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David Stafford
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Student of markets, enjoys following their course.
My book:
Around the World in Several Pieces
  • CFD Pulls An "Immaculate Reception"(Perhaps An Overstatement) 0 comments
    Jul 16, 2013 5:28 PM | about stocks: CFD

    CFD had kind of been in the dog house for yours truly as of recently. CFD was kind of included in ye old portfolio with the intention that an outside or like 8% vs a=on average 5% position in it, might offset some equity negativity inherent to the portfolio as a whole. In so many words I was looking for that commodity beta, to add to the diversity profile of the portfolio.

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    As weeks turned into months, I had yet to see the CFD that I was hoping for. CFD was kind of like the hot prospect, the heavily scouted position that just wasn't filling out its role in the overall portfolio. On down days, it was down aswell, and I know its common to just use a S&P spider short position for this purpose, but I was hoping, that it would be possible for a very small portfolio to have a negatively or null correlated positive position in a different index/sector per se, as a hedge, since its much more cost effective per se, and easier to maintain clearly(never has to be rebalanced etc.).

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    Up until today, CFD had no been bringing the A game per se. CFD was down more often than the equity positions as a whole, even though they were kind of unorthodox equity positions to be honest, but either way, with the anti-commodity sentiment that flowed through the market over the past several months, CFD was needless to say, not fulfilling its role in the grander scheme of the portfolio.

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    Sure one could argue that having a indirect investment in commodities, by holding commodity dealing/using companies could have superficially sufficed, but something about the fundamental nature of the need to diversify indices present in the portfolio, kept me waiting for CFD to fulfill my aspirations of it, and essentially the not-so whimsical concept of diversification, kept CFD on the bench per se.

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    Today, CFD came off the bench and reminded those who follow it per se, why it's a part of the team. On stocks "worst day in two weeks"(http://www.zerohedge.com/news/2013-07-16/stocks-break-10-day-winning-streak-03-plunge-worst-day-two-weeks) CFD was up, and was up by a disproportionately large amount relative to past performance. Of course this is only 1 day, but perhaps its always satisfying when the fundamental principles of portfolio construction ring true, in a time when even though the market is not really arguably reflecting "fundamentals" that there are at least some portfolio construction principles, which will occasionally surprise us with their validity.

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    Classic US Football play; the "immaculate reception" by Franco Harris; http://www.youtube.com/watch?v=7xMDIcsUMmA

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