I am, by nature, a worrywart. Sometimes this is good, and sometimes it is bad. When I was father to very young children, my ability to walk into a room and instantly assess any potential dangers was very valuable. As a trader, though, my worrisome nature can sometimes be costly.
A good example over the past few months has been with miners (symbol GDX), which I have mentioned something like fifty-thousand times this year. I was very vocal about my bearishness on the miners last year. I got a lot of nasty emails about how loony I was to think such a think. Precious metals kooks can be a passionate bunch, and they were firmly convinced not only of gold's imminent lift to $5,000 per ounce but, naturally, the value of miners following right along.
Well, my bearishness on miners was bold, visionary……….and poorly executed. I have worried myself out of that position countless times. In retrospect, simply shorting the holy hell out of miners and then just updating stops from time to time woudl have been a very profitable approach. Instead, I've tried to capture nickels and dimes along the way, sometimes winning, sometimes losing, and – in the end – making dramatically less than I ever would have just staying put.
I have had better success with the Euro, on which I'm even more resolutely bearish than miners. I have been able to put together very large positions and hang on to them at length. Having a huge FXE short doesn't necessarily make for a great night's sleep (I wake up at precisely 4:44 each morning without an alarm clock – – Chinese readers may shudder at the numerological significance) but, particularly recently, my insight on this chart has led to good profits.
In a normal market, I wouldn't be as worried. But in this market, in which I know that at any given moment, some announcement from that traitor Bernanke or from some European central banker or God-knows-who-else might send the market zooming higher based on the giveaway of more trillions, I am in a state of perpetual nervousness. I have fantastic positions, but some jackass could blow them up, and thus I'm always looking over my shoulder.
This weekend was a good example. I ended last week 75% committed, and entirely in short positions. On Saturday, I read that our dear friends in China had relaxed their bank reserve requirement, in another futile bid to goose their economy. Soon thereafter, press reports came out saying that the EU would let Greece completely rework the terms of its debt deal, making it for gentler, if only they would put a government together.
Given these two events, even ZeroHedge on Saturday was saying that "all was solved" and it would be a few more months until the next bailout debacle. So I figured on Sunday I'd get completely gutted, not only in my hedge fund, but also in my personal account, which was 100%? committed to FXE puts.
So I wasted a good chunk of the weekend being nervous and uncomfortable. And yet when the market opened Sunday, the ES and NQ dropped, as did the Euro, and BDI and I were frantically emailing back and forth about what was happening.
After that encouraging start, I thought I could relax. But: no! Everything started ticking up, and the ES and NQ went green. BDI emailed me in utter frustration and despair, and yet another chunk of my weekend was getting ruined with worry. But, you know as well as I do now, once Monday started, all hell was breaking loose, and I wound up having a terrific day.
So what was the result? My weekend was sullied with completely pointless anxiety, and in point of fact my trading day worked out great.
This is a treacherous market. No one, and no thing, can be trusted. But what I have to keep reminding myself is that all of them will fail. Bernanke. Blankfein. Barack. Ballsy bastards all, and all will fail. I simply have to stay disciplined and nimble enough to minimize the harm they will do to me.
The Euro is going to get to 1.25, and after a bounce, down to 1.15 or lower. I know that. But the path there is going to be full of terror, doubt, and some pain. It's no fun. But I guess that's what we get paid for.
