Eric Rizen Lynch

Finance Blog

The old finance blog is going the way of the Dodo. I still have a passion for the market and will probably force you all to read it here from time to time, but I wasn't putting the effort into updating it regularly, so I'm going to retire it for now. I'll make periodic posts here though.

To recap February a little, I was doing very well in Feb (like most people) when the sudden downturn wiped out all my gains and then some. I still out-performed the S&P by about half a percent for the month. I was fortunate enough to have made some smart moves ahead of the downturn, but my handling of the downturn afterward was a bit worse than I would have liked.

To explain, shortly before the Chinese 9% drop in their markets I made significant shorts in the FXI (the Chinese index ETF), PTR, and one other Chinese stock I can't think of right now. I had also bought myself some protection in the form of some put options on the SPY (S&P index). These two things allowed me to handle the initial downturn much better than most as I got significant gains out of all those hedges.

That being said, I was caught with my long positions being a bit too aggressive (not in terms of $$$, but in terms of the stocks I picked being a bit more speculative in nature) and my longs got hammered more than most people's. I also stuck with them a bit too long anticipating a bounce (which we got today) that didn't happen quickly and I finally rotated out of some of my riskier names Monday and into some soft goods, pharma, and telecom stocks which I made out with nicely today.

Those who read my finance blog know I predicted a correction early this year of 5-10%. I still think that's all this is. We got a nice bounce today, and I think we'll see a bit of follow through on it tomorrow but I think over the next few weeks we're going to see at least one more leg down, although not as significant as the first. I've prepared for that by being about 25-30% cash right now, and a lot of my money is at work in conservative stocks with 4% or better dividends that behave more tax favorably than cash (dividends are taxed at a much lower rate than bonds/treasuries/money market right now).

I've actually started to gradually add a few short positions very late today in anticipation that this rally will be short lived. If there is some follow through tomorrow, I'll probably build those a little. Overall I think I've handled the downturn pretty well, but I wish I hadn't hesitated so much on rotating into some more conservative names, and ideally I really should have followed my gut and positioned myself more conservatively when I rotated out of technology earlier this year and anticipated the correction. Instead I got greedy like many others and went into some higher risk non-tech names since those had been working so well since mid/late last year.

-Rizen