Wednesday: Dow -4.6%
He slept better Tuesday night and arrived Wednesday to crazy numbers on his Bloomberg screens. The overnight futures on the S&P 500 index collapsed from 1170 to 1077, an 8% swing. "It just looked like the world was coming to…." Forester stops himself before finishing. "Well I shouldn't say that, sorry. But I started to think, maybe I'm just wrong."
In just a couple hours he went from bullish to insecure. Stocks crashed out of the gate Wednesday before rising by late morning. By then Forester had steeled himself into buy mode again. He reduced the index puts again and added nearly $10 million of shares across nearly his entire portfolio, which includes top names Chevron (CVX), Marathon Oil (MRO), Altria (MO), The Travelers Companies (TRV), and Microsoft (MSFT). He didn't have time to pick favorites.
After running up most of Wednesday afternoon, stocks crashed again late to finish down 4.6% on the day. Forester was miffed. "Maybe I'm missing something here," he thought. "Because the market is really acting funny. You don't get these large swings in markets unless you're in a 2008 environment."
By the end of Wednesday, Forester was spent. He had been barking orders at his two analysts for two straight days. The S&P had whipsawed by more than 4% every day that week. He had been trying for three weeks to take a vacation to Green Lake, Wisc., with his family.
Deep down Forester thought he had made the right moves. He bought stocks Tuesday and Wednesday after they had fallen about 20% from their year highs. He knew the U.S. economic news hadn't changed as dramatically as the stock market seemed to indicate. So he went home and tried to get some rest. He finally got a good night's sleep.
Thursday: Dow +4%
When stocks opened higher Thursday and kept climbing, Forester started smiling. The fund still has about 15% of its assets in cash, so he isn't making an all-in bet on stocks. And he still owns index puts to protect the fund during future falls. But Forester feels like he accomplished the fund's objective last week: capture 30% of the market downside, and 60% of the upside. "In order to do that you have to add to your exposure somewhere near the bottom," he says. "But it's scary down here." He thinks his high-quality companies will hold up well during tough times ahead.
Once the S&P 500 passed Tuesday's high during trading on Thursday, Forester thought things would get better. For now, they have. After rising on Friday, stocks are up again Monday.
Forester is finally thinking he might be able to get away for a couple days of vacation. And not that he much cares, but his fund's relatively small 3.6% decline the past month is better than every single one of its 1,152 competitors.
