Personal
Portfolio
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It has been an interesting month.
Talk about a jobless recovery......
Earnings have been coming in better than expected for a while now. It started with Alcoa is continuing.
It's looking like we might actually have a month whereupon we close
up - that is if the teleprompter can manage to keep its mouth shut for
three or four more days.
I'd be for keeping an eye on those
better-run regional banks. I continue to think there are
opportunities to be had with a bit of patience.
Masco (MAS), as
well as some of the home builders are getting quite attractive again.
Standard Pacific Homes (SPF) moves on good news and it is cheap.
Of course to make some serious change, one would have to make a
sizable investment and therein lies the risk. With a little
patience, the stock can be rewarding.
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Personal Portfolio
July
has been shaping up nicely. I sold the rest of Huntsman in the
taxable account ahead of the planned tax hikes. That figured out
to a 342% profit - one of the best gains I've ever made. Might as
well keep as much of it as I can.
I decided to take some gains
to cash last week, planning on the teleprompter's monthly
trashing of some area of business and thus creating a temporary buying
opportunity. To my utter amazement, it hasn't happened - yet.
Perhaps the teleprompter had something a bit more destructive in mind.......
About those Regional Banks..
I
took the opportunity to start picking up some more shares of HBAN and
RF this month at what I think were depressed prices.
Emphasis
was on HBAN. I think people picking up shares on the dips could
end up being quite satisfied if they have a longer term perspective.
One
day later, Regions reported their earnings and while they did not
turn a profit, they lost less than what was expected.
I don't see much else out there worth looking at, at this point.
There is One Exception
In
the world according to me, I think in order for the economy to
recover, the financial sector has to recover first.
Commodities and materials suppliers will recover second.
Masco
supplies the likes of Home Depot and Lowes. They supply the
suppliers, especially in the area of home building materials.
Disappointing earnings tanked the stock today (looks like a buying
opportunity to me, so I did) and I think it is trading at very
attractive levels. This stock I regard as a core holding and I
have lots of it - all
dividends set for reinvesting in more shares of the stock.
I think it is going to pay to go over-weight on this stock in the short term :).
Financials Recover First and then.....Commodities?
PSPFX has made me a lot of money over the years and I have been eye balling it again lately.
When
I decided it is no longer prudent to be over weight in
financials, I will probably diversify out into this fund again.
It's not for the faint of heart and it is volatile but it can be worth the time and effort.
ADRE
is an ETF and it is more concentrated than PSPFX. I've done well
with this one too. It pays out a dividend as well.
Trading Software - Your Road to Riches?
In my view, the surest way to accumulate large sums of money is to
do so over time, deferring as much as possible in tax privileged
accounts.
In my view, the surest way to lose large sums of money
is to fall victim to on-line proprietary trading platforms with their
claims that your road to financial salvation is just around the
corner. All you have to do is trade using their software
and your troubles will be over. Heck, you can win free prizes too!
These programs are not about
saving and investing. They are about trading because that is how
the companies selling these trading services make their money.
While they may have their place for some, I would say with confidence
that 90% of the investing population should stay away from them, myself
included.
The reason for this? Pretty simple actually if your remember that:
A: It takes money to make money.
B: It takes a lot of money to make a lot of money.
These companies are counting on you the small investor, not to think this through.
Companies
like these cater to anyone and they make the bulk of their profits off
the small investor. It is also the small investor who ends up
losing the most in the end. They have some money to make money,
but they don't have a lot of money to make it truly worthwhile.
The primary reason for this is the fees and taxes generated from frequent trading and I will provide a simple example.
BallStreet's trading program indicates a rising trend in DavidsLiteDonuts, trading symbol DLD.
DLD is trading at $10.00 a share and you, the small investor have $1000.00 to spend.
The charts and candle sticks and everything else look quite pretty (that is the point, isn't it?).
It
costs $4.95 to make the trade so you end up investing $995.05 in DavidsLiteDonuts and are now the proud owner of 99.505 shares of same.
Now if only they go up in value.........
The
market is trending up and it is a decent day all in all and DLD is
moving with the market. DLD is a fairly volatile stock, thinly
traded and the candlesticks and colorful charting lines indicate an
exit point of $11.20, or a gain of 12%.
The program encourages you to take the profit so you put in a sell order of 99.505 shares at $11.20.
The trade goes through!
You made $111.44!
Oops, we forgot about the $4.95 it also costs to sell the stock.
111.44 -4.95 = $106.49 of Pure Profit!
But lets not forget that this is a Short Term Capital Gain and assume a 25% tax rate.
Uncle Sam wants a cut and that is going to cost $30.66.
What's left when all is said an done?
You have a gain of $78.84, or about 7.8%
Do you think that stock trading is something you should give up your day job for?
That's easy enough to figure out.
Let's say I take home $500.00 a week from my day job, which is $2000.00 a month. I'm doing ok, all in all.
I would need to make 25 trades a week using the above example where I was making 12% every trade.
For
each concurrent trade, I would need to have an additional $1000
invested. 5 concurrent trades = $5000.00 in capital.
In
the real world, do you think your favorite trading software is going to
help you get it right every single time, for gains of 12+ percent?
In the real world, that ain't gonna happen.
Every
time you lose on a trade, you have to make up for that loss on another
trade, which lends itself to riskier trades with more speculative
stocks. It is very easy to get sucked into a downward spiral.
In
the end if you are lucky, you won't have lost - much, and those that
encouraged you to use their platforms......well......those
watermelon smiles they are wearing got a bit wider.
A rare sight in July, in Northern Nevada
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