I'm not a market timer, but have had money arrive with good timing this year. In the past few months, many of the EU debt tantrums have served as opportunities to place big investments on 3 of the major ETFs. Most of those bets ended up being well timed. Looking at the market today, those funds are up more than one should rationally expect.
While earnings season hasn't been the blood bath it could have been, there is no reason for stocks to be up. My conclusion is that these are not trading at bargain prices.
QQQ: trading at 67 but was recently in the low 60's
SPY: trading at 140 but was recently 130
DIA: trading at 133 but was recently 122.
Note that all of these funds are up about 20% since Jan/Feb, with no solid foundational improvements to the core economy. Companies are chugging along with skeleton crews of cheap labor and generally not hiring.
It's not clear what is giving investors this unfounded optimism, but it is not fundamentals. Whether it is the fact that things are looking good for Romney winning the election or that Europe has a plan for a plan for a plan which will never be implemented or just the lack of catastrophic news, I'm not comfortable.
In the past month, I've pulled two big holdings that I've had for years off of the table (AMZN and GOOG). Not simply because the market is artificially up, but because it is up enough that I have earned my required annual rate of return on the investment and am happy. I can't predict a pullback, but I can say with confidence, that once you've made your return, go home happy. Both sales have profits at long term capital gains rates.
I don't like having money on the side lines. But I dislike it less than buying stocks at artificially high prices.
Tuesday, August 14, 2012
Tuesday, August 7, 2012
Social Security Ponzi scheme beginning to collapse
The most critical component of growing a Ponzi scheme is that it works as long as more people pay into it than collect, whereby the negative growth and siphoning of money off for illegitimate functions can be covered up. As soon as that rule cannot be held, it all collapses as people expect to get back more than they paid in.
Despite the ability to put a gun to our heads, the government's Ponzi scheme Social Security can no longer abide by that rule. The collapse is on. It will be both slow and painful.
My lifetime goal as a parent is to see that my children never pay into this bankrupt program.
Despite the ability to put a gun to our heads, the government's Ponzi scheme Social Security can no longer abide by that rule. The collapse is on. It will be both slow and painful.
My lifetime goal as a parent is to see that my children never pay into this bankrupt program.
Tuesday, July 31, 2012
Paying off your home in 7 years or less! Priceless.
If you've read a lot of this blog, you know I'm a big Dave Ramsey fan. I've heard Dave say their average "fan" and FPU grad, will pay off their mortgage in 7 years.
Listen to the July 30 webcast of the radio show at about 2:17:00 -2:19:00 as a couple describes their experience. It is AWESOME. Listening to it made me remember the month we paid off our home as well as the months following. There are fewer levels of peace greater than that feeling of having a paid for home.
The funny part about this 7 year number is that I was talking to an accountant on a prior consulting project back in 2007 who was buying a house ($700k). He was talking about the mortgage options and the 7 year balloon was one of them. I told him that option worked pretty good for me because you could get a low payment and pile up cash and pay it off at the end of the balloon if he felt like it.
The entire team, including the director, laughed at me like paying off your house was the most absurd they had ever heard of.
Point of fact, Dave Ramsey encourages buying a house with cash, but doesn't beat his listeners up if they get a 15 year mortgage. He does not encourage balloon mortgages, that was something I did long before listening to his show.
Listen to the July 30 webcast of the radio show at about 2:17:00 -2:19:00 as a couple describes their experience. It is AWESOME. Listening to it made me remember the month we paid off our home as well as the months following. There are fewer levels of peace greater than that feeling of having a paid for home.
The funny part about this 7 year number is that I was talking to an accountant on a prior consulting project back in 2007 who was buying a house ($700k). He was talking about the mortgage options and the 7 year balloon was one of them. I told him that option worked pretty good for me because you could get a low payment and pile up cash and pay it off at the end of the balloon if he felt like it.
The entire team, including the director, laughed at me like paying off your house was the most absurd they had ever heard of.
Point of fact, Dave Ramsey encourages buying a house with cash, but doesn't beat his listeners up if they get a 15 year mortgage. He does not encourage balloon mortgages, that was something I did long before listening to his show.
Monday, July 30, 2012
Being right- revisited
Some Monday night pontifications
Over at Hot Air, there is speculation that Wall Street may be betting that Romney will win. With my political views, I am in favor of that outcome, but I am not sure. There is a lot of voter fraud and even more people getting free stuff for this to be certain.
My entire investment strategy since 2008 has been on KNOWING that the market is going to suck. This leaves me with the problem of not being sure if it will continue to suck or not. Romney can't fix everything (Europe for example). What he can fix, can't be fixed over night. So I am CERTAIN that growth will be slow.
Sure that's a shade riskier than predicting the sun will rise, but not a bad foundation to start on. Any giant leap in the market from now until April is purely artificial. The market going up because the EU has a plan for a plan for a plan to stem collapse is (in Mary Poppin's lingo) a pie crust rally; easily made and more easily (and frequently) crumbled.
Shooting from the hip, I see job creation as the weather vane of when the market really recovers. I don't mean the crap numbers put out by the government. Talk to your out of work buddies. Right now, I know a ton of able bodied men and women who have been out of work for a year. When you see them go back to work, then you know that consumer spending will start to rise w/in 2 quarters as will business purchases. Further, when your buddies start to ask "do you know of anyone who would fit this position?" then you know the declining unemployment rate is for real. You also know that demand is up and higher wages may also follow. Somewhere in this transition, you can safely stop selling those covered calls 10% into the money. Rallies will be based on actual improvement.
Of course, if Romney loses, betting on continued flat to down markets is a decent investment strategy for the next 4-5 years as the US economy will mirror or even lag the EU. A positive sign is that no one is sure of that loss and therefore NOT betting against it.
Over at Hot Air, there is speculation that Wall Street may be betting that Romney will win. With my political views, I am in favor of that outcome, but I am not sure. There is a lot of voter fraud and even more people getting free stuff for this to be certain.
My entire investment strategy since 2008 has been on KNOWING that the market is going to suck. This leaves me with the problem of not being sure if it will continue to suck or not. Romney can't fix everything (Europe for example). What he can fix, can't be fixed over night. So I am CERTAIN that growth will be slow.
Sure that's a shade riskier than predicting the sun will rise, but not a bad foundation to start on. Any giant leap in the market from now until April is purely artificial. The market going up because the EU has a plan for a plan for a plan to stem collapse is (in Mary Poppin's lingo) a pie crust rally; easily made and more easily (and frequently) crumbled.
Shooting from the hip, I see job creation as the weather vane of when the market really recovers. I don't mean the crap numbers put out by the government. Talk to your out of work buddies. Right now, I know a ton of able bodied men and women who have been out of work for a year. When you see them go back to work, then you know that consumer spending will start to rise w/in 2 quarters as will business purchases. Further, when your buddies start to ask "do you know of anyone who would fit this position?" then you know the declining unemployment rate is for real. You also know that demand is up and higher wages may also follow. Somewhere in this transition, you can safely stop selling those covered calls 10% into the money. Rallies will be based on actual improvement.
Of course, if Romney loses, betting on continued flat to down markets is a decent investment strategy for the next 4-5 years as the US economy will mirror or even lag the EU. A positive sign is that no one is sure of that loss and therefore NOT betting against it.
Friday, July 27, 2012
Hagglers be damned!
Some cultures expect you to haggle. I am not of that culture. I don't care if you are from a culture who likes to haggle, I personally find it insulting. Mostly because it's done badly, in bad faith and without consideration for the potential cost.
When you see a good deal, shut up and snatch it.
I'm in the midst of selling some equipment. I've priced it well below retail value but well above desperate. I've passed on several low ball offers. One clown drove 400 miles and when he arrived went to putting down everything I had for sale saying it wouldn't work for his company and then told me in no uncertain terms that he never pays full price for anything. He then offers me almost half the asking price for one piece of equipment. I should have told him to find his car keys and leave, but did end up selling him some other stuff that I really wanted to get out of my shop before it got ruined by moisture. He had gotten a hotel room and called me the next morning and upped his offer to 5% below what I told him my floor was. I was polite, but I should have told him the new floor price was my full asking price. This bozo was as bad as any craigslist lowballer.
Today I had a reasonable offer which wasn't too insulting, but still bothered me. I verbally accepted it. However I forgot that I had another (soft) full price offer which I ought to have given first right of refusal to at least put down earnest money. My bad. However I did manage to contact the soft offer and give them a short window to put up or shut up and then quickly informed the haggler. The soft offer person jumped at the chance to get this and apologized for their slowness.
Now had the haggler not been so eager to undercut an already good deal, they would have been able to drive away this morning with a hell of a bargain. Their necessity to haggle means they will probably have to pay 50% more to buy this same equipment retail. Three years ago I had to pay double what I'm asking for a similar piece of equipment because you can't buy this stuff off the shelf.
Haggling and stock trading
There are those few moments after buying a few round lots when you wonder if you sell the covered call option at the higher end of the bid/ask window, with the reverse being true when closing out a position. I don't screw around letting the clock tick. In the time you spend trying to make a few extra bucks, you can lose hundreds by a swift market change. True sometimes it can be in your favor, but why screw around when you've already done the math at the listed bid/ask price? Like my equipment haggler, your desire to get an even better deal might cost you thousands.
When you see a good deal, shut up and snatch it.
I'm in the midst of selling some equipment. I've priced it well below retail value but well above desperate. I've passed on several low ball offers. One clown drove 400 miles and when he arrived went to putting down everything I had for sale saying it wouldn't work for his company and then told me in no uncertain terms that he never pays full price for anything. He then offers me almost half the asking price for one piece of equipment. I should have told him to find his car keys and leave, but did end up selling him some other stuff that I really wanted to get out of my shop before it got ruined by moisture. He had gotten a hotel room and called me the next morning and upped his offer to 5% below what I told him my floor was. I was polite, but I should have told him the new floor price was my full asking price. This bozo was as bad as any craigslist lowballer.
Today I had a reasonable offer which wasn't too insulting, but still bothered me. I verbally accepted it. However I forgot that I had another (soft) full price offer which I ought to have given first right of refusal to at least put down earnest money. My bad. However I did manage to contact the soft offer and give them a short window to put up or shut up and then quickly informed the haggler. The soft offer person jumped at the chance to get this and apologized for their slowness.
Now had the haggler not been so eager to undercut an already good deal, they would have been able to drive away this morning with a hell of a bargain. Their necessity to haggle means they will probably have to pay 50% more to buy this same equipment retail. Three years ago I had to pay double what I'm asking for a similar piece of equipment because you can't buy this stuff off the shelf.
Haggling and stock trading
There are those few moments after buying a few round lots when you wonder if you sell the covered call option at the higher end of the bid/ask window, with the reverse being true when closing out a position. I don't screw around letting the clock tick. In the time you spend trying to make a few extra bucks, you can lose hundreds by a swift market change. True sometimes it can be in your favor, but why screw around when you've already done the math at the listed bid/ask price? Like my equipment haggler, your desire to get an even better deal might cost you thousands.
Paying off your mortgage
It's an amazing notion that I can't quantify outside of personal experience. People who pay off their mortgage NEVER want to take on debt after that point. NEVER NEVER NEVER...
Wednesday, July 25, 2012
It's not that my returns are awesome...
My returns would not blow your pants off. Who really gets excited about targeting 7-12% while hitting 5-14%.
Most of the time, no one. What is impressive about the style of investing outlined in this blog is that the positions I lay out are incredibly resilient to the market performing badly.
I suppose when there are massive upswings, I'll be getting teased for my modest returns. I'm OK with that. It's a lot better than getting your pants pulled down when the market goes south.
Below is the round lot math on my latest transaction (which was much larger than a single lot). Note that I'm really loving the ETFs. I've already done similar transactions on DIA and QQQ, so this time around I sold my KO positions (which were about to get exercised on the next ex-div date) and took a large position in the S&P via SPY.
Most of the time, no one. What is impressive about the style of investing outlined in this blog is that the positions I lay out are incredibly resilient to the market performing badly.
I suppose when there are massive upswings, I'll be getting teased for my modest returns. I'm OK with that. It's a lot better than getting your pants pulled down when the market goes south.
Below is the round lot math on my latest transaction (which was much larger than a single lot). Note that I'm really loving the ETFs. I've already done similar transactions on DIA and QQQ, so this time around I sold my KO positions (which were about to get exercised on the next ex-div date) and took a large position in the S&P via SPY.
|
Purchase details
|
SPY shares optioned to 123 in 2014
|
|
Quantity
|
100
|
|
Initial
Cost
|
-13355
|
|
Initial
Option Sale
|
1870
|
|
Revenue
from future sale
|
12300
|
|
Estimated
Dividend (1.5 years)
|
405
|
|
Total
Revenue for holding period
|
1220
|
|
Annual % return ((1220/(13355-1870))/1.5
|
7.08%
|
Subscribe to:
Posts (Atom)