Men Don't Grow Old. They Grow Careful. -Ernest Hemingway (From A Farewell to Arms)
Maybe Ernest Hemmingway had something here. The older we are, the more careful we grow. If we are to grow old, then we must grow careful. If we are too careful, then we do not grow...
I have been blogging for nearly 11 months now. Over the course I have educated myself and readers about economic, historic, and political trends. I do, for the most part, spend a portion of each day browsing through blogs, news, the archaic form of news delivery known as a newspaper, and my favorite... casual conversation. This blog has in many ways became a tool for research and understanding. It has allowed significant insight into areas in which I had little to no understanding. In many ways, this blog represents a learning community. Learning alone is nice, but there is also a financial piece that has accompanied this blog... How do we profit from this market, or at the bare minimum, insulate ourselves from the varied havoc reeked by Wall Street and politicians in D.C..
Three Mega-trends for the Upcoming Year
1. The Financial Crisis is Far from Over
Pundits on Wall Street would like to see a bottom placed in the market. As we blogged earlier... there is little credibility left on Wall Street. I would like to reminder readers that we can turn on the TV daily to hear another TV personality call market bottom... only to be toasted days if not hours later. The complete meltdown of Bear Sterns, Lehman, and Washington Mutual reminds us that the financial problem is big... and it could be devastating. Likewise, charlatans like Bernie Madoff (with billions)who could well be the biggest scoundrel in the history of Wall Street to date, underscores the the economic minefield of Wall Street. For most, money is safer under a mattress than in the hands of a broker.
2. Foreclosures Galore
While we have blogged that 1-10 houses in the United States face financial ruin, we still do not comprehend the depth of this financial meltdown. One mid-west transplant from California remarked that the house he sold in Sunnyvale, CA has lost 10% of its value in the past six months. His insight into California's housing market could well be the most frightening. As a mortgage broker, he explained that option arms, negative arms, and Jumbo Loans have yet to reset. Even with the Federal Reset, there are a tremendous number of borrowers who will not be able to refinance... under ANY circumstances!!!
3. Deflation v. Inflation
In conversation with a programmer at the Department of Treasury, he stated that the Treasury is printing out too much money. Way too much money. Still though, he commented that Treasury is more concerned about deflation instead of inflation. This individual cited housing prices, oil prices, and all goods (with the exception of food) are coming down... way down. The Treasury and Fed have gone to great lengths to ensure that money is available to purchase these goods. When asked about BILLION dollar bailouts, TRILLION dollar stimulus packages, he simply commented that the economic meltdown is their biggest priority.
Portfolio Round-Up: I am in the Money
It is never kind to brag in light of the financial turmoil that has devastated world markets, but I will simply say that this blog, and fellow bloggers like Ax at bigbigbet have encouraged me more than ever to take charge of my finances. And with great risk came great reward.
Big Winners
Calls/Puts
PQ +215% Call
SPG +363% Put
VNO +280% Put
XLI +304% Put
XLY +477% Put
Losers
Call/Puts
BAC 100% 12/25s Call: I underestimated the response of companies to the TARP. I was in good company as Buffet was said to have lost on the same calls... I followed the Oracle...and got punished for it.
TRLG -43% Puts: As a coach, I remind athletes that they should always give it their best. The worst thing they will do is lose! If only I would have heeded my own advice. But this was at the early stages of my option trading. You live and you learn.
Could Haves (Could Have Made More)... Should Haves (Should Have Sold Earlier)...
WGO -40% Put: My first option trade. I liked the triple convergence of consumer discretionary spending, high fuel prices, and unemployment to drive this one into a triple digit profit. Instead, I watched the value of this play paired... I started to panic... and that was that...
BAC -15% Put: BAC was a company I loved to hate... not only did I lose on the call side of transactions, I also lost on the puts as well. I became increasingly irritating when the government intervened this summer banning short selling... propping up this company... and I will still call CEO Ken Lewis not much less than a COMPLETE buffoon... Remember Ken if you are going to lie to the public, pick a story, rehearse the story, and stick to your story... Dare I say this could be another Citi destined for $6.00 per share. Go long on the discount price, this one is too big to fail...
COF +30% Put: Another joke still trading in the upper 20s. Like BAC, COF, and HBC, I watched triple digit profits evaporate before my eyes. At least I made a few bucks on this one...
HSBC -27% Put: Little did I know that our British cousins' situation was more dire than our own. The simple fact is that credit, as over-extended as it was here in the United States, it still wasn't as bad as Great Britain. They put a short sale ban on their financials as well... and the Tiger Coach got left holding the bag.
STI -40% Put: Their is no foreclosure crisis in Florida. At least that is what the fine folks as Sun Trust would have us believe. This bank was/is in about the same shape as NCC. Something tells me they could be one of the banks that received a loan from the FED in return for some of their useless collateral. I hope the Bloomberg Suit exposes all of these crooks for who they really are!!!
AU +10% Call/s: I traded this stock a few times buying at the open, and selling at close. I had built a nice system...and the system failed me. Kissed away approximately 40% in AU profits... and I have grown older...and wiser!!!
Not Bad for an Amature
I do not claim to be an expert. This blog is written in part as an intellectual exercise. It has given me the opportunity to observes the humor, trends, and absurdities of life. The economic, historical, and political realms are simply the venue of this observation. As far as investing goes, I was lucky to say that my portfolio at close of business today is up 88% for they year. Over 75% of these monies are currently in the market, with a reserve fund waiting for the best opportunity. I have a list of 10 stocks that could either make us rich or poor. I only ask that you share your thoughts with me. After all, I am not an "expert" like Thomas Lee or Jim Cramer.
These returns do not include the 403B plan which was saved by in large before the October and November meltdowns on Wall Street. As I watched the profits ebb away, and with the urging of Ax, I "wiped the board clean" and booked profits there as well. Those monies are currently sitting in T-Bills (1.3%) looking for the right place to move it.
In Closing: This is not my blog...it is Our blog...
I would like to thank all readers who have shared this journey. We have readers in five continents... from Capetown, Africa to Sydney, Australia...from Neidersachen, Germany to Bangladesh, India...and all over the United States. We have received letters from House of Representative members, Senators, and even members in U.S. government agencies. We also reach a variety of academic institution throughout the United States. We especially appreciate the comments of readers like Ax, DC North, Boom and Doom, Jimmy K., and a number of those who simply remain anonymous. Let's look forward to another profitable 2009.
