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Update on 2009 Predictions.

|Includes: AAPL, AIRV, AMZN, iShares MSCI Brazil Capped ETF (EWZ), RMG

 Had planned to do this mid-year but totally forgot. If you recall on December 31st, 2009 I made a few macro trading predictions for 2009, so far so good although I haven’t done as well as I should have despite getting things mostly right.

  • Corporate bonds to recover: didn’t get involved here as I didn’t have easy access to a leveraged play on this and was too busy/lazy to buy some iShares in my pension fund. Dumb miss, as market up 15-25% depending on the index from start of year.
  • Equity markets to go up and vol to drop: S&P is now c. 1020 (up from 890 at year end, c. 15%) but traded down to 666 first. I’ve kept my individual portfolio holdings throughout (AAPL, AIRV, RMG, EWZ) but was stopped out of a leveraged long on S&P at c. 800 and did not get the trade back on. Didn’t play on VIX which has come down to c. 25 from 40 at the end of last year.
  • Selective Emerging Markets will outperform (in particular Brazil, India and Sub-Saharan Africa): Brazil iShares (NYSEARCA:EWZ) has outperformed S&P by about 50%, I held my long position but didn’t add to it as my limit orders were a bit too greedy. As for India and Africa, my preference was for private plays but if public markets are a proxy, directionally these seem to have done well also, with India outperforming S&P by c. 30%, whereas Africa it’s less clear.
  • Buy long dated calls on Oil: really angry on this one, my size was too small so my broker didn’t want the hassle of doing the trade for me. Was looking at $65 to $75 Dec 2010 calls. Even with big brokerage costs these are up 5-6x… Note to self, get new broker.
  • GBP will stop going down: I am structurally very long GBP so my trade here was not to hedge. So far so good as GBP is up c. 10% against the major crosses so far this year, having been even a bit higher a few weeks ago.

So, where do we go from here? I know it’s not very exciting, but I suspect we go mainly sideways in most asset markets between now and year end. If you are holding the positions above, I would continue to run them but tighten stops and look to take profits if S&P approaches 1100, Oil gets above $85 and GBP re-tests it’s August highs vs USD or EUR. Would be more patient or less nervous with positions in corporate bonds and Brazil; although both would probably suffer in a generalized market sell-off, I’d be more inclined to add on dips. Generally, I think it’s not a bad time to be raising cash again and sitting on the sidelines waiting for a better opportunity to come in: choppy sideways - which is more or less what I expect - is a very dangerous market to trade unless you are doing it full time (in which case it can be profitable and fun.) My biggest regret? Not buying AMZN when it traded below $50 like I swore I would. Have raised to $60 but not too hopeful. Otherwise I’m pretty happy with how my portfolio weathered the financial hurricane of ‘08/09. Learning? Don’t overtrade: fastest way not only to lose money, but also your sanity.

(Self-)Report card: Predictions A, Trading C+, Overall B- Trading is always harder than predicting.