Archive for December, 2011

A Review of Posts to this Site

Thursday, December 29th, 2011

 

December 28-2011

So far, there have been 18 posts on this site,  but the posts which sum up my market philosophy are the 5 as follows:

August 2010    A Message to My Family Friends and Associates.

April 2011        Not a tough Decision

May 2011 –       Play Till May Sell Alert

Nov 2011          Its November But …Risk Off

Dec  2011          Going All the Way….To Cash

Its surprising to me….by having taken a  top down approach to investing , I have been forced to continuously ask myself why this or that macro economic remedy  isn’t working.   A very  useful exercise for finding ”  devils  in the details “.

This includes spending some considerable time just thinking,  ( what a luxury ) about why the Occupy Wall Street movement had outsiders asking ” what is this fuss all about ”  ?

 ” I’m as mad as hell and I’m not going to take it anymore ”  just won’t get the wheels turning.  

What was missing from this action was the focus and the ability to articulate to the rest of us specifically what needed to happen to make middle class America feel less ripped off, and more  included. 

I’ve decided that what the  Occupy movement  really wants  is REFORM !

So, now I’m off on that tangent… with the ultimate goal of fully understanding  and being able to enumerate and articulate the changes required to make it safer for an ordinary individual to invest in equities, and have faith that our institutions, including financial markets, are not rigged, from the inside, against him.

So far, my list includes … term limits –  line item veto,  system to encourage whistle blowers, Congressional staff conflicts of interest,  lobbyists,  restraints on Congressional insider trading and front running,  eliminating  earmarks , rules on crossing the employment line from government to industry and back again,  how corporate boards are selected and audited , investor rights,  flat tax,  and how congressmen report to constituents….with more to come. 

Lots of research to do, before I start offering any home grown solutions.

This activity is parallel to my constant monitoring of  potential ETF investments

Richard aka Rich, Dick, RMG and Smiley from Woodlawn

Housing and the Recovery….How to Stimulate

Monday, December 26th, 2011

December 26 – 2011

Almost all the pundits agree our economy is going nowhere until housing begins to recover.

Unless I am reading the wrong material I see  no solutions being offered beyond the far out idea of bulldozing the supply overhang into a reasonble relationship with demand. And the news gets worse monthly.

I’ve watched the Republican  debates and haven’t heard a practical solution proposed.

So…I am offering the following  idea to any candidate, including President Obama.  

There is probably an ocean of 401K pension money invested in a narrow menu of financial investment choices. These are, mainly mutual funds, offered by investment firms, via employers, to employees.  Plus there is all that money which has been rolled from 401Ks into IRAs .  Some of this  money is exactly what is needed to jump start housing  and the economy.

BUT, the tax rules relating to early withdrawal of 401K money and IRAs  do not allow this money to flow to  the housing market. 

Rules relating to early withdrawal of 401K money and IRAs ( before age 59 1/2 ) stipulate it be taxed as ordinary income plus a 10% penalty for early withdrawal.  That’s a very strong disincentive to remove money from  a 401K or IRA   for practically any purpose. Why  ?? 

Do you suppose  there could be a financial industry lobby protecting this disincentive ?

My question is why can’t 401K/ IRA  funds be withdrawn to purchase a personal residence. Why can’t such an investment in a hard asset inflation fighter  enjoy the same status as investing in financial assets offered by Wall Street.

What I would propose is that the 10% early withdrawal penalty be removed for individuals using this money for  the purchase of a  primary residence.

Then, I would spread the withdrawal amount  (to be  declared as ordinary income) over the life of the mortgage.  Thus, for those purchasing a house to be financed by a 30 year mortgage, the ordinary income declaration would be spread over 30 years.

This is a benefit for the middle class, for  the housing market and absolutely for the economy. For sure, financial industry special  interests would actively oppose it.

Too bad. With housing prices depressed and no bottom in sight, its time we  take back at least some of the money we put in the hands of Wall Street and invest it where it will benefit ordinary people via housing and jobs  on Main Street, Chestnut Street, and Bayberry Lane ! 

Richard, aka Richie, Dick and Smiley from Woodlawn.

Going All The Way….. To Cash

Tuesday, December 20th, 2011

December 20,2011

This market is pure torture for an impatient impulser such as I am.

To counteract these character flaws I have implemented mechanical triggers which require dicipline and daily updates.

I believe we will be  in a secular bear market until 2013 / 14.  That is the overall top down view.  To operate profitably in this kind of market  means buying wisely to squeeze the last ounce of profit out of the intermittent bull reversals that will occur within the confines of  the downsloping trend line of the  bear market.

As of now, I am liquiding my remaining positions in the defensive  ” May Go Away”  portfolio.

The net result from  May 28 is an overall realized loss of  $27,788 offset by dividends of $ 11,861 making for a total net return of  negative 9/10ths of 1% compared to a profit on the S&P 500 of  positive 7/10ths of 1%.

So, during 2011,  I took $116,000 profits off the table May 13 and have given back $15, 927 during  what I thought would be a dangerous seven  months in the market…..and dangerous it was !   For me, since May 28, doing something has been 9/10ths of 1 % worse than doing nothing.  Am I getting aggressive now ? ….. No…  As a retiree I have no option except to burn capital knowing that the alternative is to lose money AND burn capital.

I am all in cash as of today and I want to invest these funds in ten all weather ETF symbols.  But, today,  the average price of the portfolio is  6.6% above where I would be willing to invest half  my funds and 12 % above where I would invest the balance . 

I just need to be patient.     Grrrrr!

Richard, Richie, Dick and Smiley from Woodlawn