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goldminingXpert (29.57)

Dogpiling December: The GMX Retrospective Part 2

Recs

16

December 16, 2008 – Comments (24) | RELATED TICKERS: SKF , QID , DXD

In Part 1 of the series, we covered the earliest days of the GoldminingXpert where he struggled to gain 500 points and was not yet an all-star.

In part 2, we start covering the more prosperous days of December 2007, where GMX learned to embrace the power of CAPS dogpiling. If you've read my blog for long, I've long talked about the effect of dogpiling on the CAPS community. In short, during this period, I learned to search out for stocks that were near universally hated by the CAPS community (particularly her all-stars) and then add my red thumb. Here are the results of some of the CAPS dogpiled stocks I joined in on:

Ticker:  Start Price/Today Price

HOKU 8.35/2.75

URCO 1.89/0.04

WRSP 3.66/0.02

CFC 10.55/4.25 (I would pick this one to go down 7 times--and was correct 7 times. Great way to harvest accuracy.)

REFR 9.53/1.79

AVR 10.54/0.32

WWAT 1.91/.26

Key Lesson: If CAPS hates a 1-star concept stock, it goes down. None of the picks I shamelessly made following people like TMFBent failed. That doesn't mean you should blindly follow the game's all-stars into their picks--however, the clearest lesson is that you should NEVER EVER EVER buy a 1-star stock that has CAPS all-stars running to insult. If the stock has a top bear pitch of "LOL" or "Pwned!!!!!!!!!!" you should NEVER buy that stock!

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During this period, I also discovered the healing power of ultrashorts on a CAPS' players accuracy. My mentality at this beginning of this game was to make as much accuracy as possible. Up until recently, my focus has never been on points--from the very beginning, my goal was 80% accuracy.

With that in mind, I realized that the ultrashorts were a beautiful tool. On December 3rd, I came to the conclusion that Santa wasn't coming. The bear market was just on the horizon and I was ready to cash in. Therefore, I put out green thumbs on SKF, SH, QID, MZZ, and DXD. I shorted the market via the ultrashorts at 1470 S&P and covered at 1445 the next week. While this wasn't a huge move, my ultrashorts moved up 4 or 5% while the S&P dropped 2%. Result: 6 or 7 points a pick x 5 = 35 points. Big whoop, eh? However, my accuracy on those picks would be 5/5. Ta-da, easy way to raise accuracy. In a bear market, you can be sure that ultralongs will always go down more than the S&P and ultrashorts will rise versus the falling S&P.

I have now picked SKF fourteen times over the past year. I've used 9 green thumbs and 5 red thumbs as occasionally it gets too overbought and moves back down. All 14 picks have been closed with positive points/13 with 5+ points locking in even more accuracy.

Two key points from here:

1) The market can be timed! There, I said it.

2) If you want to rise to #1, you have to be able to leverage the ultrashort/longs to your advantage. I've scored 221 points off my 15 (I have another active SKF pick currently +10 points) picks of SKF. Multiple this across many ultras and you have a huge well of points and accuracy. 14/14 accuracy and 221 points off of one ETF... and there are dozens of these to trade. A well-designed strategy of shorting tops and going long at bottoms will add a steady stream of points and accuracy to your more volatile single-stock portfolio.

24 Comments – Post Your Own

#1) On December 16, 2008 at 1:44 PM, MLGtrader (98.38) wrote:

So where is the market going in th near future.  I own SRS and FAZ, so I hope down.  My view is that there will be some good exit point where I can get out with modest gains on these shorts and I'll just have to wait until then.

Making money on the leveraged ETF's movements is like legally taking money from someone else because they are not generating capital.  Because of this, I try to take my gains while I have them, greed is a horrible, horrible thing in the ultrashorts.

MLG 

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#2) On December 16, 2008 at 1:49 PM, goldminingXpert (29.57) wrote:

MLG-- I own FAZ.

However, you could just check my profile to get the answer to your question: I see GMX has the following active picks:

Green thumbs:

SKF, MZZ, RXD, SRS, etc.

Red thumbs:

UYG, SSO, ERX, etc.

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No way this market holds up past the beginning of the new year. 

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#3) On December 16, 2008 at 1:57 PM, BigFatBEAR (29.29) wrote:

I note, with a certain amount of dismay, a clear lack of sex, drugs, OR rock'n'roll in this second part of the saga. Be prepared to underperform in part 3...  I'm selling your blog at these levels.

Joking aside, you have some good insights to dogpiling and ETFs here - thanks.

Also, I noticed that you live in FoCo...   any affiliation with CSU? Go Rams!

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#4) On December 16, 2008 at 3:06 PM, herztical (28.14) wrote:

While I hear you on the financials (no one knows what they are really worth); the govt backing will be endless and thus avoiding 0 or bankruptcy ala Citi.  Wouldn't the better play for the next 6-12 months be on infaltion protected stocks (Gold Silver) or 2x/3x commodity etfs?

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#5) On December 16, 2008 at 3:09 PM, kdakota630 (29.76) wrote:

There's a 3x commodity ETF?

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#6) On December 16, 2008 at 3:28 PM, herztical (28.14) wrote:

sort of; Direxion has 3x energy right now; but I'm sure there will be more to come bc of its popularity

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#7) On December 16, 2008 at 3:32 PM, kdakota630 (29.76) wrote:

I knew of that one (ERX) but thought maybe there was a commodity one that I didn't know about.

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#8) On December 16, 2008 at 5:15 PM, MLGtrader (98.38) wrote:

Jeez Bernanke, why don't you just directly stab me in the back with a knife?

Now the limits have been hit on the ultrashorts and the market is at its resistance.  I see big time downside at these prices.  But man o man both my ultrashorts shed 25%.  The gains today should be erased soon on profit taking and shorts entering the market again after their limits were hit.

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#9) On December 16, 2008 at 5:26 PM, kdakota630 (29.76) wrote:

I took the opportunity to enter a position on FAZ.  I was waiting for the auto-bailout to do it for me, but the deep cut by the Fed did it instead.

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#10) On December 16, 2008 at 6:14 PM, goldminingXpert (29.57) wrote:

I'm buying puts on the QQQQ for front-month (i.e. that expire Friday) as the Fed's treasonously bad decision has set off several of my crash indicators relating to commodities and bonds. That said, I'm not talking about the furure in this blog, I'm talking abou the past; I blog enough about the future.

Big Bear: I do go to CSU, I am a junior economics major there. This is not a VH1 retrospective, so not much of the nightlife of this CAPS player will be revealed. However, there will some talk of drugs in part 3...

If I were you, I'd go long the blog here due to its fundamental value; while it certainly isn't in a hot sector, there's a lot of core competencies here that aren't being fully priced in your model.

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#11) On December 16, 2008 at 6:47 PM, semper77 (32.83) wrote:

MLGtrader - I'm going to disagree here, at least in the short term. I can see this running to 960 on the SPX in the near term before turning down again.

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#12) On December 16, 2008 at 6:47 PM, starbucks4ever (98.07) wrote:

Well, I warned you about the stack of cash dropping on your head from a helicopter...

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#13) On December 16, 2008 at 8:16 PM, d1david (29.31) wrote:

Nice post, you gave away our secret.  ;  )

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#14) On December 16, 2008 at 9:22 PM, BigFatBEAR (29.29) wrote:

GMX - no way! I was an econ major at CSU, and graduated last year (much to my chagrin). My recommendation - don't graduate, especially in this economy!

I must say it's really really good to see a young guy and fellow RAM rocking the CAPS hardcore. :)

But, since I'm technically above you credits-wise, I think I have rank enough to disagree with your blog's fundamental worth. Strong sell from here. :P

Anywho, I'd definitely relish the opportunity to talk to a fellow Ram, a top-10 CAPS player, and an econ-geek all in one. If you're game, hit me up sometime. We can badmouth professors and junk. ;)

-BFB

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#15) On December 16, 2008 at 11:39 PM, goldminingXpert (29.57) wrote:

BigfatBEAR, don't know if possible or how to send messages in the Fool, so shoot me an e-mail at ianbezek @ yahoo.com (don't want bots reading this and spamming me) and I'll be in touch.

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#16) On December 17, 2008 at 12:33 AM, Tastylunch (29.37) wrote:

You left out redthumbing garbage OTC stocks. BravoBevo has shown that playing the OTCs from both sides isn an accuracy and points booster. :-)

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#17) On December 17, 2008 at 11:07 AM, FleaBagger (28.89) wrote:

GMX and BFB -

It looks like I should have gone to CSU and majored in economics. I did the next best thing: I poached GMX's FAZ timing. Thanks again!

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#18) On December 17, 2008 at 12:26 PM, dexion10 (27.79) wrote:

thanks for the insights goldmining xpert

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#19) On December 17, 2008 at 12:54 PM, FleaBagger (28.89) wrote:

What's the deal with TBT? You still bearish on the 20 year?

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#20) On December 17, 2008 at 2:58 PM, goldminingXpert (29.57) wrote:

I love TBT, wish CAPS would let me double down.

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#21) On December 18, 2008 at 2:09 AM, MLGtrader (98.38) wrote:

SRS officially sucks.  It is not moving how it should according to its underlying holdings.  I stopped out most of my position. 

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#22) On December 18, 2008 at 11:51 AM, semper77 (32.83) wrote:

Though this will come off a bit hypocritical (especially coming from a noted dogpiler like me), I do find it important to point out that although GMX's Key Lesson above was great advice to follow at the time, market (and game theory) dynamics would suggest that eventually GMX's 1 star strategy would lose its edge as more CAPS players (and investors) utilized it.

Simply put, I do foresee a day when a CAPS star rating could possibly become counter-intuitive, when a stock ranked one-star leads to artificially low prices as everyone piles on. Such scenarios will eventually carry heightened risk to those late to the party.

Even today, you'll find that alot of these one-star issues already have significant short interest, making them high risk to bouts of short-covering (particularly during times of unpredictable government interference).

I can only see this becoming more prevalent the more popular the CAPS community becomes.

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#23) On December 20, 2008 at 2:48 PM, strongw (49.83) wrote:

Hi ,dude. Do you think it is still a good time to short a home builder like MTH. I find that it has a good upside trend from the recent chart. By the way, there is gonna be a morgage aid to homeowners. Do you think it will be a piece of good news for home builder? I am ready to short it.

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#24) On December 20, 2008 at 2:54 PM, strongw (49.83) wrote:

Hi,Dude, do you think it is still a good time to short a home builder like MTH. I find that it has a good upside trend from the recent chart. By the way, there is gonna be a morgage aid to homeowners. Do you think it will be a piece of good news for home builder? I am ready to short it.

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