A mad day trader’s diary of market turmoil

August 22, 2011

The following is a guest post written by Marianne Paskowski, who was vice president of Reed Business Information’s Television Group. Today she manages her extended family’s portfolios from Cape Cod.The opinions expressed are her own.

Some of my pals, with unvarnished disdain, call me a day trader. They lost a lot of money in the 2008 crash. I stayed the course and finally made money. So I prefer the handle “active investor.”

Last week, though, the up-and-down market got me thinking about what I actually do to manage investments, so I kept a diary of my days, tallying up what I did or didn’t do. My conclusion: I’m definitely not an investor, but a trader in this market, and that’s because I feel far worse about what is going on now in the global economy that I did three years ago.

And I don’t see any good news on the short term horizon so I’m trying to keep my powder clean. It’s killing me,  because I’m used to more action. But I’m not crazy and don’t like to be in the path of falling knives.

So let’s revisit last week in what I can only call a bad trip through a carnival house of mirrors —  full of distorting, confusing images. I didn’t have a great week and I don’t know anyone who did. I actually hit the bottle of Tums today. Not a good omen.

Not too shabby at all. The Dow was up 213 points and I had a lot of realized income come my way via dividends and interest from earlier trades. I actually got out to the gym, ever so briefly, ran a lot of errands, but couldn’t stop thinking about the market.

So I bought 500 shares of BMO, set a strike point and sold some covered calls.  I’ve been in and out of Bank of Montreal and always made money. Last go round, I only stayed in for two weeks. I bought it back for $5 a share less than when I sold it earlier this summer. It kicks off a great dividend, so why sit in so much cash? Weeks earlier I grabbed just about every profit off the table, so there wasn’t a lot to do. Very frustrating.

I started getting jittery and I was thrilled that one of my friends canceled lunch, as I was glued to CNBC and watching my computer screen and all of the lousy data. Rather than go to the gym, I worked out in my office. That Shake Weight gizmo that works your entire upper body in six minutes has its merits.

Really, what did France’s Nicolas Sarkozy and Germany’s Angela Merkel actually accomplish in their lauded meeting that day? Not much as far as I could tell. They agreed to impose some obscure banking tax on the 17 Euro nations.

Clearly, the market was in a head-scratching mode, ending the day with the Dow down only 77 points. I did nothing –didn’t buy or sell any positions. My active investing was reduced to watching and waiting.

I could tell the markets were still grappling with what happened in that meeting the day before in Paris. The chatter quickly changed to: What does this mean for U.S. banks with exposure to European banks? The day ended with the Dow up four points. So I tip-toed back into TJX, the darling of retail analysts. Been there before, for a short visit, and made money. So, why not now with back to school and upcoming holiday shopping, I reasoned.

The proverbial $$%^ hit the fan with the Dow down 420 points. Secretary of Treasury Tim Geithner celebrated his 50th birthday and I’m sure he didn’t like that gift. The market sure didn’t like the swirling rumor, or fact, that some unknown European bank filed for an emergency loan from the ECB.

Of course, there were other bad data omens that day, namely very disappointing numbers for existing home sales. The Philly Fed Survey was no gift to the market either, pointing dead south. And then the Consumer Price Index showed that inflation here was on the rise. The perfect storm, leading to the end of a bummer day

I didn’t buy or sell anything, but was happy that I was still in RWM, an inverse ETF that shorts the Russsell 2000 and another, SH, that shorts the S&P 500. Saved my bacon. I really hate to short the market and those inverse ETF’s need a lot of hand holding or you get stuck holding the bag on an up day. I’ve been in and out of both and can’t wait to get out again.

Oh my, I almost forgot to push out the covered call for Coca Cola. I’m losing it, this week, coupled with a really horrible market the week before has almost left me in a stupor.

So my broker moved it to December with a higher strike point. Tomorrow is expiration Friday, when option expire for the month, and KO would have been a goner. Whew, close call.  I know what it’s like to have a call assigned away when you don’t keep your eye on the ball. Thankfully, I’m in good hands with my broker who taught me a lot.

The Dow down 173 points. It was also expiration Friday for August, and of course a Friday where nobody wants to get stuck holding the bag when something could happen around the world. Ah, those pesky expiration days for selling covered calls that occur the third Friday of every month. You make income by basically renting out your stocks. I don’t cover every position because often the strike point doesn’t make the effort worth it, like MO, in my case. Altria-covered call returns are chump change to me.

I turned the TV and computer off and vowed not to watch any financial news all weekend or read another stinking financial newsletter. Enough

One comment

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You are the only person who DOES make sense. Will you manage what is left of my portfolio? Thank you for putting things in persepctive. I appreciate your no nonsense approach.

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