on logic, history, and contrarian thinking.

Specifically we feel certain that the short-squeezing rally in REIT stocks is over or very nearly so, and that the appreciation seen in this sector not only fails to reflect reality and the coming environment but is in stark contrast to it. This is purely a feeling based on logic, and recent market and sector action.

SRS, Ultrashort Real Estate ProShares ETF, a leveraged inverse REIT ETF, has sold-off massively in recent weeks, to the point that we feel reasonably comfortable entering the fray on the long side. We have some logical and no real technical indicators for this entry, however we are speculators ergo speculate we shall.

This type of holding, a leveraged inverse ETF, is something that must be totally understood and its leverage respected. Due to the extreme volatility inherent in such instruments we will close the position for a loss immediately should it trade below $9.47. That will limit our risk in this position to roughly 15% based on Friday's close of $11.15

We do currently already own some SRS, bought on Friday.

We enter some options straddles on the following stocks. With a straddle we can profit if the underlying equities make volatile moves in either direction, and with options premiums finally having come down significantly since last year's highs we view these as decent entries. Of course as is the nature with options we risk a 100% loss on both sides of these trades and will portion accordingly.

UNG, United States Natural Gas ETF, October $16 calls last offered at $0.65 and October $11 puts last offered at $0.65 It's impossible to say if the current natural gas hype will result in any actual price appreciation, and the storm season could easily disappoint so given that the actual fundamentals are very bearish - increasing supply, decreasing demand - then hedging with an options straddle is the right way to go in our view.

TCK, Teck Resources Limited, November $25 puts last offered at $2.60 and November $30 calls last offered at $2.75

ACC, American Campus Communities Inc., December $22.50 puts last offered at $1.50 and December $30 calls, last offered at $1.20

The latter entry, ACC, is a REIT so if REIT shares generally - and ACC specifically - continue to rocket higher the expected losses in that scenario on the SRS entry above should be mitigated by gains on this ACC straddle. If REIT shares collapse, and ACC in particular, as we argue they should fundamentally-speaking, then we may profit on both trades.


As per the stop levels detailed in the original related postings, we were stopped out of DDRX and FAZ shorts for losses of roughly 10% on each.


We are currently bullish the U.S. dollar, bearish oil and precious metals in the near and intermediate term. We expect real estate to continue to deteriorate in price, and real unemployment as properly measured to worsen.


In early April we wrote that we'd begin a monthly trailing 12-month recap. That has not happened. Summertime is not a time to spend time so frivolously, and since then we've diarized few trades ergo frequent updates would be of no value. Perhaps we'll endeavor to make this recap semi-annual, a more realistic pace, and hopefully these new trade ideas will tide us over profitably until then.




We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or for mentioning any stocks or companies in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as detailed here. This blog is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

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