Portfolio Diversification – The Funny Way

by JDH on February 13, 2010

This week was not that eventful. The Dow, the S&P 500, and most other indexes finished the week roughly where they started. The price of gold was up, but not enough to generate any real headlines. The major indexes (or indices, if you prefer), are down on the year, and we are now at an inflection point: Either the rally that started in the spring of 2009 will continue, or the correction that started in early 2010 will continue. We are either pausing in a rally, or continuing the correction.

I’m betting on the latter, but what do I know?

Over the past two weeks I bought puts on the S&P 500, and sold them at a profit, then bought calls, and sold them at a profit, and then on Thursday I went short again, picking up a few shares of RSW – Rydex Inverse 2X S&P ETF, on the expectation of further weakness. These trades are all pure gambles, not with any real money.

I continue to hold my gold and silver positions, and this week I added a new stock: PBG.TO – Petrobank Energy and Resources Limited. (Full disclosure: this is NOT a Dines or Casey stock, so you can blame me for this one). This is an oil play, both in Saskatchewan and Columbia (although I assign no value to the operations in Columbia). It’s an interesting story, with upside. They have some interesting technology for exploiting the oil sands, that is already working, so this is not a start up or an exploration play. Even better, they have recently restructured their balance sheet, converting debt into equity. I’ll leave it to each of you to do your own due diligence, and as time permits I may have more to say on this in the future. In short, I want to diversify away from just gold and silver, so other resource stocks will be added to the mix as time goes on.

Speaking of diversification of one’s portfolio:

The only other story in the past seven days was the 2010 Superbowl, and the only real story (unless you are a New Orleans fan), was my new favorite commercial, from ETrade. I’ve watched it a dozen times, and each time is funnier than the last. But I guess that’s just me.

My gut still tells me that we are in for interesting and volatile times over the next few weeks. Perhaps it will be a terrorist attack, or a renewed outbreak of H1N1 at the Vancouver Olympics. (They got off to a horrible start with the death of a luger in a training run on Friday). Perhaps it will be something from Iran, who keep making noises. Perhaps it will be something else.

Perhaps I worry too much.

If so, I spent Friday skiing with my boys, and I’m taking the rest of the weekend (and the Family Day Holiday here in Ontario on Monday) off to visit with family and friends, so perhaps I will be less cynical when I return to these pages next Saturday.

See you then.

{ 0 comments… add one now }