An interesting month, no doubt.  I updated my performance page.  All in all, I can't complain having notched a 1.32% return.  Of course this trails a stock only portfolio and even my 45% stocks/45% bonds/ 10% cash "benchmark portfolio".  I need to study the benchmark issue again and see if another with a lower equity amount is more appropriate.  But, my previous work supported that one and I am probably going to stick with it.

The real question is why I am keeping my equity exposure as low as it is given my view that stocks are cheap.  I think I'll have to consult a psychologist for that one.

Currently I am at 25% exposure ( a far cry from the 45% benchmark).  Given the big January run-up, I feel that it is prudent to be a bit conservative.  I have done well in spite of my low allocation so I shouldn't beat myself up too much!  In addition, the numbers were good in spite of a 0.50% hit from AAPL alone!

I have taken profit on CHK.  Great run from that stock, but I think it is a bit expensive given all the restructuring it is undergoing.  In addition, I have cut back on dividend payers that are not paying much more than the SPY - XOM, for example.  Also, I have rebalanced the stocks I hold to roughly equal dollar amounts (except for AAPL and S).

Options continue to be cheap and I replaced the equity exposure that I sold in the stocks by buying March call options.   I REALLY LOVE THIS TRADE.  I just purchased March 155 Calls at just above 10.5% volatility which is very cheap.  If you are underweight and looking for a way to get in to what could be a big rally, but with some protection, then this is the opportunity.

If you are adventurous, you can buy a bit more than you need and hedge the extra by selling SPY agains it.  I would not recommend this unless you understand the basis of option pricing.  But, as part of the rationale of this blog, I am revealing everything I am doing, so there you have it.

I have been WRONG about bonds on this recent move.  Given that we continue to get poor economic growth numbers, I believe bonds are still good.  Right now, they are going down because you have money coming out of them at the margin to go into stocks.  I believe the right trade is to pull money out of CASH not bonds.  But, that is not the way things are trading right now.  I am sticking with it, though.   And may buy some more.  Currently I have about 9% in long term government bonds through TLT.