Trade Alert: Hospital, hedge fund, rallies and emotions

My gosh, it’s been a wild month and two days. I woke my wife up at 4am on December 27 because Amaris wasn’t breathing quite right and she went into the hospital 170 miles away that day. She’s still in there and today they told it would be at least another two weeks before we get her home.

And of course, I launched a hedge fund on January 1. The stock markets went straight up for the first three weeks of the year before finally putting in some back and forth grind the last week.

I started slowly in the hedge fund and then when Amaris’s health got really bad and it was quite scary three weeks ago, I put the brakes on a bit again. Emotions are the enemy of a good investor/trader and my (and my wife’s and other, five year old daughter, Lyncoln’s) emotions were running extremely high at that point. Amaris has since turned a corner and I’ve been able to work at the office five days and five nights a week for the last couple weeks and have been trading around existing positions and putting more money to work.

In the first week or two, the markets were just coming off the December 24 bottoms and the two month crash that bottomed (at least for now) that day. In the hedge fund, I slowly scaled into some longs and some short hedges, the short hedges partly because I didn’t want to be too long if the markets tested those December 24 bottoms.

In the last couple weeks, I’ve covered and/or am in the process of closing out many of my hedge fund’s earliest shorts (and sold all of the puts in these positions) including ULTA, TTD, EFX, TME, BOX, SVMK. You need a catalyst and good timing for shorts. I also don’t want to waste too much of my time and energy on these types of shorts. You guys know that I try to wait for the best Revolution Investing pitches and then ride them for the long term. Sometimes, when there’s a RIOT blockchain that spiked from $2 to $40 when I started citing it as as a no-brainer short for Trading With Cody subscribers, I might have a higher conviction about shorting a stock. And I’ll keep a few shorts on here and there as hedges too, but I’m going to be as disciplined as usual about avoiding shorting good companies just because their valuations are high.

I still have small shorts and/or a few puts in PIR, APHA, MJ, VHC, GLUU, JD, AVGO, but I’ve kept these positions very small for and/or have just started building them. And, heck, I might end up closing any or each of them if they move much against me.

Meanwhile, I have let most of my longs and/or call options just ride as the markets and have even scaled into more of these longs as they’ve been rallying to slowly build these positions while the valuations are at these levels. Many of these longs have been on a strong rally mode and I expect we’ll get a chance to nibble some more of them and add another tranche or two in coming days and weeks as earnings reports, Federal Reserve updates, China Trade War updates, Government Shutdown updates, and so on move stocks. And stocks move markets.

You’ll notice I’ve got quite a few semiconductor stocks, both longs and shorts. Stocks with strong exposure to Revolution Industries like 5G, AI, Driverless, including semi stocks, most of which are down big from their October 2018 highs are part of that. But the semi cycle itself, especially in China, is in a downturn and I’m not sure it’s going to bottom this quarter or next. So I’d like to find a few more shorts in that sector. I might also short some SMH, the semiconductor ETF, at some point soon just to hedge some of my semi longs.

I’m just over about half as fully invested in the hedge fund as I’d consider “fully invested” but am in no rush to get there.

As usual, I’ll be letting the markets pitches and the opportunities therein dictate when I put money to work.

I’ve been at the office since 6:30am MT this morning and it’s now after 8pm. Apple reported a ho-hum quarterly report after hours but, indicative of how valuations and sentiment got to be so low after Apple’s warning three weeks on January 3, that the stock is up 7% after hours tonight. We’ll see if it holds tomorrow, but regardless, there will be new pitches to swing at, new opportunities to invest in and new pitfalls to avoid in coming days, weeks and months.