Wade's Market Insights' Year-to-Date Returns, April 26, 2024
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I have had requests, in the past, to post the returns for my newsletter + Private Twitter Feed (X) service. Note: All trades are posted in very close to real-time on the WMI private Twitter (X) page, and a trade alert is sent out to paid subscribers on WhatsApp (for paid subscribers who wish to receive them).
I’ve held off, previously, on posting returns because I trade a lot and I utilize a multi-strategy approach, and it’s not “for everybody.” For example, during significant risk-off periods in the market, I will do a large amount of short-selling and have very few (if any) long positions. This has been my process since the Spring of 2000 and the beginning of the tech bubble bust. Some investors never short stocks or ETFs, and most shouldn’t unless they’re experienced traders and/or they have experienced and skillful guidance.
Thus, some of my best returns/periods over the long time I have been doing this come during bear markets (2000 remains my best ever year in the stock market, but I’ll elaborate on that later). And posting those returns doesn’t help WMI subscribers if they’re don’t short stocks or rarely do so. Hence, I didn’t want to mislead or frustrate some potential paid subscribers who are long-only investors.
With that being said, I am by no means a perma-bear. I trade the trend, and I’ll often go long stretches without shorting stocks, or short in a far smaller amount and size — in part for hedging purposes and/or because the market is at risk of faltering/turning over. As you can see in my 2024 YTD returns, all my gains were on long trades (sometimes utilizing leveraged ETFs), and short sales were negative for the period. That’s okay, it’s part of the process, and I’ll elaborate in detail on that in a separate newsletter.
I’m quite aware that it’s not possible or feasible for every paid subscriber to put-on every single one of my trades, so take what you’re comfortable with and is consistent with your experience and risk-tolerance; both on the long and short side.
If you’re looking at getting more experience at shorting (now is not the time!), I can substantially help you to do so in a prudent risk-adjusted manner. More on that later. But again, I am not bearish on this market. When I become real bearish, I’ll make it quite clear.
As part of now starting to post my returns, I’m going to put a bigger emphasis on highlighting my “high conviction” trades. That should help out less frequent traders. There’s no guarantees, of course, but when I have a strong conviction on a trade it’s because a number of factors are aligning — I’m sure many well-experienced traders can relate. I’ve often discussed these factors in my newsletters or on the WMI private Twitter feed.
Methodology for calculating the returns:
I’ve posted all trades as equal-weighted (equal dollar amounts). I think doing it this way is more helpful for the typical trader/investor and paid subscribers. Doing so, of course, will sometimes increase the effective ROI or decrease it, depending on the particular market period and how much I’ve over-weighted or under-weighted different trades.
I’m also posting them as equal-weighted because it’s not realistically possible for subscribers to replicate my on position-weightings, and I wouldn’t recommend that most investors do so without knowing their financial situation and account size, etc.
For example, I will sometimes employ leveraged ETFs for sector bets. I always recommend that subscribers, on such trades, adjust (reduce) their position-sizing to reflect the leverage and to be consistent with their risk-tolerance.
However, if I have a high level of conviction on a trade, I’ll frequently only reduce the position-size, from my average/standard trade position-size, a relatively small amount (i.e. 10%-20%), or sometimes not at all. In other words, it’s a full-on 3X leveraged bet using the same amount of $$ that I would typically use for the average trade. I don’t recommend that most traders do this. For example, this was the case for the January 5th entry into SOXL (the 3X leveraged bull fund of the Semiconductor SMH ETF). All the stars were aligned for this trade (I won’t go into all the specifics at this time). It ended up being a pretty quick 33.8% gain.
Understand that I don’t use 3X leveraged ETFs real often - I pick my spots, and I get out very quickly if it’s not acting the way the that I think it should be. i.e. The February 1st TZA trade (the 3X leveraged small-cap IWM Bear fund), which resulted in me pretty quickly getting out with a 1.6% loss.
Similarly, I noted to paid subscribers that the March 25th CENX stock trade was a high conviction trade, and I over-weighted it. It ended up being a 30% gain over the next 4 weeks. I also, very recently, noted a trade as a “high conviction” trade for paid subscribers.
For clarification, if I rate something as a high conviction trade, it doesn’t necessarily mean that I expect it to be a rocket ship, but that it has the right combination of characteristics that I look for to make it a high-probability, good risk vs reward trade with a good gain potential. They’re not “high-fliers.”
I also sometimes scale into and out of positions, to manage risk, particularly leveraged ETFs. For the WMI returns spreadsheet, I’ve calculated the weighted-cost basis of such trades/positions, and used the date of the first partial position purchase as the trade entry date, and the date I’m completely out of the trade as the sell date. i.e. The GDXU trade (the 3X leveraged Gold Miner Bull fund), was purchased in 1/2 partials on March 22nd and March 26th, and sold in partials on April 10, 12th and the 15th (in a 20% partial piece, 10% partial, and the remaining position, respectively).
After getting the year (the first week) off to a rough start, it’s been a good stretch. The market doesn’t move in a straight line, so there’s going to be periods where making money is easier (long or short), and others where it’s choppy and more difficult. The key is to be disciplined, and to adjust your trading to reflect the environment. Don’t fight the trend and the tape.
With that being said, I’m always more concerned with the areas/sectors of strength (for longs) or weakness (for shorts), within the market, rather than the very closely-followed S&P 500 index. Breadth and the tape usually tell you a lot more about the market than the S&P 500 index, itself. The S&P 500 is up a solid 6.92% YTD, but the real action has been in some big sector moves underneath the surface.
For new subscribers, I should mention that I never work on writing a newsletter during premarket or market hours — I am immersed in the market action, the tape, charts, the news flow, reading earnings reports, etc. I am always going to focus more on research than my volume of newsletter posts. And the private Twitter page makes for efficient, timely posts on a various market and trade subjects.
I’m far more focused on trading returns than I am on the volume of newsletter output. I still manage some former hedge fund clients and friend’s accounts on a 20% of profits basis — and only profits (hedge fund model, a high-water mark is utilized). I write this newsletter because I enjoy the mentoring/education process, and it helps to keeps me ultra-focused. I’m long-accustomed to high-intensity multi-tasking and juggling a lot of balls, so to speak.
Let me know if you have any questions.