Monday, August 30, 2010

8/30/10 Flop Lag...

Today is what we would call flop lag in poker. Today is exactly the response I assumed we would have had on Friday. It’s only a day late- but I did hedge both my option positions FZA and SDS by selling OTM  calls- this limited my upside and also limited my rebound today. I am now net $200 on my recent short of the S&P.

One thing I am actually considering tomorrow is buying to cover my OTM SDS calls. I will take a $200 hit but I still think we are heading lower. Technically there was a lot of damage done to the S&P charts. The only thing that is going to save us from testing July lows is a low volume rally.

Obama’s speech today was a joke. America was hoping for solutions, and he comes out and blames Bush and the GOP for the mess. I agree that there is blame to go around, but we want answers not finger pointing. Again, you cant be anti-business and expect job growth. Its illogical. But hey, when there are political points to be made, politicians will make em’.

Once I think we have bottomed I am going to start a long Div-Champ portfolio coupled by long call strategies on growth stocks. Bare with me while I ride this market down.
All the best,

Friday, August 27, 2010

Please, please let this be a suckers bounce......

 I am still long my SDS position from 8/25/10. I am in the hole nearly $400. Im sticking with the position but I am really not sure if I should.

Here is what baffles me about the market…. Why are we rallying nearly 200 points today? GDP revised DOWN to 1.6% (which is awful). INTC lowers 3rd quarter guidance. Bernanke confirms we are slowing and housing market is popping…. But we RALLY?

Days like today make me NOT want to trade and just stick to long term investments. The Market should be tanking yet we have a huge rally.

I’m going to marinate some ice cubes and get back at it on Monday. Im keeping this position over the weekend.

Wish me luck (unless you’re long!.



Thursday, August 26, 2010

My Dividend Strategy and Watch List.

It is a common theme among young investors that our portfolios should be based on ‘riskier’ assets. The theory behind this premise is that younger investors have a longer term horizon than their older brethren.  Thus, we will be able to absorb greater losses, while replenishing our portfolio with future investments. This is counter intuitive to my investment strategy.  Let’s quote the guru Warren Buffett:

·         #1 rule of investing is “Don’t Lose Money.”
·         Rule #2 is “Don’t forget rule #1.

Obviously, this is easier said than done, but by investing solely in solid, blue chip dividend paying champions you are definitely stacking the deck in your favor. There are many reasons why this strategy will outperform the market over the long run. For one, these companies have paid, and increased dividends for over 25 years. They usually generate large free cash flow and carry low debt/capital ratios. They have low betas, which mean they fluctuate less than the market average. Furthermore, a company that consistently increases its dividend is confident in its business and future outlooks.

Another trait that I look for in a stock purchase is what Buffet likes to call a ‘Competitive Moat’. A Competitive Moat is a distinct advantage that a company has over its competitors. It could be a long term patents, superior brand recognition, manufacturing advantages and superior technology. It is difficult for smaller companies to take market share from companies with a large ‘competitive moat’. Furthermore, the moat dissuades newer companies from even attempting to compete with the older stalwarts.

Next, I will look at dividend yield, dividend growth and their ability to sustain these payments. I look for a minimum dividend yield of 3%. I have made exceptions to this rule in the past, but it is usually a good place to start. Subsequently, I want to make sure the company has the ability to continue paying this dividend. I prefer companies with less than 70% payout ratio. This will ensure that they are generating enough cash to cover the dividend and sustain the business.  Ideally, the dividend is growing. This will guarantee that we are keeping pace with inflation.

Wednesday, August 25, 2010

Shorting the S&P

Today I initiated an aggressive short of the S&P on todays bounce. I am long 10 Sept SDS 34 calls @2.18. With daily re-balancing of these leveraged stocks, I am keeping a short leash on this trade. I think market is heading considerably lower... but with low volume you can never tell. I could be broke long before the market is rational. 

The jobs number could come in very bad, and the market could still rally. GDP revision could be negative, I don't think that is priced in.

I will let you know profit/loss. 


So here is a brief rundown of my current finances.

On August 2nd, 2010 I liquated $20,000 in equities. With the S&P sitting at 1,125 it was on the verge of a decent pullback.  The last month’s events have confirmed my suspicions.  Normally, I would simply ride out the storm, but I was sitting on a large amount of Credit Card debt from a recent trip to Italy and college costs. I figured this was a good time as any to sell high and clean up my high interest loans. I am down to one credit card with a 0% interest rate and $3,000 balance- I am comfortable with this.

The 20YM Mission Statement

The United States of America is a nation of limitless opportunity and endless possibility. Yet many of us feel trapped, buried in debt and struggling to make ends meet. We have become a consumer nation, taught to spend, to borrow and then spend some more. We live paycheck to paycheck with no definitive plan for the future. This is an unsustainable cycle that must be broken to achieve financial freedom. However, somewhere along the line, achieving the American Dream became demonized. Political demagoguery pits the wealthy against the poor creating a culture of victimization. Well, I am not wealthy, but I am not a victim. I am a product of my own decisions. Some good, some bad, and some awful, but they were all my decisions. Many will have you believe that decisions don’t matter, if you weren’t born lucky, attractive or wealthy you are destined to struggle financially and drown in an endless sea of debt. They want you to believe that you have no options, you have no future and you have no choices.  The American Dream as we know it is dead.

I reject this premise outright.