(we continue from the ‘Sharpe Income’ project yesterday …)
Professional traders are already aware of the concept I am going to discuss today.
But for those who are new, allow me to introduce you to the concept of a ‘Long / Short’ book (although in truth, how I construct a portfolio is a little more involved that simply having a ‘Long / Short’ book). But let’s at least illustrate the concept for individuals who are new to trading.
So yesterday, I was waxing philosophic with a bearish bent of stock indices. Actually, I had specifically stated …
I would say I’m bearish on stock indices on a 3 to 15 day periodicity. Even with the rally of the last few days. Consistent trading above 2057 would cause me to re-think my bearish thesis. But at the moment, stocks are simply languishing within the current range
Truth be told, something we discuss in the online trading course is that at any given moment we have our hands in a multitude of barrels, or processes. If you ask us at any moment if we are long the market, or short the market … my first inclination is to say “yes”.
It just depends on our particular skew, and which process is being discussed.
So let’s look at the reality of this outlook through the lens of the Sharpe Income project.
Yesterday, as noted above, I had discussed a bearish outlook. And yet look at the Sharpe Income project at the time of this writing …
Sharpe Income Project – Income Assets
Medtronic (MDT) … rallying (not yet purchased for this project)
International Business Machines (IBM) … rallying
American Express (AXP) …. rallying
Colgate (CL) … rallying (not yet purchased for this project)
Union Pacific (UNP) … rallying
Microsoft (MSFT) … rallying (not yet purchased for this project)
Wells Fargo (WFC) …. rallying
Sharpe Income Project – Capital Gains Strategy
IVV … rallying
TLT … down slightly
SHY … down 5 cents
Cash … flat
And that is simply our ‘Fixed Income’ approach at the moment, of the project we present here. But it benefits from this rally although I had a bearish bias. If the market falls apart on us? I have actually constructed that account so as to have innate, built-in downside protection (and note that it’s probably not even noticeable at first, and may not be what you think it is. I can assure you it progresses far beyond the realms of basic ‘diversification’).
But as I was saying, that’s simply our Fixed Income approach. Our ‘Short-Term’ trading approaches? Well, for ‘The Sharpe Report‘ … … are we ‘long’ (or bullish) the market at the moment, in the process that we are demonstrating?
Are we ‘short’ (or bearish) the market at the exact same time in the processes that we are demonstrating?
So much time and wasted effort is spent on the part of new retail traders, being led by charlatans, snake-oil salesmen and much of the financial media as to tracking ‘predictions’ of whether someone was ‘long’ or ‘short’ the market in a given periodicity.
If you are new, please understand such pursuits are a total waste of time. Most professionals are running ‘Long / Short’ books; or possibly ones like myself have taken the ‘Long / Short’ concept a step farther. Although we can develop a ‘skew’ to our portfolios (skewed majority long, or skewed majority short) … the truth of the matter is that we just don’t care about stock direction as much as you are being led to believe by others.
Because we have our hands in a ‘multitude of barrels’ so to speak.
You just keep involved, check your weightings, and try as best you can to lean into various swings and trends of the market per your processes …
(we continue the ‘Sharpe Income’ project in the next entry … )