The month of January saw a 'melt-up' in equities, although astonishing, because of the sheer force of it, but not surprising entirely.
I will keep this month's update short and sweet as market movements, both up and down, have raised grave questions in my head as to how to manage money in this environment. I am distilling information as they come and am in process of synthesizing an appropriate narrative as to what is the underlying message of the volatility.
Notably, without any opinion whatsoever, and without an ability to bear the consequences of a buy and hold strategy (as clearly, stocks have moved into punting territory now), the portfolio holds all cash and opportunistic option positions. I believe that the risk management ability (max known total downside) of options now is far greater than portfolio of stocks or plain vanilla (futures) derivative contracts.
According to my strategy objective, this is a deviation from the value-driven principles I love and behold, but the same valuation driven principles have forced me out of the market. I was in an opportunistic long call trade for a further 'melt-up' in equities in the late part of January and the portfolio returns for the month show the downside to the position as I exited.
With utter disgust, I have become a broad-based market investor, if at all, and will probably remain so till there is further clarity. The recent sell- off in February, in my view could go either way but the volatility has been quite amazing, especially for someone without any crisis experience.
Some worrying factors that I am watching out for:
If anything, I am pretty sure that the fear of losing money may have finally set in for equity market participants globally, which at the least, may lead to a healthy capital market.