Last week, the DOW fell from its 14K peak down to nearly 13K. Today (Tuesday) it finally rallied back to 13,300.
I remain confident in my investments. Previously I was 1/3 in short-term U.S. treasury debt but I've quickly moved my position almost entirely into the Prudent Bear Fund (one of the few good managed short funds available). Luckily I caught most of the fall, gaining about 9%. Today the upward rally ate about 3.5% of that gain.
Regardless, I'm going to taking this rally as a way to stengthin my position by going even more short. I've assume more shares of prudent bear and am almost 100% in that single fund. Since the fund is 70% short (and uses US treasury bonds for sweep), it should profit greatly during a deflationary crash despite its long position on precious metals mining stocks.
Actually...even though I'm bearish on gold for the next few years, it truely is the ideal hedge in case for some reason the Fed changes its policies an hyperinflation sets in. And when the crash is over, precious metals will probably be the best place to be. Additionally, gold is appreciating so much right now that it keeps the fund perfoming well even in this pre-crash era.
According to Jim Shepherd (http://www.jasmts.com/), in the advent of a 30-50% crash, a successful short fund should be able to gain over 200% in value (3x principle). But remember -- this is in nominal terms -- coupled with deflation, the real value gain could be enormous. The name of the game in deflation is to be sure your debtor doesn't default, which is why you must use safe government debt for sweep.
Of course, I am not planning to use any extra leverage. I assume there will be a story of some guy who did a bunch of fully leveraged shorts and became a multi-millionare overnight, but this crash is far too devious for that. Really, it is so long, long overdue that timing it has become almost impossible.
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2 comments:
Is this really you Elliott? I'm sorry, I just got off work and my back is killing me. So I may be a little strict in my critique of your blog. The markets aren't all about crashes. They are about wave structure. Maybe a change of topic should do the trick. Also, I'm not too bearish right now. Seasonally this period of the year is bullish. It's possible we'll see a new ATH from TODAY's low. But as always I could be wrong. Maybe sometime in May or April of next year will be the next high. Anyway, i suggest you change the title of the blog, but regardless, it's a damn good idea!
The EWT keeps saying that the crash is just around the corner. Jim Sheperd agrees. I'm still not up on my TA yet but there's a lot of consensus amoung bears the a crash within a year is very likely.
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