I unwound my expiring uncovered calls on Sept. 17 when I bought them to close . . . at big losses. Although I still have decent unrealized gains from my long equity holdings, this was a disastrous month compared to the rest of 2009.
This month’s realized loss has wiped out all of my realized gains for this year, and then some. That sucks. If I were a hedge fund manager I’d probably be fired. That’s the great thing about working for myself – no one can fire me based on poor short term performance. I truly believe it will be at least a decade for my investment philosophy to show measurable results. That’s fine with me, because I don’t have to prove anything to anyone.
I’ve said all along that I’m a long term investor, and like Warren Buffett I’d have a hard time getting hired or keeping a job today with money management firms that measure themselves by the month rather than by the decade. Lately I’ve been too focused on the short term myself, taking short-term profits from uncovered calls while broad indexes have been climbing a wall of worry. I have also underestimated the stupidity of professional investment managers who are all too eager to bid into an overvalued market in their never-ending quest to beat the other guy’s alpha.
I’ll remind myself of Uncle Warren’s wisdom: Be fearful when others are greedy. Investors jumping back into the market are getting greedy, so I need to be more fearful. I’ll lay off the uncovered ETF calls for a while and instead focus on finding some long-term value plays for my focus portfolio. Those are things I can measure with much more mathematical precision than the broad market sentiment that drives index prices.
