Q: I’m guessing if you aren’t already clean-shaven you will be shortly. Congratulations on being one of the few Wall Street folks who truly know what the hell is going on. The problem is everything is getting hammered at the moment, even the gold related stocks you referenced a couple of weeks ago.
J: That’s what shorts are for 😉
Q: Would GDXJ be a good addition to the gold part of my portfolio along with GG,NGD as a more diversified position ? I was thinking 1/3rd each. Or something else?
J: I would rather buy AEM but that’s just me. GDXJ may be better for those who want a bit more diversification.
Q: Thanks for the updates. I just wanted to reach out as I’m hoping you can still include your portfolio allocation percentages, even if it’s with some type of caveat or additional detail to make sure everyone understands the risk or the scaling plan. For me, this is maybe the most helpful information you provide, as it tells me how confident you are in your investment and let’s me see how a pro is allocated. Without this, we’re all left guessing what you might be doing, which seems riskier and more harmful to me. We all have to make our own decisions, and I’d much prefer transparency rather than you trying to save us from ourselves (even though I appreciate you trying). In any case, please consider keeping this. If you don’t think it was accurately reflecting your portfolio allocation (if you are scaling in or our more frequently), please consider a very transparent way of showing this. It’s very important to me, and I’m assuming to others as well. Either way, this is your service, and I respect your decision.
One other thought to add if you’re opposed to the suggestion. Based on what your allocation percentages were before you changed I would assume a “full position” for long term is 20%, while a full position for short term is 10%. Is that a fairly accurate interpretation I could personally use moving forward? Also, if you choose to not provide allocations, will you still indicate when you go in big on a position (more than a full position such as HLF)?
J: I would prefer to simply say something like, “this is my largest position now,” to indicate my confidence level. I just really don’t think it’s a good idea for folks to implement a portfolio that’s not fine-tuned to their personal goals and risk tolerance. That’s a recipe for trouble.
Q: As an ira trader it is hard to stay in one position for very long, when all the Federal Reserve has to do is open their mouth and say something, like they did in October 2014, and completely change the stock market’s direction. Currently 90% in cash.
J: That’s a good point. It will be important to pay attention to just how much faith the market has in the Fed as we go forward. During the past couple of bear markets that faith completely evaporated and I expect it will do so again during the next one.
Q: I would prefer both allocation %age and size. That provides me guidance on what would constitute a balanced portfolio, in your opinion. Are you saying that the set of trade ideas are not balanced to reduce risk ? Perhaps some quantification of the risk can help your subscribers to gauge what portion of their assets they want to invest in these trade ideas. To clarify a position size of 1/4 means that you have bought 25% of what you want to eventually own ? Does the size also indicated relative allocation with other positions ?
J: Size is 1 not 2.
Q: Thank you for the rapid updates! Are you watching any individual stocks that might be attractive when this is done cratering? Are you still considering TWTR?
J: I still really like all the names in the trade ideas. Outside of those, I’m not really seeing much.
Q: Jesse, if you haven’t taken full positions in srty faz, qid sqqq would you do so here or wait for a failed rally? It looks like the miners cannot get out of their own way. I thought on this sell off my shorts and miners/gold would be positive but have been hammered. What makes the miners turn back up? How does it feel clean shaven?
J: This morning’s (Tuesday) rally would have been a good time to start putting on positions in the inverse ETFs as I mentioned in an alert. As of now, I would probably wait for a rally. I’ll be trading around my core short positions so keep an eye out for those discussions in the reports and alerts. As for the miners, I think this is just a standard test of the lows we put in recently. If the selling in the stock market intensifies again there’s a chance those lows could break, which is the main reason for the short positions. As I’ve written many times, I view the trade ideas as a holistic portfolio more than individual trades.
Q: Thank you for posting the short updates the past couple of days. The updates really help. Would you consider doing this (even just a short paragraph and graph) on a more consistent basis?
I notice you have inverse leveraged ETFs in your Trade Ideas. Can you enlighten me on the advantages/disadvantages of an inverse index ETF vs shorting an index ETF vis-a-vis the daily pricing affect vs the cost of shorting? I don’t presume that this would be a two minute response, but if you know of any research articles or blogs on this, I’d sure appreciate the leads.
Thanks for your time (and thanks for broadcasting your shave).
J: I’ll post anytime I think there’s something that should be shared. But when there’s nothing much to say…. What I like about the inverse ETFs is that they are easy to trade and, unlike normal short positions, they get smaller if you are wrong rather than larger. With a regular short sale, your losses are unlimited. With the ETFs, your losses are limited to whatever you commit to them. It’s a simple distinction but a big one.
Q: There has been a lot of talk about spreads, as well as credit markets as a leading indicator for stocks. Could you recommend some in depth reading on this subject?
J: I’m sorry, I can’t. However, I’ve written about it pretty extensively in both in the blog and in market comments/chart books over the past 9 months or so.
Q: How are you handling SQQQ tracking error? Are you in and out or just letting it ride? How do you gauge expected returns?
J: It’s not a long-term holding for me. It’s a trading vehicle so I’m not as worried about it.
Q: I am sorry I don’t understand the financial lingo well – “scaling in on the short side” – are you saying sell the inverse ETFs or increase your positions ?
J: By “scale in” to short positions, I mean sell short the index ETFs or buy the inverse ETFs, yes. Scaling into a position just means entering now with the ability to add more later. I was mainly directing this at those who have not yet added any shorts or hedges to their own positions.