finance

All posts tagged finance


I've been flinching since last month but the blow didn't come til this week. The stock market took a beating this past week, and I was fortunate to have put myself in a safe place before it happened. Well, relatively safe. My 5-year cyclical safety portfolio has been losing half of what the S&P 500 has been losing, which is comforting considering it still has some dividend help, but I made a bad decision on keeping some real estate. Overall, I've lost the majority of my gain since two months ago, but it wasn't much to begin with. The bulk should still come from dividends and long-term growth.

On my trading portfolio, I put myself in a very safe place with international stocks and the Brazillian index, but putting money on gold as a hedge hasn't worked out. The problem is that the market is not falling on inflation data or other economic symptoms. Rather it's a adverse reaction to the end of cheap money, the credit that's been fueling leveraged buy-outs and sub-prime mortgages. In this situation, it's a general aversion to risk and credit, and therefore gold suffers as well.

Other than that, I've been doing very very well this year. However, my inclination is that the stock market is going to get worse before it gets better. The fact that the market pierced its trendline so fiercely without any sign of a let up by Friday is not good. There aren't too many safe spots to stand at the moment.

Taxonomy. Isn't that when you mix taxes with astronomy? Because that sure seems to be how complicated it can get. For folks like me who are still unfamiliar with 90% of the tax code, it's more astrology than astronomy.

And then there are people who know it inside and out, or think they do. I have to share this article about the twenty most ludicrous tax deductions. For example:

4 – Fake Boobs – YES
This one is infamous. A stripper going by the name of CHESTY LOVE used her hard-earned savings to boost the size of her boobs, to the eye-popping size of 56-FF (do they even make bras in that size?) She figured it would get her more tips. And the write-off was allowed, being considered a stage prop essential to her act. Ha!

I'm trying to treat my taxes like a video game. It's a virtual conveyor belt of hazards, like Donkey Kong's skeletal skyscraper of death, so cleverly rendered on glass at UC Santa Cruz. Oh how I wish it were more like the visceral goodness that was God of War 2. With every W-2 there would be pools of blood and eviscerated public officials, and I upon struggling with heaps of 1099-DIVs and 1099-INTs, I would burst into Rage of the Titans and annihilate my financial details, my sharpened Gainskeeper in hand.

Alas, taxes remain mundane. That's one video game idea I hope never comes to fruition… navigating THE MAZE OF TAX ARCANE 2: UNCLE SAM'S REVENGE!!!

Yes, I love tax week.

On my crusade to show a little more effort in reviewing my investments, I decided to do some analysis premptively, state my objectives, and commit myself in writing to my decisions. A golden opportunity came my way, as I recently decided to build a portfolio I didn't have to watch every day like my daily trading one. I trade for fun, not just profit.

Principal: $50,000
Timeline: 5 years
Risk Tolerance: Medium Low
Strategy: Mainly catching long-term cyclical uptrends, with diversified padding.

Here's my plan… …

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The last few days, we saw global markets take a frightening stumble. Beginning with the Shanghai Index (FXI), falling 8.8% by day's end, Japan, Europe, and the Dow took smaller but equally rough spills. Taiwan, on a holiday, didn't see the gut punch until the next day. NYSE computers, unable to keep up, were backed up until a server switch caused the ticker to plummet with backlogged orders, exacerbating the situation and dropping stop levels all around. Welcome to the digital age.

The bright side of the story is that the ticker has recovered about half the loss. But as a lesson in volatility, I hope it was heard. Stories of people in China borrowing against mortgages so that they could "avoid risk" by buying only one stock… well let's just say the market is healthier when homebrew speculators are spooked.

It was also no surprise that the correction came on the heels of Bank of Japan's tightening of interest, and thusly putting the dent on global liquidity. I'm going to set my prediction in solid stone right now. After this correction, markets will continue at the same pace, and any further corrections will be saved by the influx of private equity (read: buyouts from the blue). Once they're involved, volatility will be insane, and they will move in and out of the market at will as the worst hedge funds do. Personal investors beware: I think it is impossible to ignore the technological mechanics of trading anymore. This ain't your daddy's Buffet's exchange, and the horizon for fundamentals to presevere in is longer and choppier than before.

Nothing in gaming to talk about, other than that we (personally) are seeing new prospects I hope to talk about soon. In the meantime, enjoy this very interesting economics article:

Taipei's Magic Ring

It's time for my first year-end review of how my portfolios are doing. I hope this introspective proves interesting for readers, because, as I've garnered from other financial blogs, it will certainly be useful for me to consolidate my experiences into one critical place.

So I'll chomp my surrogate cigar, a slab of delicious Robertson Farm's beef jerky straight from Oklahoma, and get a rollin'! Know-nothing investor a-go-go! …

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Isn’t it strange how little hypocrisy has evolved over the course of human civilization? Invariably, it sticks to a couple simple propositions:

– Believe in an issue.
– Protest an antagonist issue except if it applies to you.

So the Democrats grabbed on to a report pulling selective quotes about how the Iraqi war has only engendered more conflict. The Bush Administration tried to intercept the critics by saying it was going to release specific portions of the document claiming overall threat has decreased. Democrats then scorn the administration for “selective declassification” and dismiss the whole charade as propaganda.

Apparently pulling selective quotes to begin with wasn’t “selective declassification.” Is anyone else getting sick of this game? I can’t believe how many people out there believe more in the game than in reality. It saddens me that 60% of Americans believe recent drops in oil prices is somehow right-wing oil manipulation. Maybe it serves Big Oil right for having such shitty PR, but most Americans do not know that Big Oil is a drop in the barrel compared to other oil barons in Saudi Arabia or Venezuela. Exxon ranks a distant number 15 in size, and only half of that even is oil.

The Fed thinks we’ve peaked on inflation. My portfolio has risen precariously on that news. I’ve made enough in the past few days to buy myself a PS3, but that would be succumbing to Harrisonragi’s “selective declassification” of next-gen details. All I can be bullish on is the Xbox 360’s version of Guitar Hero 2 with DOWNLOADABLE CONTENT! I want that wireless X-Plorer dammit! No doubt the chum in the picture is struggling with his Democratic desire to tell all his friends about it, and his Republican desire to rock out against the man.

Shame it’s the other way around today in real politics, where Democrats do nothing but tell all against the man, and the Republicans do nothing but rock out with their friends.

If you've ever watched the classic short film The Way Things Go, you can't help but be fascinated by the frightening fluidity with which a precarious but self-conscious house of dominoes will fall, and how fascinating it is to watch as it unwinds. Car-crash syndrome. It gives us an epic tale of constructions and deconstructions, near-misses and satisfying clunks. It is, after all is said and done, a turning mobile gently emanating musical chimes to the delight of the tot in us all.

This is but a long-winded way of saying, the housing market is FUCKED. And I'm dancing the happy dance in anticipation for a market-bottom in a year or two, which will be followed by a globalized recession as consumption contractions shatter the world of fiat trade. One researcher from MIT said that the people in the best position were young, first-time home buyers who can enter that bottom in a year, and rent for now. That's us!

Following Santa Clara housing statistics and Foreclosure.com, you can see that it's a bloodbath out there with median housing prices diving -$47K in four weeks! In the local paper, I saw a whopping y-o-y six-fold increase in for-sale listings in Palo Alto!

For those of you who want to know more about why a recession is going to smack us in the ass, and not on our lips, I recommend this EXCELLENT article by Nouriel Roubini summing up the situation:

Eight Market Spins About Housing by Perma-Bull Spin-Doctors…And the Reality of the Coming Ugliest Housing Bust Ever…

Indeed, in a matter of months, the gravity-defying housing boom and bubble turned into an alleged “orderly slowdown”; then, the orderly slowdown turned into a euphemistic “soft landing”; and next, the soft landing slipped into a “slump”; most recently, the slump worsened into a hard landing; while the latest data suggest that the hard landing recently turned into a bust. And soon enough this housing bust will turn into a rout and an unprecedented meltdown.

10 life lessons I've learned from the markets
By Brett Steenbarger
TradingMarkets.com
August 14, 2006 8:30 AM ET

Trading has taught me much more than patterns of supply and demand. It has provided a framework for thinking about life. Here are ten life lessons instilled by the markets:

1) Have a firm stop-loss point for all jobs, relationships, and personal involvements. Successful people are successful because they cut their losing experiences short and ride winning experiences.

2) Diversification works well in life and markets. Multiple, non-correlated sources of fulfillment make it easier to take risks in any one facet of life.

3) In life as in markets, chance truly favors those who are prepared to benefit. Failing to plan truly is planning to fail.

4) Success in trading and life comes from knowing your edge, pressing it when you have the opportunity, and sitting back when that edge is no longer present.

5) In all facets of life and investing, risks and rewards are proportional.

6) Happiness is the profit we harvest from life. All life's activities should provide a good return on investment.

7) With volatility comes opportunity. Always.

8) All trends and cycles come to an end. Who anticipates change, profits.

9) The worst decisions, in life and markets, come from extremes: overconfidence and a lack of confidence.

10) A formula for success in life and finance: never hold an investment that you would not be willing to purchase afresh today.

Brett N. Steenbarger, Ph.D.

The harbinger to November rain seems intent on supplanting the throne of the bluesiest period of the year. I'm talkinga about our dearest, most choleric month of August.

Within its tendrils melancholic, the stock-market caesar takes its annual brute stab in the back in time for the ides of the eight month. But having done a lot of spiteful math this week, I can proudly say that I've managed to beat the S&P 500, albeit by a meager +1.6% percent. Wherefore proud? Considering the "surprise" downturn the market had, and my own inexperience with having just started investing last October, that's not bad. My gain has hovered at 5.22% with minor spikes to 16%. However I've situated myself for much better gains later this year, now that I've weathered the worst. I've learned a lot about something I always considered to be pure gambling. Of course, the less you know, the more gambling it is.

While the stock market was taking a beating in auto, food, and near about every other sector, another rainy cloud snuck in. E3 was canceled. There isn't much to say about this that isn't already covered in this excellent article. I'm bummed, but I think it's for the better.

But all is not lost! A new animated series based on Mike Mignola's art, voiced by the likes of Paul Giamatti and David Hyde Pierce, has been born, and it's awesome. Remember the feeling you had the first time you saw Dexter's Labratory or the Braak Show? Aqua Teen Hunger Force? The Tick?!? Here it is, times ten tenfold. Watch and weep, for joy and for August.