Buen Dia

Been a long time since the last post.....I am glad to be back. I do not expect a ton of posts over coming months, but there are two major developments / plans for this year's trading that I hope to discuss on at least a weekly basis during rest of the year.

First Point:

I see two themes for this year's speculations. One is the gold market. Second is the real property market. My plan is to be long the gold market in second half of this year and short the real property market at some point as well. I have spent some time over last few weeks identifying the gold stocks and options that I think will benefit most from the end of the rate tightening cycle. I have also assembled a spreadsheet that tracks the different sectors of the real property market by assembling a list of 3-7 companies in each subsector and then taking a simple average of the % the stocks in the sector are down from their 52 week highs. Here is the current printout:

Summary - % Decrease from 52-Week High	Date - 03/10/2006
Sector	%Change
Mortgage Investment Trusts	-34.58%
Homebuilders	-30.04%
Title Insurers	-18.09%
Mortgage Companies	-16.18%
REIT - Healthcare	-8.10%
Mortgage Companies / Government Affiliated	-9.93%
Real Estate Manager / Developer	-8.80%
REIT - Office	-6.09%
Mortgage Insurers	-5.19%
Humongous Banker and Broker(Major US Financial Institutions)	-3.87%
REIT - Diversified	-3.67%
REIT - Hotels	-2.47%
REIT - Retail	-2.27%
REIT - Industrial	-1.26%

It is hopefully evident from the above grouping of the sectors that the phase of the decline in the real property market will affect different sectors earlier than others. This will be similar to the collapse of the internet bubble in 2000 and will probably playout over a 2-3 year period. Then the dotcoms went early, followed by the B2B companies, followed by the telecom carriers and the fiberoptic vendors.

Many of the best opportunities for shorting / buying puts may not occur until the above sectors are down 40-50% from their 52-week highs - because only then will a clear downtrend / bear market in the sector be established. Timing will be key here - and I have also modified a framework taken from Soros to try to understand the course of the cycle to point out where exactly we are in the industry's boom and bust. This will be interesting / exciting to work with.

Second Point:

This is probably more important than all of the above discussion combined although less interesting at least to me. I am planning on instituting a system trading program. I will still execute the trades - but I will post the plan in terms of maximum % loss allowed on any one trade before liquidation, maximum % of capital committed to any one position or sector, and finally (I am still toying with this part) - at what points to take any profits on the successful trades (I am leaning toward taking in 1/3s...but we will see.) I expect the powerful move of posting the program on the blog will force me to hold to its parameters and hopefully not let my emotions get the better of me as occurred several times last year.

So - we are 2.5 months into the new year and I am a bit late on this. I apologize to any readers who are still out there. Still - I think that we have a lot to be excited about for this year and a ton of learning yet to do. We can't let last year's lessons evaporate ........ need to put the hard earned experience to work for the better. :)

Best regards,

BG