Condition Bear Market
S&P Target 970
Hedge XLE -1.14%

Position Date Return Days Call
BKI 5/31/2011 0.64% 98 Hold
CFI 6/22/2011 0.44% 76 Hold
SE 6/27/2011 -5.97% 71 Hold
AWR 7/5/2011 -3.64% 45 Closed
CLH 7/6/2011 -3.60% 62 Hold
GCI 7/14/2011 -26.74% 54 Buy
AGO 8/5/2011 0.72% 32 Hold
DISH 8/10/2011 8.75% 27 Hold
NA NA NA NA NA
NA NA NA NA NA
Mousetrap Return -3.68%
S&P Return -9.32%
Hedged Return -4.67%

Mousetrap Annualized -23.09%
S&P Annualized -58.60%
Hedge Annualized -29.36%

Annualized Advantage 35.50%
Hedged Advantage 29.24%

The hedged return is nearing a 30% advantage, and the long only return is still above 30%. I suspect that we have a little lower to go before the next mini-bounce, but this is normal bear market behavior. Typical stop losses will get taken out on the long and the short side, causing both long investors and short sellers to lose money.

My own returns, being hedged are moving less than 1% a day even while the rest of the market gyrates around. Without a very sophisticated timing model and nerves of steel, the only options in a bear are hedged or in cash.

Hopefully the model will work out a reasonable gain by the end of the bear – probably in the next six months or so.

GCI remains the buy – and it’s getting close to the next reasonable buy point. Anywhere in the next few sessions would be reasonable, but should be hedged with a compensating short position, which the model is using with an XLE short.

Tim