Dizzying Day Trip for Ultrashort Real Estate

Well if this mutual fund thing doesn't work out, perhaps a swing trading newsletter will be the future.

Yesterday's purchase of Ultrashort Real Estate (SRS) in the mid $53s [Bookkeeping: Wish Me Luck], is now up 25% in 24 hours. I think we actually got the exact bottom but man, it's a hard way to make a buck (ulcer city). I'm going to take a bit off this position which has grown from 3.5%ish to 4.3%ish of portfolio in a day. It is one crazy animal and unless the market is in free fall, it is hard to feel any confidence. I still love it as a hedge but until the retail bankruptcies start hitting the headlines people will apparently whistle past the REIT graveyard.

I'd like to stress to newer readers, I normally employ a core and edge strategy - hold core positions for a long time and trade around the edge - usually those trades are weeks or months in the making; something goes up 20% - you take a partial position off. But this crazy market has smashed timelines down to hours or at most days. We have done a lot of selling this week on the long side as many of our stocks have made gains in a few days (+20-30%+) that normally take 4-6 weeks, and cash is now up to roughly 48%. One day I hope to return to actual "investing" but in the interim we're morphing into much shorter term trading philosophies, and we'll try to make some shekels while we keep much of our capital protected to the side and out of what has turned into a full blown (government back stopped) casino of nonsense.

As always, S&P 870, 840, and 820 are our lines in the sand. The only reason to be long is "all the cool kids are doing it" and "the fat guy in a red suit with the sack is showing up soon" and "Obama shall save us"

Next week (Christmas) and the week after (New Years) will be full of retail trading nonsense, so I don't plan to read too much into anything, as volume will be light as the professionals are busy refinancing their $5.4 million apartments at 4.8% rates. (they always win don't they?) We'll stick heavily to the sideline with cash horde.

Below S&P 820, we are back to carnivorous bears. Frankly, based on what I'm thinking for 2009 for S&P 500 earnings, 900 is going to be very expensive based on PE multiple. Again, it's all about sentiment; the economic news shall be dreadful for many days to come. Bulls want to see a clearance over the 50 day moving average (S&P 940 and falling fast) These bulls, once they put down their Kool Aid, should be asking Santa (and Obama) why copper and oil are in free fall (despite a falling dollar, despite all the world's governments stimulating with billions/trillions of infrastructure plans) if the economy shall be recovering "in 6 months". Food for thought, if you are not a PhD designed computer algorithm.

Disclosure: Long Ultrashort Real Estate in fund and personal account

Comments

[Terry Finn:]

I took a real whipping on SRS. Bought 1,000 shares at $250/share on Nov 21, 2008 and bailed out on Nov 25, 2008 at $130/share. OUCH ! 120K loss in 4 days. Now I've got a loss to use against some of my '08 gains. But it still stings ! I should have known that this ETF is too crazy to touch.

2008 Dec 18 11:24 PM

[icandoitdon:]

i can't understand why anyone would try to trade srs. anyone can get lucky on a trade but it is not possible to consistently make money in the face of that kind of volatility. it's a fool's game.

as for losing $120k in 4 days on a single stock, all i can say is what were you thinking?

2008 Dec 19 01:44 AM

[Myron Kidd:]

Read the above, If Retail Starts Going OOB?, hello....razor thin margins, high rent,tanked christmas, Feb earnings in the toilet....can you say "March Madness" and (SRS) is going over $350....and you thought people weren't spending in '08? WAKE UP.....all except the U-Stor-It crowd which will have record reservations because people will be living in them by June.

Happy Holidays

2008 Dec 19 09:08 AM

[specks:]

Congratulations on your loss!
Question..... How in the world did you make that kind of money to invest???

2008 Dec 19 05:13 PM

[snake driver:]

I feel your pain Terry. I have gotten my butt kicked on this one too. Can someone explain to a layman exactly how the price is set on an etf like this one? Is the price determined by the combined value of the underlying assets, options, etc, or is it set by the bid/ask of the ETF itself, or is it a combination of both?

2008 Dec 20 11:19 AM

[snake driver:]

I feel your pain Terry. I have gotten my butt kicked on this one too. Can someone explain to a layman exactly how the price is set on an etf like this one? Is the price determined by the combined value of the underlying assets, options, etc, or is it set by the bid/ask of the ETF itself, or is it a combination of both?

2008 Dec 20 11:22 AM