I am experiencing issues posting the updated portion of the Vine strategy to the website. Items of note are that I sold 200 shares of the 3rd segment. Below is the entry, chart will follow when the site is back up.
Staying in the current vine segments has been a bumpy ride over the past few months but has paid off. By doing so the Vine strategy has been consistently above the market returns throughout the almost year span that the strategy has been open. While greater returns could have been achieved by more active investors it is important to understand that this strategy is not short term oriented and yet has still produced returns well above the market and possibly any active funds that didn’t play the market swings exactly to key. As you can see from the difference in the active return to the portfolio return I have taken 200 shares of EWG at a profit adding $566.00 to the cash position in the 3rd segment. I feel that the 3rd segment is at most risk in the near term due to the increased troubles in the euro zone. I felt that the German export segment would continue to strengthen from the weak euro however I didn’t anticipate the correlation between the EWG’s euro denominated holdings to swing that wildly to the currency. While the correlation is positive now it will make it more difficult to move into the 4th segment of the Vine knowing that the two are this much correlated. So that left me with the decision to either move the front portion of the strategy which is acceptable or to take the profits from the strategy as a whole and close this Vine.
In my personal trading I have taken some noteworthy steps. I took the remaining profits from the USD rally to the JPY and started a position into the GBP/JPY based on the extent of the drop and the hopes that the tensions in the Asia region do not escalate. I also started a position in the RUB to the USD as a positive roll play. These positions are very risky at these times, as the geo-political issues in Europe and Asia will dictate the moves short term. I will be very fickle in the amount of patience I’ll have with these trades despite the fact that the long term trends in the two pairings look attractive. In volatile times, and the leverage involved in FX, you have to be more concerned with survival short term than holding onto a trade that will pay off over time.
Today was a perfect example of a series of unknown events coinciding to create adverse market conditions, while these events are not very predictable it is important to factor them into your strategy after they occur. Sometimes this could be the catalyst that investors on the fence need t sway one way or the other.
With the 10yr down, major indices down, the dollar up to commodity currencies (and commodities down) but down to non commodity currencies it seems interesting that there is no one asset class performing well today.
My new article explains the catalysts that are believed to move gold, and why they may not be the best indicators going forward.
With QE2 out and another $600 billion scheduled to be dropped into the market, there is a lot of calm in knowing that the Fed will not let this recovery stall. In the process however it also shows that the Fed is unlikely to be concerned with inflation until the threshold of 2% is reached. This could bring inflation through the back door by way of higher commodity prices. The best way to see if higher commodity prices such as cotton, oil, and base metals to start to creep down into higher consumer prices is to look for companies with low gross margins and very weak pricing pressure. These companies (should be raw material intensive products) will not be able to absorb as much of the higher costs and upon the squeezing of the gross margins will be faced with trying to lower their non operating costs and/or eventually pass the costs on to the consumer. Then inflation will start to become retail, and become a concern to the overall recovery.