In hindsight, it should have been clearer that we were way oversold last week. I think back to my
from the amusement park last Tuesday. I talk to a lot of people on the buy side (fund managers), and my calls from the park Tuesday, while dodging cotton candy and dripping ice cream cones, indicated a level of nervousness that had become extremely high.
And, hindsight being what it is, I understand why. After getting pounded for weeks, I was getting worn down, too. I had succumbed to the pressure, demanding of my family that we leave the park early so I could do more work. On vacation. I had to get to my home office.
We had pared our portfolio back in the weeks before last week's nervousness, but my stomach was still in knots -- my stress level higher than in the office, primarily since I couldn't see the people I work with, see the screens I usually watch.
Through the week, we traded well -- hats off to the now-relaxing JJC. We sold a lot of puts Tuesday, bought some stock. Since Tuesday's short-term bottom, we've had a nice rally. The next move is simple: Good
, and the rally continues. Bad CPI, we get hammered. I know. Tremendously insightful. But sometimes it is that straightforward.
When it seems that simple, I start trying to outthink the simplicity. My dilemma: How do you set up the portfolio to take advantage of a rally that could occur if the CPI is benign vs. getting hit by a CPI that is too strong for this still-fragile tape to take? Right now: Sit tight, do nothing.
We added some exposure last week, enough so that I don't feel a need to "reach" for something ahead of tomorrow's report. Sometimes it is better to buy a stock up 3 knowing it might gain 20 than it is to force a trade for those 3 points. Especially when you know things can go sour in a heartbeat. I'd rather wait, like most of my trading colleagues out there today, than get smacked in an unraveling market.
Part of my willingness to sit tight stems from my supreme confidence in our ability to accomplish a great deal of portfolio rebalancing in a matter of moments. So I'm happy to wait, catch up on research, phone calls and emails. Trying to figure out what to do with
(we're long). Trying to position ourselves to take advantage of the earnings coming tonight. Normally, it would make sense to sell the common before the calls and play it relatively risk-free, but the calls have so much premium right now that I am selling a small amount of calls and common.
We're also dipping into some
. Yes, I've been correctly called a disk-drive bear by Cramer, but I -- along with some others -- are chasing a little SEG after
comments that they are seeing some tightness in certain drive capacities. Given these comments, and other positive anecdotal comments from the PC world, I figure the drives should have a trading follow-through. But this is a fast-money game, not some long-term play. Cramer-style, I am kicking myself because we had bought SEG lower, but trimmed back the position with our latest portfolio paring.
Oh, editors -- they never change. Somehow
, the editor-in-chief who is working with me this week, sneaked in some political commentary into my previous column. My only political statement is that I was frightened to read that
looked at a house only a couple of blocks away from our place! Called my wife, told her that we may have to "hit the bid" in our new house. ... Have to admit, after a long night with my daughter's Linda Blair
imitation/stomach ailment and her insistence on watching
for the third time at 4 this morning, it wasn't so terrible not to be "mauled" by JJC this morning at 6:15 a.m. It is good to be missed, but the peace was wonderful!
Jeff Berkowitz is a partner in hedge fund Cramer Berkowitz with James J. Cramer, co-founder of TheStreet.com. At time of publication, the fund was long Hewlett-Packard and Seagate. The fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that the fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Berkowitz's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at