社区

Being a contrarian investor/trader, markets at all time highs are not music that I will want to hear. 

Toppish markets makes it difficult to accumulate undervalued stocks or identify undervalue opportunity. 

There's lots of talks and advise on how this stock market rally still have legs as earnings is still expanding and we should be evaluating based on future earnings growth. Sounds good and sounds factual. stocks are forward looking, earnings forecast is forward looking, however, when everyone is an optimist, funny things happen. Just look at the fall during august 5th. 

Compare that against volatility chart $Cboe Volatility Index(VIX)$ 

Recent volatility are at lows, which means that there isn't much fear in the markets. What this will mean is that any bad news could become black swan events. Good news could also become bad news. Eg. Cut in interest rates is supposed to be positive for growth, but it could be pitched as a sign that economy is slowing and stagnation is coming. 

The problem is that narratives are painted to "explain" sudden drops and raises and not the other way round. if we invest according to their input, it's a sure fire way to sell low and buy high. 

How now then? The supposed interest rate cuts is coming. The problem will be more of how will the market react. There's no sure way. 

What I am doing is that I am splitting my portfolio into 2 big parts. Options and dividend stocks. cash is left on sideline for dividned stock accumulation as well as dividends that had been collected so far. 

Options wise, I have been positioning around 30-40% of portfolio on $ProShares UltraPro Short QQQ(SQQQ)$  $Direxion Daily Small Cap Bear 3X Shares(TZA)$ for protection of main portfolio. I am also shorting stocks that are weaker, as during corrections they crash more and during rallies they are weaker as well. As timing of any reversal is uncertain, I won't short stocks directly, but short by selling call options. 

The advantage that this brings is that time

Decay is on my side even if I am wrong. 

i can also sell calls above recent stock highs or price targets for greater buffer.

In addition to that, I can still defensively roll if the markets rally against my position. 

Time in the market beats timing the market, that's true. But ever wonder why Warren Buffett is holding so much cash now? [Thinking] 

Cold feet cos he is growing old? Or is there something else that he is seeing.

https://www.investopedia.com/how-warren-buffett-berkshire-hathaway-grew-cash-pile-sold-more-stock-8696526

Guess time will tell.[Helpless]  for me, I prefer to buy some insurance and prepare some dry powder. Go big or go home isn't for me.