Overall 80% cash and equivalents, 20% stocks. Stocks position up 3% this week due to new entries in the financials. The market powered decisively higher this week and went positive for the year leaving me with an large cash position and underperforming.
After having sold Citigroup in mid-April, the stock found support at the $3 level and moved decisively higher. Wednesday was a breakout day with the stress test news so I bought 1000 in each account at about $3.80. There was a similar situation in AIG, so I bought another 1000 on the retirement side. So now i'm long 2000 AIG on both the taxable and retirement side. Haven't listened to AIG's earnings call yet.
FAS had a similar move, so I bought 200 in each account on Wednesday at $11.17. This is perhaps 1/5 of a full-sized positon, but given the volatility of this stock, I thought it best not to enter all at once. Its amazing to think that my initial position in FAS taken at 3.88 back in March. Had I just held that position (instead of selling it for a 30% gain) I would be looking at a +400% gain. What can I say, fear and greed.
At this point, the public and the hedge funds are chasing this market higher, afraid to be left in the dust. Its a good time to return to my trend-following mantra and watch the range bands. I read an excellent book on the subject called "Trend Following" my Michael W Covel. In this book the author showed years of statistics about how simple trend following produces excellent long terms result without any regard to the fundamentals. In other words, turn off the TV, stop reading the newspaper and just follow the trend!
Psychologically, its very difficult to do. I recall James Altucher of thestreet.com talking about one of the great trend-followers John Henry - owner of the Boston Red Sox. Henry ran his trend-following model for over a year and showed a -4% loss. But he kept on following the signals and the system ended up making many years of excellent results. Humans are wired much more for short-term results. 100 million of years of evolution that rewarded hunting, gathering and scrapping for that next meal is hard to undo.