The Fall of CNBC

So I've been catching up on this story about Bubblevision, since I don't have television service. (Only FiOS Internet access, but it's great so far.) It is truly entertaining, both to watch the video as well as reading some of the analysis to come out of it.

What can I say? I popped my cherry on CNBC. I've been watching them, to some degree, since the early 1990s. Even after discovering Bloomberg TV, and watching hopefully for CNNfn to grow into being somewhat entertaining (before its demise), I kept coming back to CNBC.

But then, last year, there was a shift. A large motivator for that shift had to do with the realization that CNBC guilty of propagating bad information in various ways. However, I also became clear about what I was seeking from CNBC, and how it no longer served a central role in providing that. What I was seeking was information. Specifically, I was trying to find ways into the knowledge flow.

You see, this entire world of finance is based on information. A friend of mine used to have the following quote as his e-mail signature:

"Information - the currency of the future."

This was around 1993, so long after the release of "Wall Street", wherein Gordon Gekko first expounds on the importance of information. For a neophyte such as myself, at that time, I could not appreciate the sheer brilliance and importance of Gekko's lines regarding information. Even after being exposed to the above quote, it never hit me, through all the intervening years, just how critical the right information is to success in this world. I'm not sure when it finally landed, but I felt amazingly stupid for not "getting it" sooner. (Rightfully so!)

CNBC has always represented the regular man's access to the information flow of the world of finance, and Wall Street in particular. The very embodiment of the concept of "democratization" of information. At least, so I and many others thought. We didn't know what we didn't know.

CNBC's role in my life has slowly been usurped by the Internet, in particular the many excellent resources I list along the right hand navigation bar, and most powerfully, By Twitter. Sometime since early last year, the light bulb came on. I got it. And since then, CNBC was no longer just wrong. It was pretty much irrelevant, becoming more entertainment than information. All Jon Stewart did was highlight this for regular people, and they probably still won't really get it. The power brokers, on the other hand, have clearly been aware of this for a long time.

I don't miss CNBC, because there was never enough substantive information to miss (unlike the devolution of the Wall Street Journal over the past 10 - 15 years). It's clear as day. CNBC doesn't matter. Whether it ever will again, or even should, if a wholly different question. Sure, it will always have its place on trading floors/desks, among the financial cognoscenti, and the regular man. It is a tool - a very blunt tool - but a tool with some uses. Without sound, it is a decent breaking news tool and ticker. (Bloomberg's colors make it far too difficult to read their ticker quickly, IMO.) Yet the prominence and stature will never return, at least not for me.

Such is life.

Net Worth Update - 07 March 2009

I apologize for the delay in posting this, but life has a way of catching up with you. Ya know?

As of 7 March 2009, my net worth is $57276.53. In a word, it sucks. However, there has been progress on various fronts.

First, I've been able to build my emergency account back up to $20111.07 from close to $15000. Those funds were transferred into my brokerage account for trading purposes. Now that I'm back over 20K, I will redirect the $1000 that I currently Direct Deposit into that account toward my American Express debt. Paying down the AmEx to $0 is one of my goals for 2009. (And no, I was not extended the offer to cancel my card and pay off all of the debt in one shot.)

Second, if not for the need to put $999.37 worth of work into my almost 10 year old car, my balance would be less than $20K. Such is life! However, it is thrilling to really make some progress on cutting that balance down. Once I start moving funds away from the emergency savings account and toward that goal, the balance should decrease even faster. Just thinking about it is energizing (but that could also be the feeling of my body burning more fat *shrug*)!

Third, I'm getting back into the mode of reducing unnecessary expenses. My total food expenditures for February 2009 came to. I think I ate out twice, and both of those were with friends whom I hadn't caught up with in a while. (In one case, said friend is recently unemployed so I picked up the tab. In the other case, we split the bill.) I recently canceled my Zagat.com subscription because I hadn't used it since I signed up (again) in April 2008. I'm considering dropping my WSJ.com subscription and possibly my Barrons.com subscription. I love Barron's, even more than WSJ.com, but I read neither as much as I used to. I may keep Barron's and dump the WSJ since I despise the re-designed WSJ.com site. This is pretty much what I expected once Dow Jones was acquired by News Corp. I will also be canceling 2 domain name registrations with Network Solutions. These are names that I will no longer use for a business idea that I am no longer interested in pursuing. Thus, I'll let those expire at year end. Since the majority of the current calendar year is already accounted for, I hope to find another way to monetize those domain names via domain parking or some other means

Fourth, I underspent most of my targets, with the exception of food costs. (Quelle surprise!) I only spent $126.65 on gasoline against an expense target of $400; $56.01 on medical expenses, against a target of $75; $21.60 on entertainment (a lift ticket for snowboarding) against a target of $100; and $1315.84 on rent and housing costs, against a target of $1369. Food, on the other hand, hit me for $610.99, against a target of $500 per month.

In the coming months, I'll spend some time balancing my food expenses against all the other priorities I have. Key among them will be saving for both emergencies and fun, as well as food costs. Having food at home and cooking has been very kind to me, though. Once I get a acclimated to cooking, I expect that my food costs will moderate and possibly decrease. We will see.

I also anticipate moving back to the same city that I lived in prior to moving to my current apartment. In doing so, I look forward to a reduction in my insurance costs. All of my insurances increased noticeably - car, renter's and the personal articles insurance policy on my laptop. I guess that has to do with moving into a "less safe" county. Too bad it also happens to be the wealthiest (by income) predominantly Black county in the entire nation. So very sad. I hope, with the current state of the economy and the number of empty residential properties on the market, that I can find a reasonable rent in downtown Silver Spring. I think my historically good (and improving) credit, solid income, and increased supply of rental units and moderate to decreased demand for said units will work in my favor.

Overall, my goals are coming together. I attribute some of this to posting my goals around my apartment. The above blog post is taped to the wall above the head of my bed, on my refrigerator door, and on the mirror of my bathroom.

Anyway, that's a small peek into my current financial situation. I like how things are progressing. I'll keep you posted as the situation develops, so keep reading and commenting.

Until next time...

What's Missing in the Market: Panic

You know, I could be short all day and not have a problem with it. Really. However, given the statistical history of the markets, there are so much better opportunities for making money being long in a rising market which has solid fundamentals AND technicals underpinning it. Everybody wants to be early, no one wants to be late. I, for one, can stand to be late, if it means probability is working in my favor. This is a war of attrition. Capital preservation is the order of the day, if you're not trading.

The one thing I am noticing, and I see it in today's closing, is the lack of absolute panic. There has been fear, true, but it seems like everyone is trying to call the bottom (except for the people I follow/listen to, who are just trading along). There's been a lot of knife catching, and I should know, as my trading report will show. But most of what I see is people just waiting - hoping? - for the turnaround to start "any day now" so they keep buying the dips, just to jump out later for a loss. It's such a Pavlovian response. It would be funny if it didn't indicate just how long and drawn out this tape will be.

Now, don't get me wrong...there are a lot of pieces which need to come together for a sustainable rally to take hold. Most of those pieces are non-existent currently, which is why a bottom is really no closer. Given all the factors I've seen, and even with my respect for Jeremy Grantham and John Hussman, I'm staying out of the long side right now (with the exception of my primary thesis around commodities). Long is so, so wrong right now. Doesn't even feel right. We get closer to a bottom, true, but I think all of the knife catchers will find that the knife still has yet to reach the floor. THAT'S when I plan to pick it up.

I just don't see enough panic to say that all of the suckers have been cleared out. Yes, TLT is racking up gains (though it is off its highs), and TBT is getting its ass handed to it most days. Savings are up, but they can go up more. People don't even realize what else is coming down the pike, and insurance is SO fucked up I'm shocked and scared (just when I thought I had a good handle on the scope of our problems). But there's still too much hope out there. A lot more people need to get crushed to clear out the dead and create space for rebuilding. A LOT MORE.

That is all.

Selection Bias

Just great!

This is one of the problems with hedge funds. They have a bad year and just stop reporting data to the few databases which exist to collect data about hedge fund returns.

All this does is make overall industry returns look better, because there are fewer negative data points among the data that is reported.

I would imagine most of the databases anonymize data at some point. If not, they should. However, managers need to be willing to step up and let their returns be known (even anonymously if that's the only way) for the sake of the industry. It won't stop the bloodletting, and as some seem to think, we could easily be on our way back to 5000 funds (50% attrition). No matter what, the integrity of the data is of utmost importance to re-establish trust in the industry and in managers. This is one of several market oriented, non-governmental reforms that the global (and especially US) hedge fund industry needs to undertake.

That is all for now. Later!

Trading Report: Setting the Scene

Let me begin my setting the scene.

The Thesis: I believe that the best (only?) trade or even long term position right now is commodities. Yes, we're in an ungodly recession, depression, whatever kind of -ession you want to call it. Yes, it will get significantly worse. (Not going to talk my book, but believe that. Hell, residential RE and the attendant issues are not fully resolved.) However, there is a certain level of demand for commodities, especially oil, that will put a floor under their prices. It could be argued that in the high 30s, West Texas Intermediate crude oil is free. Not cheap - free! Even at the worst prices of summer 2008, oil was cheaper than water (another mis-priced natural resource).

The Security: The PowerShares DB Crude Oil Double Long ETN aka DXO.

Now that you have some background on my thinking and the stock I used to express my views, the next few posts will explain the mistakes that I see. If you happen to notice others, by all means, let me know in the comments. My goal is to both help my own understanding of my mistakes so I don't repeat them, and to share that experience with others, so that they avoid them (or at least correct them sooner).

Until next time...

Trading Report: Learning from Mistakes

This will be a short series about the mistakes I made on my purchases of DXO through January. By the time it was all done and I was out, I lost about $6000 total. Very expensive tuition, indeed. I am completely responsible for the outcome. This is trading. We're not able to will the market to do what we think it should. We're here to make bets on certain outcomes, and exercise risk management for the situations where those outcomes do not come to fruition in the expected time frame.

I will break this series up into parts based on my experiences and the lessons learned from those mistakes. I hope that others learn something from them, but the best teacher IS experience. Sucks, don't it?

Watch for the hook...

My Letter to Steny Hoyer about H.R. 1068, the "Let Wall Street Pay for Wall Street’s Bailout Act of 2009"

Below, you will find the text of the letter I just e-mailed to Steny Hoyer, the Democratic congressman from the Fifth Congressional District of Maryland. It is unedited. Amazingly, I managed not to curse. I will be following this up with phone calls.

If you haven't heard, H.R. 1068 can also be known as the "Let Wall Street Pay for Wall Street's Bailout Act of 2009". Of course, this legislation, like all the crap coming out of DC these days, lands squarely on regular investors like you and me. These fuckwits really deserve a bullet for their intentional destruction of this once great nation. And if this is how Oregon's congressman likes to treat investors and traders, that state should fall into the Pacific Ocean along with California. What a bunch of losers!

I don't normally talk about politics here because I honestly could care less about the subject. It's all legal crime and evidence of how Americans are handing over their Constitutional freedoms to the cock knocker with the best sob story. However, this horrible excuse for legislation will affect everyone, myself included, who hasn't yet escaped from this sinking ship of a nation. This legislation needs to be murdered outright, not modified, not amended, but simply killed. It is terrible for anyone who owns, or would own, any kind of security. And we all know that once a tax is levied, the government has no incentive to get rid of the revenue. (It took 108 years to PARTIALLY kill the Federal telephone excise tax which was originally levied to pay for the Spanish-American War!) Item 8 under Section 2 is a blatant lie!

Anyway, I hope you enjoy. Without further ado...

Representative Hoyer,

I am writing to lodge an official complaint about, and to implore you to do ANYTHING and EVERYTHING in your power to kill H.R. 1068., also known as the "Let Wall Street Pay for Wall Street’s Bailout Act of 2009".

As you must be well aware, the first rule of taxes is "whatever you want less of, tax". I'm sure higher cigarette taxes discourage casual smokers from engaging in an activity that is harmful to themselves. The hardcore, committed smokers are willing to trade the tax money for their fix. The government collects tax revenue on that transaction. But I would posit that much smoking has been ended or prevented due to the increase in cost associated with taxes on cigarettes. Probably way more success has been had by increasing the economic cost of smoking than by highlighting the physical damage done by smoking.

Clearly, by proffering such an absurd piece of legislation, your colleague Rep. Peter DeFazio [D-OR] seeks to discourage securities trading and investing in the United States. I'm sure there are other countries, other stock/options/commodities/futures exchanges outside of the United States which would proudly take up that business, since you and your colleagues seem so interested in giving it away. So please tell me, is killing the trading of securities what you and the Democratic Party want for this country? This is "change that disgusts me", quite honestly.

First, I am a small trader. I already pay significant commissions through my broker, and short term capital gains taxes on my trading earnings. Fine. Imposing a 0.25% tax on sales and purchases would greatly reduce my ability to conduct my business of trading. In fact, it would actively DISCOURAGE me from this activity. I know I am not alone, and many small traders would either stop trading or seek ways to avoid owning the tax to the US Federal Government at all.

Second, this act would DECREASE market liquidity. If buyers and sellers are DECREASED in number, prices of securities will reflect that by going DOWN. You and any other congressional representatives who vote for this act will be contributing to the death of American stock markets. Prices will fall, buyers will strike, and sellers will spend more time and effort seeking to devise clever ways around paying in order to exit a losing position. How are any of these desirable? Liquidity will move to other exchanges around the world. Private companies will have less motivation to become publicly traded.

Taxing transactions will, by definition, reduce the number of transactions. That means less commission revenue for broker/dealers, clearing and settlement companies, administrators, and others in the financial ecosystem. It will also create market distortions by increasing the bid/asked spread on securities and creating more arbitrage opportunities for the savviest and fastest entities. Basically, this act, if signed into law, will force small players out of the market, decrease liquidity and price discovery, and hand more advantage to large players who can exploit the information available. Instead of democratizing investing and trading, it will further stratify that world, handing even more advantage to the already privileged and powerful.

Third, if this tax is imposed, and as I read the current legislation, it will be assessed against transactions of all sorts, including against securities held in retirement accounts. This would violate the existing tax provisions on tax deferred accounts such as 401(k), IRA/Roth IRA and other retirement accounts. That is how the current legislation is worded - very broadly. Do the Congress and the President want to increase taxes on already battered retirement funds? Wouldn't that DIS-INCENTIVIZE saving? Is that something the Congress, the Democratic Party, and the President want to do - reduce long term savings, especially retirement saving, by individuals? What about Rep. Donna Edwards [D-MD].

Fourth, I voted Democratic in the past election. The Democratic Party is clearly showing why it neither deserves nor wants my support. If this act becomes law, I will do my best to prevent Democrats from ever serving in economically important roles within local, state or Federal government ever again, because clearly you, Rep. Edwards, and the party you both represent are our ENEMIES - enemies of the people you say you are serving, enemies of the citizens of this once great country.

Finally, let me say that this incident is making me very clear where Rep. DeFazio's, Rep. Edwards' and your interests lie, and it is not with people like me. Should the "Let Wall Street Pay for Wall Street’s Bailout Act of 2009" pass into law, another personal mission of mine will become to prevent you and your cohorts from ever "serving" US - we, the people - ever again.

P.S.: Do your pensions get assessed this tax? I'm sure you'll find some way to make sure your absurdly large pensions will be privileged and protected to, won't they? How is Congress any different from Wall Street, with similarly large golden parachutes? You make me sick!

Recessions & Recency Bias

Over at Infectious Greed, Paul posted this interesting chart the other day. It illustrates how few people currently working in American society have any real experience with a severe recession. The number is pretty small indeed. Take a look.

Even someone 45 years old probably was not in the workforce, or barely in the workforce, in 1981 - 1982. There are going to be a lot of people unpleasantly surprised by the extent of this downturn, as if there haven't been enough already.

What I found most interesting is the comment from rdd regarding the best things he took away from the experience. (He mentions entering the workforce in 1981, just in time for the second half of the infamous early '80s double dip recession.) Needless to say, I agree completely with his lessons. The one that stands out most vividly is to develop skills that others don't have. One of the biggest - if not THE biggest - secrets to success I have encountered is being able to do that which other's can't, or even better, won't. If you are the one who will, you make yourself that much more indispensable. Use people's laziness to your benefit.

That is all.

Trading Report: First Swing Trade = WIN!

Anyway, I *think* that's the correct term. And it was a success!

On Wednesday, I bought 100 shares of TBT, the ProShares UltraShort Lehman 20 Year Treasury ETF, as a short play on US Treasuries. (Over the longer term, I think the outlook for Treasuries is grim, so TBT might be a decent longer term hold.)

While I originally planned to make the trade a day trade, I was compelled by market factors to hold the position through the close. (Basically, it closed marginally above my entry at $45.00.) I placed an initial stop at $44.75 so that should the ETF drop, my loss was capped at $0.25 per share, or $25 total. If the opportunity presented itself, I would reset my stop to capture some of the upside while not tracking the market all day.

Well, opportunity REALLY presented itself on Thursday, 12 February. When I checked in around 12:15 PM EST, TBT was around $45.62. Thus, I reset my stop to $45.30. After checking in again around 12:30 PM, I reset the stop to $45.60 (with TBT trading in the $45.90 area). By 1:45 PM, my stop was executed and all 100 shares were sold for $45.60 as TBT made its way back to the $45.20 - $45.20 range. While it eventually closed at $45.96, I didn't re-trade it.

So, for the entire experiment, a $60 gross profit (not including commissions or taxes). While it's not a lot, I am still in the early stages of trading, and I don't have huge amounts of capital so I have to be prudent. But I am happy with the initial results.

(And remember boys and girls, this is not investment or trading advice. I'm just relaying to you what I did. You need to make your own decisions, based on your own research. Don't blame me if you try something I did and it blows up on you. That's your own situation to deal with. I take responsibility for my own successes and failures. Do you do the same for yours?)

Until the next trade, peace!

My Response to Crooked Timber's Analysis of "Wall Street"

This one I have put off for a while, with no really good reason for doing so other than being busy. However, after buying the 20th anniversary edition of "Wall Street" (my 2nd favorite movie of all time!) on DVD and watching it over and over, I found this analysis on crookedtimber.org and felt compelled to respond to it. I think several components of the review seriously overlook basic facts established in the film. So let's start at the top.

First, I don't disagree with the ultimate hypothesis of this review -- that Gordon Gekko was ultimately acquitted on all charges of securities fraud. Bud Fox, on the other hand, I'm not so sure about. While I see the author's point, I think some of Bud's actions were clearly illegal.

In the second part of this review, I plan to examine some things about Gekko that are critical to my understanding of the man and his motivations. Part II will encompass more of what is considered a movie review.

The first 2 points as laid out by our author only minimally trouble me. The first big problem is with the 3rd of the 6 "general areas" of charges against Gordon Gekko -- trading in Fairchild Foods, Rorker Electronics and Morningstar. Bud Fox does not bribe the owner of Marsala Maintenance to get a job which allows him to wander through the offices of Roger Barnes' firm late at night. In fact, he proposes to Mr. Panos, the aforementioned owner, an arrangement in which he would make an equity investment into Marsala. His exact words, at 57:10 (20th Anniversary Edition on DVD), are "Let me ask you something - what would you say to some working capital and a partner?" He then goes on to lay out his idea, noting that Panos' business is so good that he doesn't have the resources to keep up with his current book of business, not to mention the business that Bud can bring in. You'll also note that Bud walks through the site with clipboard and pen, appearing to evaluate various facets of the business and performance of its employees. At no time does he even deign to pretend to be cleaning. He's an investor monitoring and managing his investment, or at least, that's the image he seeks to portray.

Clearly, Bud has broken the law by reproducing files of Marsala Maintenance's client. There can be no doubt about that. But his gaining access to the offices cleaned by Marsala Maintenance, Roger Barnes' included, are legal under the arrangement he proposes to Panos. Whether that is the actual deal, or some variant thereof, which Panos agreed to, we cannot know. However, you can even call it a bribe. But it was not a bribe just to become an employee. He had the money to at least backup some of his claims, and Panos, being an intelligent businessman, made a business deal to expand his operation.

The 4th general area that this review covers is the conduct (or lack thereof?) surrounding Teldar Paper. This is on Gekko's radar long before he encounters Bud Fox, so there is no impact. Bud is an observer to these proceedings. I will note the mention that Teldar Paper being "leveraged to the hilt, like some piss-poor Latin American country" also has nothing to do with Gekko. In fact, it is probably a large reason that Teldar is position to be raided by Gekko. This is the fault of the then-current management, Cromwell (played by Richard Dysart of "L.A. Law" fame) and his staff. How he could even use this point to implore the current shareholders in Teldar to turn down Gekko's tender is beyond me. It's really an indictment of his poor management. So I agree generally with our author regarding this point.

The 5th general area is Gekko's conduct regarding a buyout of Bluestar. Our author seems to have missed the conversation that Bud and Carl (his father) have around the 1:00:00 mark where Carl informs Bud that the "damn fare wars are killing us" and that he's losing 5 of his men to layoffs. The FAA decision is just one of many affecting the outcome for Blue Star. All it did was increase the airline's chances for success. The author (Daniel) also presupposes that Gekko's intentions at the outset were less than honorable. However, I think we can discount that theory based on the outcome of the meeting at Bud's apartment. Gekko is more than willing to let Bud carry the ball in courting the unions. He also proposes a buyout with employee stock ownership provisions and other incentives for success. Only after Carl lambastes the idea do we see the change in Gekko's enthusiasm. He is obviously crestfallen. Now, none of this is to say that Gekko did not have the breakup idea in his back pocket the whole time, but I think the breakup was not how he intended to enter into the deal. Instead, it became his way of making lemonade from the situation.

Daniel's thesis that Bud committed fraud in his dealings with Gekko regarding Bluestar is plausible. Since I am not a securities lawyer (especially in the late 80s, as I was 12 when the movie was released), I can't say.

I won't address the 6th general area, as my feelings are generally in line with Daniel's.

So that's it. Bud Fox, an ambitious young stockbroker breaks several laws in order to curry favor with the high powered financier he idolizes, until his own world is threatened by his ambitions. He then has a change of heart and turns on his mentor. While ethically, Gekko's actions are questionable, I think they are far from being illegal overall, while Bud Fox has quite clearly crossed the line into illegality.

If you made it this far, you're probably wondering why I wrote this. Honestly, when I found the crookedtimber.org analysis, I was searching generally for information about the movie and stumbled upon it. However, if you watch the movie closely, as I have innumerable times, the points I make above stand out like a sort thumb compared to our reviewer's analysis. This was my attempt at setting the record straight.

In part II, I'll delve into what I think is the motivation behind Gekko. Until then...

Trading Report: Preamble

I'm going to discuss the first few trades I've made, both paper and real, as an exercise in metacognition. Along with actually generating real income via trading now, I want to improve my abilities and generate more income in the future. Hopefully, this process will further my trading education and support that goal (for starters).

First of all, I am now clear that I seek to enter any trading day on which I actually trade (with real money) with a goal to net at least $1000 from my trading. Otherwise, not only is it uninteresting, but it really isn't worth my time to risk the capital. This may mean I don't enter into the market with as much frequency as I might otherwise, but it does 2 other things which I think are critical. First, it gives me a specific goal to keep in mind whenever I do enter the market. Second, it gives me more time to practice my evaluation skills and paper trading without feeling like I have to risk capital.

My first successful trade (and really my first trade ever) was 2000 shares of the PowerShares DB Crude Oil Double Long Exchange Traded Note (ETN) -- known as DXO -- which I bought a few days before the end of 2008 and sold about 2 weeks later, for a pre-tax net of about $960. Not bad for a first trade, especially one that was completely unplanned. I wanted to start accumulating DXO and figured that my entry at $2.20 per share was fairly good. (The day that purchase occurred, I had a limit order at $2.10 which was totally missed because DXO gapped up about $0.13 at the open.)

Since that first trade, I've made a few smaller trades, mostly buying DXO at prices ranging from about $2.40 to $2.82, and even a short sale on IYR (if I recall correctly) which netted approximately $60. Currently, I've fairly inactive, just holding back and observing. I've a few theses which I'm tracking and just getting comfortable with trading. I welcome any ideas, suggestions, or tips (such as brokers and tools, as I am looking to change to a new broker with better tools - primarily real time charts - soon).

You can follow my trades (and other musings) by following me via Twitter, as that's where they tend to get announced first.

Until next time...

Change of Direction

This move is probably overdue by several weeks, if not months. Now is as good a time as any, so...

I am in the process of converting my brokerage account into a pure trading vehicle. All investment activities will occur in either my employer 401(k) OR in my self-directed Roth IRA. I plan to migrate all of my existing investment allocations to InvivoAnalytics' Satellite Portfolio into my Roth IRA over the course of the year. It will be a slow process of rebuilding in the Roth, but it's for the best.

I have liquidated all holdings in my brokerage account that are long term investment oriented holdings. I won't be switching to another broker (for now).

I am doing this because mixing the 2 objectives in a single account had become...messy. I have found it difficult to maintain focus, which has distracted me and slowed my decision making. Slow decision making has led to missed opportunities.

Converting the brokerage account for purely trading will also allow me to take more concentrated positions than I can currently. I believe this will allow me to grow my brokerage account faster. I am to the point where the balance in my brokerage account, while not huge, is large enough to actually do something "useful". In a sense, my account finally has some weight.

Finally, the long horizon investment holdings will sit in a tax advantaged retirement account. I've had this account open for a while, but it has been dormant. Increasing the activity in this account will lead to tax diversification, which is always a plus. The investment holdings will also be allowed to grow unencumbered by my need/desire to raise trading funds, not that I was sacrificing them anyway. However, now that the split is physical and not just logical, I no longer suffer from temptation to touch those long term holdings.

For the next few trading sessions, I will be essentially "paper trading" - researching and studying trades ahead of trading sessions, but not actually executing them. Instead, I will watch how my proposed trades perform and how I can adapt my trading system(s) before I start risking capital. Even though I have had more success than failures on the few trades I've made, and I do want to start trading to earn money for various purposes, I've decided to spend a bit of time on my education by doing this. It sucks, but losing real money would suck more.

Until next time...

Quick Scalp

Well, that was short-lived.

Remember that energy play I talked about recently? Well, I sold out my position in DXO just now after 2 weeks since entry. Not as large of a profit as I could have made, but definitely positive by $963 according to my calculations. I'll do the final numbers and let you know.

And if you're wondering why I never mentioned the ticker before now, its so that no one can accuse me of talking my book. I trade (and win or lose thusly) based on my own thinking and instincts. You should do the same.

Cheers!

Quickie

Re-balanced the hell out of my 401(k) in the last 2 weeks. That would appear to be the best time to sell out of all the vested employer stock that the employer contribution took the form of. All of the excess is going into the money market option for the time being, so I will have some dry powder available after I finish re-allocating most of the cash.

:)

Also started building a small position in an energy ETN. Will start looking for a (roughly) equivalent ETF but so far, this is position is rocking! Up approximately 20% in 2 weeks. It's actually a bit more than that, but I haven't calculated the exact amount since I purchased at 2 different entry points. Funniest part is that I bought this with a time frame of 12 - 18 months, even though it is a bit aggressive as an investment. I never thought I'd see this kind of performance this quickly though!

2009 Goals

Well, that was an interesting year! No matter what happened, 2008 was the best year of my life ever. Now it's time for 2009 to claim that title.

I fell down on my 2008 goals. September 2008 came around, put its foot in my ass, and I just stopped dead in my tracks. I stopped tracking my spending to the penny. Everything stopped.

It's really not important what happened. I'm fairly clear on what happened and what I need to do to breakthrough that block. (This post at MuscleHack.com gives a bit of insight on what that process looks like.) The first order of business is to post my 2009 goals here, for the world to see. Next, I plan to post them everywhere within my daily life, so that I remain present to them. Then I'll share them with people close to me, as I already have with my coaching partner, so that the people I most care about, and who most care about me, can hold me accountable to those goals.

Needless to say, I'm feeling some stress around some of these, in particular the first goal on the list of regular goals. Oh man, what have I gotten myself into!

Regular --

Business: Finish writing e-book by 9 Jan 2009. Publish by 16 Jan 2009.
Business: Make 3 contacts during Money:Tech 2009 (6 Feb 2009).
Personal: Ride a blue trail by 31 March 2009.
Professional: Find and accept an offer for an awesome new career opportunity by 31 March 2009 (end of 1Q2009).
Fitness: Achieve 10% body fat by 31 Mar 2009 (end of 1Q2009).
Fitness: 25 dips, full extension, full body weight by 31 Mar 2009 (end of 1Q2009).
Personal: Cook 1 meal per week by 30 Jun 2009 (end of 2Q2009).
Business: Finish unwinding my real estate partnership by 30 Jun 2009 (end of 2Q2009).
Fitness: 1 hr of cardio on the Precor EFX 556 in interval mode by 30 Jun 2009 (end of 2Q2009).
Fitness: 10 wide grip pull ups, full body weight, by 30 Jun 2009 (end of 2Q2009).
Personal: Save $15,000 for house down payment by 30 Sep 2009 (end of 3Q2009).
Personal: Read 1 book per month (12 total) by 31 Dec 2009.
Personal: Accumulate $30,000 in emergency funds by 31 Dec 2009.
Personal: Achieve $90,000 in net worth by 31 Dec 2009.
Personal: Pay AmEx down to $0.00 by 31 Dec 2009.

Stretch:

Fitness: Achieve a visible sixpack by 30 Sep 2009 (end of 3Q2009).
Personal: Achieve $150,000 in net worth by 31 Dec 2009.
Personal: Read 1 book per week (52 total) by 31 Dec 2009.
Fitness: Achieve 8% body fat by 31 Dec 2009.
Fitness: Chest press 200 lbs for 15 reps by 31 Dec 2009.
Fitness: 1 hr of cardio on Precor EFX 556 in hill climb mode by 31 Dec 2009.
Personal: Accumulate $50,000 in emergency funds by 31 Dec 2009.

Looking at the list of stretch goals, in particular, scares me. I mean, I feel tension and fear around those and my chances of achieving them. That lets me know that they are well chosen and will push me. I'm thinking that I should spend more time pursuing the stretch goals, and by doing so, I will likely achieve many of my regular goals as a matter of course.

So there you go. It's time to get started!

Happy New Year!

Wow!

It is both amazing and disheartening that the last time I posted was on 7 December 2008. Not quite how I envisioned the final weeks of the recently passed year progressing. Not at all.

Oh well.

I'm in the midst of preparing some long awaited (by me, anyway) posts that I hope you too will enjoy. So I hope you'll join me for the trip as I start out making this year the best ever as Alpha Guy.

Cheers!

Understanding the Fed

A VERY nice, but brief, piece of work over on the Trading Goddess' blog about how the Federal Reserve of the US works. A must read!

I Call B.S.!!!!

Why do people insist that Goldman Sachs and Morgan Stanley will fall under the "tougher regulatory scrutiny" of the Federal Reserve when the Fed hasn't been tough or shown evidence of having a spine since Volcker was the chairman? I just don't get the unbridled inanity of these remarks. Is it only professional journalists that say such stupid things?

That is all.

PE Liquidations among Endowments

I'm wondering if any non-Ivy schools are taking advantage of this opportunity to acquire stakes in private equity funds on the secondary market. This isn't the first that we've heard of this story, and it likely won't be the last. However, if any endowments were sitting on some liquidity, this is sounds like a decent entry point with some well respected PE names.

*cough* Howard U.? *cough*

Of course, what is more likely is that these non-Ivy or non-first tier endowments are probably trying to liquidate their portfolios too. So sad.

These first tier endowments are getting hit by MTM accounting rules too? If smaller endowments can't get at least 50% off, then something is terribly wrong! At 50% or greater discounts, some of the LBOs of the last few years sound fairly reasonable. But its going to take even greater discounting to squeeze $120B in assets into $40B of investable capital.

When I originally started writing this post, Harvard had not yet reported their latest results. Down 22% (WSJ.com sub req'd) since the start of the fiscal year. Wow!

I contend that there is plenty of alpha out there to be gained, but it will take creativity, negotiation skills, and iron will to earn it. The days of easy alpha (more accurately, alternative beta) are over for the near future. Is this one way some of the second tier endowments can catapult their results into the stratosphere? Hell if I know! But I can fell the abundance of opportunity, and it gets more pronounced with every leg down. The question is who will take advantage of it?

Inflation FTW!

I don't know why so many people think the Fed actually cares about preventing/stopping inflation when the Fed's primary role over the course of the last 95 years has been to manufacture inflation. I mean, come on, what would have you think the Fed is seeking to fight inflation? It can't be the last 26 or more years of credit creation led by the Fed (mostly on Greenspan's watch). With the dollar worth 5% of its value in 1913, the year of the Fed's founding, it can't be that either.

Am I missing something? Why do people still think the Fed has a mandate to fight inflation? If they did, they are horribly incompetent and inept at that job and thus should be taken out and shot. I am a firm believer in Hanlon's Razor, but even this level of stupidity doesn't make sense. I can't see how 95 years worth of ineptitude can be justified unless...its not ineptitude at work but intention.