After two weeks of travel - very stressful - I've returned to my turret and see the jizz [ that's a real word - a prior Word of the Day ! ] of the market as devastation in many stocks reminscent of a World War I battlefield after a thorough shelling and gas attack. Ugh !
Obviously, my moves to buy the big commercial bank stocks in my Alpha Fund was ... "early" at best. At worst, I suppose "stunk" fits. Other postions in the Alpha Fund, except GE, have performed rather well taking into account the trading adds at the lows earlier this year. Even though the Alpha Fund is designed to be concentrated in a few big positions ( < 10 ), some diversification is still crucial to prevent a really huge meltdown. Of course, limiting the Alpha Fund to about 15-20% of my holdings helps, too. This is risk and money management.
What now ?
I will continue to play out the hand using meliorism. Some new money coming in a few days will be deployed into my stocks that are now ... uh ... "bargains". Oh, I remember well those quotes of Jesse Livermore scoffing at the public buying "bargains". But my long term thesis still seems correct, viz., that the big banks will gain share and profitability vs. the other parts of the financial sector. Also, I need to seek a few smaller stocks with really good growth prospects.
I wonder if this news was overlooked on Friday: "WASHINGTON: Sales of existing US homes rose a surprising 2.0 percent in May from April amid falling home prices, the National Association of Realtors (NAR) said on Thursday. The improved monthly data for the battered real-estate sector offered a fleeting glimpse of relief from a severe and prolonged slump that has resulted in spiking foreclosures and credit turmoil. " Uh ... who was it that forecast a housing bottom in Spring ? Uh ... I think that name began with "Bu..." Hehehe, and it wasn't "Butthead". I also read in the Financial Times that London's regulators are forcing hedge funds to disclose large short positions much faster. Will our SEC follow ? Short interest continues to grow, so I suspect the beefers will continue to push the market down.
Inflation
Gosh, I thought that "inflation" meant a broad increase in prices. In the late 1970s, housing costs increased dramatically as inflation was rampant due to excessive money printing by Jimmy Carter's Fed. This weekend I got my real estate tax bill and it was down by 6.8%. So that prompted me to compute my actual housing costs. This is mostly mortgage interest and principal, taxes and insurance. Bunkerman has a fixed rate, 30 year mortgage at 5.41%, so that cost has not changed. Real estate taxes are down, as mentioned. Insurance, including an umbrella liabiliy policy and earthquake insurance, is down by 12.7%. Combining in actual $ amounts, the total is down by 3.42% year over year. That is strange, for a year of such rampant "inflation".
Reading the history of the Mameluk empire in the period from about 1200 AD to 1516 AD, I noted that the cost of living in Cairo was increasing dramatically in the late 1400s ... before 1492. Gosh, I wonder how that Spanish gold affected prices before the discovery of America by Columbus - a time warp ? Ok, enough jest. But the point is that blithe quips about inflation and its causes in the past might fall apart when actually looking at historical facts. That same applies to the present.
Checking gasoline demand from my commodity research site, the public's demand for gasoline has sharply fallen. Summer "driving" season seems to be gone. Year over year demand is about 3% lower and the usual hump from June to late August might not exist this year. Recent demand is about the same as last December. Since the US is the largest consumer, overtime this will have an effect. If only Congress would kick the pension funds out of the futures market and into the real, physical oil markets where they belong. Let them buy physical oil in the ground, not futures or other derivatives with limited natural hedgers.
Word of the Day
This week I will focus on "syn-" words. That's "syn-", not "sin" for those readers thinking about that other, slang, meaning of "jizz".
"Syn-" is a combining form to make compound words, being a Latinized form from Greek.
Syn- means together, similarly, alike.
"Synchronic" - adjective {$10]
Synchronic means describing a subject as it exists at one point in time; it's opposite is "diachronic"
Sentence: A simple, synchronic summary of the US presidential campaign for 2008 is a slugfest between Obama and Big John.
[Did you notice that alliteration in Bunkerman's prose ? Hehe ...]
Showing posts with label money management. Show all posts
Showing posts with label money management. Show all posts
Monday, June 30, 2008
Sunday, January 13, 2008
Strategy and Money Management
The markets have given all a very hard six months. A review of the strategy and money management plan is warranted.
My outlook is for a renewed bull market after this correction in price and time runs its course. The Fed has cut rates and Ben has indicated that more cuts are coming. Their TAF has reduced spreads in overnight lending. "Don't fight the Fed" is a long-standing rule that pays off given time. It takes time for investor fear to work itself out. Unless the Fed betrays Ms. Market, she will be looking quite attractive by fall.
My long term money management plan gives me the flexibility to withstand these wild days. There are two parts to it.
First, the bulk of my investment assets are in the "Krypto Fund". These accounts amount to about 80-85% of my investments today. The "Alpha Fund" accounts comprise the remaining 15-20%, as I have cut the size back from the prior 25% as I posted this fall. Why did I do that ? It was simple risk management. As the dollar value of the Alpha Fund grew, the absolute $ amount of the volatile swings got scary to me. Seeing my accounts "fluctuate" by a personally significant amount was too much. So I cut them back. Remember, I use margin in my Alpha Fund - it's an aggressive fund. Everyone has to set a $ limit of what amount of a "fluctuation" is too much for them.
Now I can be aggressive in my Alpha Fund because the bulk of my investments are managed thru long proven, globally diversified index funds plus real estate funds and gold. So this money is safe and provides really fine, long term returns, viz. over 10% per year on average. If you have a safe base - core holdings of diversified assets - you can be aggressive on your "Alpha Fund". A safe, well-structured investment base is crucial to maintaining a positive mental attitude in your investments. An investment base is like the castle of a Baron. From his safe castle, a Baron can make forays to gain new wealth and lands. If setbacks occur, the Baron can return to the safe base and recover and regroup to fight again. You need this safe castle, too.
If you try to be aggressive with too large an amount of your holdings, the swings and volatility will shake you mentally and financially. So don't do it. This is an absolute $ limit on the amount you can bear under volatile market swings, not a % limit. The absolute $ amounts are what causes fear, not the percentages. An absolute $ limit on your volatility in your "Alpha Fund" will help you control position size in risky stocks. I can keep a very large position in stocks like BAC, but a stock like EDU gets less. Almost all "four letter" stocks have much risk of a blow-up, except the larger, stable ones like GOOG, CSCO, ORCL, etc. So keep the position size in those down.
It's been a tough year so far. Take some deep breaths, collect your thoughts and get ready to ride the bull. A likely starting time is the Fed meeting of late January.
My outlook is for a renewed bull market after this correction in price and time runs its course. The Fed has cut rates and Ben has indicated that more cuts are coming. Their TAF has reduced spreads in overnight lending. "Don't fight the Fed" is a long-standing rule that pays off given time. It takes time for investor fear to work itself out. Unless the Fed betrays Ms. Market, she will be looking quite attractive by fall.
My long term money management plan gives me the flexibility to withstand these wild days. There are two parts to it.
First, the bulk of my investment assets are in the "Krypto Fund". These accounts amount to about 80-85% of my investments today. The "Alpha Fund" accounts comprise the remaining 15-20%, as I have cut the size back from the prior 25% as I posted this fall. Why did I do that ? It was simple risk management. As the dollar value of the Alpha Fund grew, the absolute $ amount of the volatile swings got scary to me. Seeing my accounts "fluctuate" by a personally significant amount was too much. So I cut them back. Remember, I use margin in my Alpha Fund - it's an aggressive fund. Everyone has to set a $ limit of what amount of a "fluctuation" is too much for them.
Now I can be aggressive in my Alpha Fund because the bulk of my investments are managed thru long proven, globally diversified index funds plus real estate funds and gold. So this money is safe and provides really fine, long term returns, viz. over 10% per year on average. If you have a safe base - core holdings of diversified assets - you can be aggressive on your "Alpha Fund". A safe, well-structured investment base is crucial to maintaining a positive mental attitude in your investments. An investment base is like the castle of a Baron. From his safe castle, a Baron can make forays to gain new wealth and lands. If setbacks occur, the Baron can return to the safe base and recover and regroup to fight again. You need this safe castle, too.
If you try to be aggressive with too large an amount of your holdings, the swings and volatility will shake you mentally and financially. So don't do it. This is an absolute $ limit on the amount you can bear under volatile market swings, not a % limit. The absolute $ amounts are what causes fear, not the percentages. An absolute $ limit on your volatility in your "Alpha Fund" will help you control position size in risky stocks. I can keep a very large position in stocks like BAC, but a stock like EDU gets less. Almost all "four letter" stocks have much risk of a blow-up, except the larger, stable ones like GOOG, CSCO, ORCL, etc. So keep the position size in those down.
It's been a tough year so far. Take some deep breaths, collect your thoughts and get ready to ride the bull. A likely starting time is the Fed meeting of late January.
Friday, September 21, 2007
Money Management
I computed more accurate numbers on my Alpha Fund and it's gotten too large relative to my Krypto Fund due to the strong gains this year mentioned yesterday. I want to keep it at 25% of the Krypto Fund. So I have to sell some more stocks today to cut it back. I'm still very bullish - this is money management. If I let the Alpha Fund get too large, the swings it incurs as the market moves can get a "wee" bit scary [ hehe, using a little Scottish there ;-) ].
I looked at the groups in it and the oils have really moved up a lot and are now well overweight - they are 12%+ of the 25% even after the sales of Wednesday and I want them to be 10% of it. So I need to sell some big oils. I'll pick ones that I can get long term gain treatment for the partial sales. I still like them all, but money management discipline rules. I need to sell a wee bit of miners, too. I'll let half of my FCX go. I have long term gains (over 100%) on it and it's looking a wee bit extended, too. Babblevision pumped it, too, perhaps an omen of a pullback?
I gauged the inverse S&H pattern in the S&P 500 cash index that was confirmed yesterday: it measures to roughly 1600.
The drop in the dollar is going to punish nations that rely excessively on exports. All those nations need to develop more consumer demand and consumer-driven international trade. But one problem they have in places like Europe and China and Japan is demographics. All those nations are very "old" in the distribution of their populations. Old people just don't buy & use things like the young. China and Eastern Europe have lots of potential consumer growth, though, from the evolution from decades of suppressed demand from the communist past.
The futures are strong early AM. I don't see any news, so it might be option related or maybe the public continues to buy mutual funds.
ORCL reported strong earnings - the chart gave the correct picture. They usually do. I'm holding ORCL for a good while longer as these strong results play out.
PS: This big move in gold & silver has increased the value of my holdings in those so much I don't need to buy as much as I thought in October. So I'm selling half my gold futures and the silver futures I bought in the summer for good "sugar". Again, this is purely money management and keeping the asset allocations in my Krypto Fund correct (10% gold & silver - that's a lot).
PPS: I don't understand why people (other than perma-bears) can say the 30 year bond is showing more inflation risk or is a harbinger of disaster. The long term real rate of return on bonds is 3%. Year-over-year core inflation is about 2%. Higher mathematics shows that 2% + 3% = 5%. That's where the 30 year bond should be. There sure is a lot of babble on Babblevision lately.
P^3S: Sheesh ... these Babblevision talking heads are dumb. The reason the long bond yields are going up a bit is BECAUSE THE FED RATE CUT HELPS ELIMINATE RECESSION RISK. Recession risk is why the long term yields got so low. How stupid can they be! They don't even think before blabbing!
I looked at the groups in it and the oils have really moved up a lot and are now well overweight - they are 12%+ of the 25% even after the sales of Wednesday and I want them to be 10% of it. So I need to sell some big oils. I'll pick ones that I can get long term gain treatment for the partial sales. I still like them all, but money management discipline rules. I need to sell a wee bit of miners, too. I'll let half of my FCX go. I have long term gains (over 100%) on it and it's looking a wee bit extended, too. Babblevision pumped it, too, perhaps an omen of a pullback?
I gauged the inverse S&H pattern in the S&P 500 cash index that was confirmed yesterday: it measures to roughly 1600.
The drop in the dollar is going to punish nations that rely excessively on exports. All those nations need to develop more consumer demand and consumer-driven international trade. But one problem they have in places like Europe and China and Japan is demographics. All those nations are very "old" in the distribution of their populations. Old people just don't buy & use things like the young. China and Eastern Europe have lots of potential consumer growth, though, from the evolution from decades of suppressed demand from the communist past.
The futures are strong early AM. I don't see any news, so it might be option related or maybe the public continues to buy mutual funds.
ORCL reported strong earnings - the chart gave the correct picture. They usually do. I'm holding ORCL for a good while longer as these strong results play out.
PS: This big move in gold & silver has increased the value of my holdings in those so much I don't need to buy as much as I thought in October. So I'm selling half my gold futures and the silver futures I bought in the summer for good "sugar". Again, this is purely money management and keeping the asset allocations in my Krypto Fund correct (10% gold & silver - that's a lot).
PPS: I don't understand why people (other than perma-bears) can say the 30 year bond is showing more inflation risk or is a harbinger of disaster. The long term real rate of return on bonds is 3%. Year-over-year core inflation is about 2%. Higher mathematics shows that 2% + 3% = 5%. That's where the 30 year bond should be. There sure is a lot of babble on Babblevision lately.
P^3S: Sheesh ... these Babblevision talking heads are dumb. The reason the long bond yields are going up a bit is BECAUSE THE FED RATE CUT HELPS ELIMINATE RECESSION RISK. Recession risk is why the long term yields got so low. How stupid can they be! They don't even think before blabbing!
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