I continue to slowly start to scale into YELP, FEYE and FUEL today. I’m buying 3x more Yelp than the other two combined, but am still just scaling into each of them slowly today and tomorrow and probably a little bit next week. Not a new trade alert or anything. Just keeping you up with my approach as I scale and buy, as usual.
Ukraine, Russia and the US war potential just took on a whole new level of likelihood with yesterday’s Baby Biden on a Board news.
The facts: Ukraine Energy Co has lots of “legal rights” to lots of energy fields in Ukraine. If Russia takes over Ukraine, those “legal rights” will be gone forever. Best way to save your company? Weeks after Joe Biden visits, you appoint his son to your Ukraine Oil Co, and now the US will say its got US interests in Ukraine. A full blown war in Ukraine is the most likely outcome with this development.
Does anybody believe Joe Biden’s son has some sort of business savvy and energy insights for a state-sanctioned monopolistic company on the other side of the planet. You can pretend that it doesn’t matter, but seeing Joe Biden’s son being put on the board there is 100% being done because he will influence US policy and taxpayer money into Ukraine’s state coffers. THERE IS ZERO CHANCE THAT DADDY BIDEN ISN’T INVOLVED. Conflicts of interest and interpreted conflicts of interest are often equal.
That Dick Cheney profited from sending us to war personally doesn’t make the fact that Joe Biden’s son is about to profit from having his daddy send us to war any better. And the news that Biden’s little boy is now going to personally profit from increased US war fighting in the Ukraine IS THE SINGLE BIGGEST INDICATOR THAT UKRAINE/RUSSIAN CONFLICT IS ABOUT TO ESCALATE SO FAR. Follow the money. #EndtheRDRegime
Okay, now onto today’s report.
Does your portfolio’s current drawdown from its highs make you scared?
When you’re running a fund, you keep track of what’s called “The Drawdown,” which simply measures how far from your fund’s all-time high-water mark you are at any given time. If you have a lot of big “drawdowns” over time, it’s indicative that your portfolio is rather volatile. A lot of investors and fund managers don’t like to see volatility in the portfolio.
I’ve seen fund managers play all kinds of games with shorting options and hedging their positions to try to minimize volatility in their fund. I personally don’t think it’s wise to waste time measuring volatility, because I’ve owned stocks like Google and Apple and Facebook for the long-term as they have swung wildly over the years. But the profits in the portfolio over time is what I care most about. So much so that I don’t even care measure the volatility in my own personal portfolio anymore.
For most investors and fund managers though, volatility creates and equates to fear. When their stocks get crushed and their portfolios show a big drawdown they get scared. Right here right now, with many formerly highflying momentum stocks like Splunk, FireEye and others down 50-75% or more in the last three months, the drawdowns for anybody with exposure to those kinds of stocks is big and ugly.
A few months ago when the highflying momentum stocks were up at all-time highs, but were just starting to show some signs of cracking I wrote:
“I don’t think the recent weakness in momentum stocks, biotechs and the markets in general, is indicative that the cycle has turned. More likely, I expect to see the bubble-blowing bull market recommence probably sometime this summer, after some continued near-term weakness in the markets finally creates some fear and some broad market panicky selling, and the bulls get worn down and start to run.”
We’re not quite to the summer yet, but the near-term weakness in the markets has the fear building and the bulls getting worn down.
All of which leads me to this question: Are you scared yet? The bulls are definitely scarred and scared, despite the broader indices still being within a day’s move of new all-time highs. Think about that for a moment. The indices’ own “drawdown” is barely measurable from their recent all-time highs! Does that make you more scared or less? I’ll guarantee any fund manager reading this article who has to measure their performance against the indices for their benchmark is gulping right now, scared to think of the recent underperformance they now need to make up. I’m glad I’m not a fund manager anymore!
With some of my biggest positions like Facebook and Google down from their recent all-time highs, countered with a Sandisk and Calgon Carbon and others that have been setting new all-time highs, my own portfolio would probably show about a 5-10% drawdown from its all-time highs earlier this year. But I’m not going to measure it, because it actually doesn’t matter. I don’t ever expect that my stock portfolio will constantly be at all-time highs. I accept that I will continue to need to use a playbook that accounts for both ups and downs in the markets and in individual stocks that I own.
In yesterday’s Revolution Investing, I started a new basket of the best of the crashed high-growth momentum stocks, and am actively scaling into $YELP and a couple others that I highlighted there. I explained this new buy in a bit more detail in response to a question this way:
Before I go, I do want to know if you’re scared right now. I know I’ve been scared before and proclaimed being terrified back in the summer of 2008 on TV, right before the markets crashed. Sometimes, being scared is correct and should be acted upon. So, there you go: Are you scared right now and if so, are you acting upon that fear? Let me know in the comments below of come join our discussion on the topic right now on Scutify.
PS. I wrote this five months ago: ” I think an $NQ short paired up with a $BIDU long might be a good mid-term to long-term way to play China tech.” I just want to follow up on that today, as NQ is down 25% today and is now less than half the price it was when I suggested shorting it. I’d probably look to declare victory as I cover the short-NQ part of the trade and hold on to the BIDU for the long-term.