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December 30th, 2013 at 9:51 am
Portfolio/IHS – Well, we're starting a new Income Portfolio in Jan but my intention is not to make big commitments until after earnings as I still expect a pullback of at least 5%. What matters is what holds on the pullback and we'll just have to wait and see.
Earnings, of course, will give us an idea of what sectors are looking strong and weak for 2014 and, as you can see from the STP above, we're still very bearish, so much so that we gained $8,000 simply because the market didn't go up this morning! Imagine what would happen if the market actually corrected?
So, if you have a $1.5M portfolio that is not well-hedged, you should take a very hard look at each one of your positions and decide if they are overbought or not. There is nothing more valuable than cash in a correction and I know that doesn't sound appealing when you are trying to live off that cash but consider that you can cash $1.5M completely and simply decide that, if CAT should hit $65, you'd like to buy $65,000 worth (out of your $3M in buying power). That means you can sell 10 CAT 2016 $70 puts for $5 and that puts $5,000 in your pocket against about $7,500 in margin.
Does that cover you for a month? Two weeks? Whatever the time is, you can afford to be patient and still go bargain-hunting whenever you need money. When actual bargains show up (and there certainly will be some into earnings) THEN you can deploy some more cash if you feel something is exceptionally low.
As I said, we're starting a $500,000 Income Portfolio from scratch next week, you'll see how we manage it with a goal of making 10% for the year.
CROX/Invest – Good move taking advantage of the new CEO excitement. That was a nice pop!