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SoS: Stopped out of everything.

So 5,000 has been broken on the Nifty and the WIDE stops on the Short Only strategy have been hit. I was expecting a move up but was thinking it would stop before this – guess it was not to be.

Crappy return, of course – a negative 10% in just about a year. Not surprising for a short strategy; and I’m sure if I had real money on it things would be different. It’s very strange, actually, to have no real money backing this strategy; I’m sure if I did I would manage it better (and who wants to lose this much!)

When we planned Moneyoga I remember hearing that this “virtual” portfolio stuff is only a learning exercise – the real test is the emotional damage the volatility of real money can do. Which is true, I guess – I’ve been strangely unattached to the losses of a “virtual” strategy, and been on the wrong side of most of the move!

There will be a time to return, and given we are currently way overpriced, the only thing I’ll do is setup Nifty puts on it. A better way to short perhaps is to find stocks that have very short term underperformance and take small bets on those – in a bull rally it’s tough to hold shorts on a fast moving stock. HDFC is still way overvalued, but to short it weakness must build; and there is absolutely no sign of weakness.

The blowout will come, but when, from which level? That’s not a question worth answering – the Taleb bet might be the only useful one, when you spend small amounts buying what will give you an outsized return in one of the following months.

  • Manish Chauhan says:

    >Even I am not too excited at 22+ Nifty PE , History was never my favorite subject , but market has tought me that its important .. 🙂

    Better to not look for very long term .. A short term fling with some stocks would be as tasty as in real life .

    In one of the talks in Bangalore ,I happened to hear Uma Shashikant , where she mentioned HDFC as an excellent long term bet , ofcourse "with disclaimer" ..

    I beleive HDFC would be a good stock to hold :0 .


  • nimish says:

    >What is ur outlook on GIC Housing Finance Co. Ltd. ?

  • Indian says:

    >Hi deepak, I think this is the best step you have taken this year, even though on virtual strategy. But, our mindset affects our real returns too, I think u will agree to this. I would like you to research in how one could earn from stock-specific upmoves, even though sensex/nifty may not move much. I feel rest of this year will give good stock specific opportunities to earn.

    I respect ur analysis and pointing the minute details you bring upfront for reading. Please take it as constructive criticism and continue to enlighten us with ur analysis.

  • Deepak Shenoy says:

    >Manish: HDFC is ridiculously overvalued 🙂 but the stops have to be respected! Still you're right, there's just too much enthu sittin on the markets.

    Nimish: be careful. Lot of people are strutting around talking about it. The stocks always had good earnings, but never a high p/e, and you might want to be careful!

    Indian: thanks mate. There will be more as time flies…