S&P closed down 2.5% today. I took off half my hedge (from 12% to 6% of the portfolio) given that the debt ceiling passed. I left the other half on, however as there's reasonable odds it can break down further from here. This is a little bit of thesis drift given that I only put on the hedge due to my concern of a U.S. default. That said, I think there's room for downside as investors realize that the only thing propping up this market has been 1.) emerging market growth and 2.) government stimulus (fiscal and monetary). While emerging markets can go either way (China sure does seem like bubble territory), 2012 will be a period of less stimulus.
Thoughts on the Hedge
In retrospect this trade is a perfect example of a good hedge. At most I could have lost was ~0.2-0.5% while the upside was disproportionate. I don't say this to pat myself on the back, but because I stumbled upon something that I should study for future consideration.
Interestingly enough, the hedge is currently up ~2.5% as the market has sold off despite raising the debt ceiling.
DCIX
I increased my position in DCIX to 8% today. They report tomorrow morning. Fun times.
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