Portfolio Update - February 2009

As usual, I received $ 888 saving for the month of February 2009. I'm sitting on about $ 3,700++ cash which is about 30% of the portfolio. As I mentioned in my earlier entry, I am waiting for the right timing to deploy cash.

In a volatile environment, I would think that we need to stay diversified and never be fully invested no matter how bullish I am on equities. One also must not take large positions. My timing on Mui and Parkson was certainly wrong as I dipped into the market too early. Fortunately, I realized that I was wrong, I began to pay a lot more attention to market psychology compared to the past. I also began to pay attentions to a group of people that use technical analysis - when valuation group defeated, most people will turn to chart which nothing but looking at floor and resistance based on past prices. It has been working well when market lost its sanity, as soon as sanity returns, valuation group will overpower this group, I begin to see people says not all stock is created equal. Stocks with high dividend yield is recovering very strongly.

I made a wrong call last month, I thought January was going to fly but Dow ended up about flat but stays above 8,000. The market threaten to go below 8,000 at least 4 times(including yesterday), this is a very testing time - the market is searching for a big negative catalyst. US Q4 GDP has been bad but still did not manage to push it down to below 8,000, I am not sure what will be the big negative catalyst to push it down. Or simply less bad news will do the job to let the market crawl up slowly.

On gold, I was qualifying a technical buy if brakeout above $ 850, buy on pull back was OK, now that it has broke out above 900++ and retail investors start to pour in money(gold invested in ETF is pilling up), upward momentum is there. The heat is turning up but it has not turned into euphoria yet. Searching the word gold bubble on Google simply does not exist so no bubble so far. But I think it is overbought, there is a good chance that people will chase to US $ 93 - 95 before correction set it to retrace back to US $ 87 - US $ 88. Then it should move towards challenging the previous peak at around US $ 100. Breakout from US $ 100 will be really interesting, I can almost bet for a parabolic rise. I seldom chase up things at all time high if there are better alternatives. For example: USO ETF( United States Oil) is selling for US $ 29 and there is a potential that it can rebound by 20% to US $ 35 vs chasing GLD ETF at US $ 91 to bet it will rise 20% to US $ 110 in six month time, which alternative has better return on risk adjusted basis? Nothing wrong with either bet but just a matter of personal choice and risk temperament.

I remember one thing that Warren Buffett said last year when he put his money to work in Goldman Sachs, all bets are off if there is no government bailout. I am still holding on to this premise, all my investment bets are off if I see the bailout fails - this is the only single negative catalyst that I think will bring the market to its knees.