This posting is the last in the mentor series. Today no. 3
Once I began using other people's money and taking chances there became a point where I decided it was time to find safe places to put accumulated capital that would allow it to continue to grow and keep up with inflation. Everyone reaches a point in their financial life where they must make a decision that declining years and lessened skill sets mean your ability to continue earning compensation via work or a career will be lower or even stop one day. One has 40, maybe 45 years to accumulate enough money before you get old enough your working skills become unmarketable. If you do not consider this fact in your investing you are a fool. So as you move up in years in life some of the capital you accumulate needs to be put in safe yielding places.
Safe yielding investments are hard to come by if you consider any capital and yield is subject to the inflation eroded value. All savings such as passbook savings and CD's never keep up with inflation. Banks understand inflation and know that they can not make profit without adjusting for inflation and therefore anything they pay you in savings interest will be less than inflation. Another option for inflation protection are common stocks. Common stocks relate to the business environment and can be raised or lowered accordingly. The lowered part is what worries me when it comes to safe yields. One can also invest in corporate bonds or preferred stocks, but again they are subject to the business environment and you can lose your principal. US government bonds are another choice, but the interest rates here are low and almost always subject to federal taxes and generally a low payout . Lastly one has to consider the erosive part taxation does to yield as a third or so of any yield is gone when you pay tax. So what's a investor to do with money they want to put your money in salt.
Enter my next mentor. Over three decades ago my father introduced me to someone who sold municipal bonds as a specialty. One can find investment grade muni bonds that not only pay good current interest of 5% plus, but if based in the state you live is free from both state and federal income tax. So a 5% coupon rate equates to around 7.5% taxable rate for most people in a 25% federal and 7% state tax rate. 7.5% bond interest not only covers most inflation situation, but makes you some money too. Yes, I know inflation can be high at some times, but you can alleviate that problem with just recycling your muni bond interest into new bonds at the prevailing bond rates. The most important key here is to buy individual bonds that you keep until maturity so as to avoid any loss of capital and to reinvest your interest. Today I have bonds left over from higher inflation periods that pay 7% coupons, almost 10% taxable rates.
Muni bonds are generally issued by US states and rarely, very rarely, default. So your principal is safe and your interest is regular. My mentor not only taught me over the years of using his services much of what I know about muni bonds, he taught me how to buy them at a discount. In late 2007, when most investors were running for the hills and willing to sell good muni bonds for 65 cents on the dollar I was buying up as much of them as I could find. Today they are safe yielding investment that will pay tax free interest for years to come. Bonds bought at 65 cents on the dollar paying 5% is nice, I will let you do the figures there.
So I can only say thanks and more thanks to my now more three decades muni bond mentor and friend Tom Pace. Tom is alive and I visit him about three times a year now to have a nice lunch and to thank him for teaching me how to salt money away for life
Thursday, April 28, 2011
Tuesday, April 26, 2011
Take A Chance
This is my second posting in the mentor series, today no. 2
Anyone who knows me knows from almost the day I started working my goal was to retire early. Frankly I was very vocal about this desire and constantly looked for ways to make and then save money. As I ended my first decade of work in 1984 I considered my current saving situation and came to the realization that no matter how much money I could not spend and save there was no way I could save enough money to ever retire period on the savings, certainly not retire early. Even at what was then 5% plus CD rates capital could not be squirreled away in quantities to make retirement possible.
I thought other people do it so why can't I? I did notice the few that did retire early do it with a pension they can only be viewed as a modest pension. They also had to depend on someone else's benevolence, usually the government, to continue being retired. I was too much of an independent soul to rely on the pension and gold watch scenario. But again other people do retire early and do it with plenty of accumulated capital. The question was how? How turned out to be they "took a chance". I came upon this realization when I attended a class at the local community college where a personal financial class was being taught. The class info was interesting, but the ultimate advantage I got from the class was a quarter century friendship with the stock broker who taught the class. The broker and I became fast friends as both of us had mutual interests and most importantly the broker, being about a decade older, had taken chances in his life to pursue dreams. We had lunch in early 1985 and when I asked him how he had started his success scenario he told me in plain English "take a chance". What he meant was for me to get my money out of bank CD's and take a calculated well reasoned chance with my capital. That was how other people make real money and how they, if they wanted to, retire early and comfortable.
He opined that everyone everyday takes a chance. If you cross the street you take a chance that you might not see the bus that runs you over. You take a chance when you go drive on the road, knowing your chances are rather high you will be one of 50000 or so who are killed annually. If you do take a chance and fail you you are only as well off as you were all along. Fear of failure is what keeps most people from achievement. Nothing ventured, nothing gained.
So over the next few decades that is what I did, take reasoned chances. As time went on I became better at the decision making either by experience at success or more importantly avoiding second mistakes. As the old saying goes idiocy is doing the same thing over and over and expecting different results. Therefore making a mistake once is the way to success. But first taking a chance is the only way to start that pattern.
My friend, who taught me this, was Andy Augustine. Unfortunately today Andy has passed on. But I carry on taking chances. He would be proud.
Anyone who knows me knows from almost the day I started working my goal was to retire early. Frankly I was very vocal about this desire and constantly looked for ways to make and then save money. As I ended my first decade of work in 1984 I considered my current saving situation and came to the realization that no matter how much money I could not spend and save there was no way I could save enough money to ever retire period on the savings, certainly not retire early. Even at what was then 5% plus CD rates capital could not be squirreled away in quantities to make retirement possible.
I thought other people do it so why can't I? I did notice the few that did retire early do it with a pension they can only be viewed as a modest pension. They also had to depend on someone else's benevolence, usually the government, to continue being retired. I was too much of an independent soul to rely on the pension and gold watch scenario. But again other people do retire early and do it with plenty of accumulated capital. The question was how? How turned out to be they "took a chance". I came upon this realization when I attended a class at the local community college where a personal financial class was being taught. The class info was interesting, but the ultimate advantage I got from the class was a quarter century friendship with the stock broker who taught the class. The broker and I became fast friends as both of us had mutual interests and most importantly the broker, being about a decade older, had taken chances in his life to pursue dreams. We had lunch in early 1985 and when I asked him how he had started his success scenario he told me in plain English "take a chance". What he meant was for me to get my money out of bank CD's and take a calculated well reasoned chance with my capital. That was how other people make real money and how they, if they wanted to, retire early and comfortable.
He opined that everyone everyday takes a chance. If you cross the street you take a chance that you might not see the bus that runs you over. You take a chance when you go drive on the road, knowing your chances are rather high you will be one of 50000 or so who are killed annually. If you do take a chance and fail you you are only as well off as you were all along. Fear of failure is what keeps most people from achievement. Nothing ventured, nothing gained.
So over the next few decades that is what I did, take reasoned chances. As time went on I became better at the decision making either by experience at success or more importantly avoiding second mistakes. As the old saying goes idiocy is doing the same thing over and over and expecting different results. Therefore making a mistake once is the way to success. But first taking a chance is the only way to start that pattern.
My friend, who taught me this, was Andy Augustine. Unfortunately today Andy has passed on. But I carry on taking chances. He would be proud.
Monday, April 25, 2011
Using Other People's Money. Mentor Series No. 1
This posting is one of three postings I will do on mentors who helped me become a successful trader, business person, and investor. Today mentor series no. 1. Maybe they can help you too.
Back when I was a young man and wanting to succeed in this world one thing I learned early on was to listen, and listen carefully, to those who had been successful. In 1979, still in my twenties, I picked up some advice from someone who ran a business at the time I never forgot. The business was a auto dealer owned by two friends who I was selling advertising to at the time. Over the years I had done business with many auto dealers who had done well, but only a few who had done well by starting their business from scratch. I wondered at the time how did these young entrepreneurs get started and what was their secret. The vast majority of us are not born with wealth so how you are to gain wealth if you are not born that way? So being inquisitive I walked into my auto friend's office one day and asked him that very question. His advice was not only given in a what is now called a sound bite that I could keep over the years, but he went on to explain in about 10 minutes his reasoning. His wise counsel at that time has helped me many times the last three plus decades.
His advice was "use other people's money". More precisely when you do not have enough capital to do what you want to do in business you use other people's money by borrowing it, making your profit, and paying it back. I know the first thing you ask is just how do you get someone to let you borrow their money? Well you earn that right, by convincing the people you are borrowing from you are good for re-payment of principal and payment of interest on the capital. You can do that either by having an excellent idea that other people believe will make money or having a consistent record of having used other people's money and repaying with interest.
Now I have never been one for original ideas, so no one will likely ever let me borrow from them on that approach. However I have been an excellent risk and proven many times that I can borrow, pay interest, and pay back other people's money. Over time I have expanded that trust to the point I can borrow seven figure amounts now with just my signature. Using other people's money and paying interest for that use means you must not only make enough profit to pay the interest, but also enough to retire the debt and make yourself some money on the borrowed money as well. Today my main lenders allow me to borrow at 3.75% and 4.75% interest rates. So if I borrow money for my hedge fund, and make my lowest profit during the last three years of 15% or so, I am making 10% plus on the borrowed money. That is enough to pay back the principal, pay the interest, and still have a tidy profit.
The decision now is no longer how much can I borrow, but how much risk do I want to take to make more profit. Like an other entrepreneur I make decisions based on market situation, competitive advantage, and unfortunately political considerations. So the lesson here is if you do not have capital to pursue your business and dreams find a way to use other people's money. My mentor, Tommy Baker, many years ago gave me that nugget of wisdom that allowed me the opportunity to pursue my dreams.
Tommy Baker is today a successful luxury auto dealer in the southeast. I expect still using other people's money.
Back when I was a young man and wanting to succeed in this world one thing I learned early on was to listen, and listen carefully, to those who had been successful. In 1979, still in my twenties, I picked up some advice from someone who ran a business at the time I never forgot. The business was a auto dealer owned by two friends who I was selling advertising to at the time. Over the years I had done business with many auto dealers who had done well, but only a few who had done well by starting their business from scratch. I wondered at the time how did these young entrepreneurs get started and what was their secret. The vast majority of us are not born with wealth so how you are to gain wealth if you are not born that way? So being inquisitive I walked into my auto friend's office one day and asked him that very question. His advice was not only given in a what is now called a sound bite that I could keep over the years, but he went on to explain in about 10 minutes his reasoning. His wise counsel at that time has helped me many times the last three plus decades.
His advice was "use other people's money". More precisely when you do not have enough capital to do what you want to do in business you use other people's money by borrowing it, making your profit, and paying it back. I know the first thing you ask is just how do you get someone to let you borrow their money? Well you earn that right, by convincing the people you are borrowing from you are good for re-payment of principal and payment of interest on the capital. You can do that either by having an excellent idea that other people believe will make money or having a consistent record of having used other people's money and repaying with interest.
Now I have never been one for original ideas, so no one will likely ever let me borrow from them on that approach. However I have been an excellent risk and proven many times that I can borrow, pay interest, and pay back other people's money. Over time I have expanded that trust to the point I can borrow seven figure amounts now with just my signature. Using other people's money and paying interest for that use means you must not only make enough profit to pay the interest, but also enough to retire the debt and make yourself some money on the borrowed money as well. Today my main lenders allow me to borrow at 3.75% and 4.75% interest rates. So if I borrow money for my hedge fund, and make my lowest profit during the last three years of 15% or so, I am making 10% plus on the borrowed money. That is enough to pay back the principal, pay the interest, and still have a tidy profit.
The decision now is no longer how much can I borrow, but how much risk do I want to take to make more profit. Like an other entrepreneur I make decisions based on market situation, competitive advantage, and unfortunately political considerations. So the lesson here is if you do not have capital to pursue your business and dreams find a way to use other people's money. My mentor, Tommy Baker, many years ago gave me that nugget of wisdom that allowed me the opportunity to pursue my dreams.
Tommy Baker is today a successful luxury auto dealer in the southeast. I expect still using other people's money.
Wednesday, April 20, 2011
Several Current Trading Mistakes
Despite my success at picking stocks and selling options I do make mistakes. Those errors have become much less frequent over the years, but they still do happen and will continue as long as I trade. However I consider mistakes that cost less than about $3000 as just a cost of doing business as a trader. You take your medicine and move on, these errors are already priced into my trading model. Below are my 2011 stock buys that resulted from options trades and my plans going forward.
WIN...Windstream is a great company in my opinion. They are one of handful of legacy wire line telephone operators left in the country. The areas they serve have very little wireless penetration and that makes the stock a stable performer that will not move much in price, but pay you a handsome currently 8% dividend for years to come. However I sold a put option several months ago that did not take into account the possibility of a drop in price as traders moved from defensive stocks like Windstream to securities with more risk as market dynamics improved. Thus I currently have $14 per share in a stock selling currently at around $12.45, at 4400 shares just under $6600 in the hole on this one. Now I am getting a $1100 per quarter dividend and a monthly call option premium of around $250, so not all is lost. However I have decided with the May option expiration I will begin to be aggressive with my options and move out of this stock in attempt to cut my loss to $4400. Once I am called out of this stock I will once the wash sale rule has expired take another lower price position in this stock.
SCCO.. Southern Copper is another excellent company. It mines copper in several countries and pays a 6.5% dividend. SCCO is a volatile stock and can go up and down $3 to $5 per share in a week. Copper is absolutely necessary to the wired world and will always be needed. The emergence of China and India in the developed world and their need for copper makes this stock a roller coaster, but great for option traders. I currently am $2700 down in value at a purchase price of $40. However I am not concerned about this trade as it will be back at or above the purchase price when the sentiment about the economy improves as it always has done. I continue to make serious option money here. I bought SCCO too high, but that does not make it a bad trading vehicle.
FTR..Another legacy wire line telephone company. Similar trading mistake here as noted in Windstream above. I continue to get a nice dividend and option income from FTR. I am down about $4100 in this security and frankly do not have the available options opportunities to move out of this security. There is the chance I might clear this holding with a sizable loss too. I will sell before year end if nothing happens and take the tax loss. Trading in this stock was a mistake due to the lack of trading range so once I am out of FTR will not take a future position. If one is looking for dividend and a stable price for income this security is still a solid holding.
NYB...I am not currently carrying a loss in this stock. But their results this past week have caused me concern about their ability to hold their present over 6% dividend. I do have a put option on this stock that expires in May. At that time I will be dropping this security from my trading if I am not put on the stock. If put I will work my way out of this holding as soon as possible. It has now become clear that the recently passed Obama financial regulation bill has made investments in small banks not smart. The big banks can spread the additional costs over a larger footprint and eventually pass on those costs to customers.
WIN...Windstream is a great company in my opinion. They are one of handful of legacy wire line telephone operators left in the country. The areas they serve have very little wireless penetration and that makes the stock a stable performer that will not move much in price, but pay you a handsome currently 8% dividend for years to come. However I sold a put option several months ago that did not take into account the possibility of a drop in price as traders moved from defensive stocks like Windstream to securities with more risk as market dynamics improved. Thus I currently have $14 per share in a stock selling currently at around $12.45, at 4400 shares just under $6600 in the hole on this one. Now I am getting a $1100 per quarter dividend and a monthly call option premium of around $250, so not all is lost. However I have decided with the May option expiration I will begin to be aggressive with my options and move out of this stock in attempt to cut my loss to $4400. Once I am called out of this stock I will once the wash sale rule has expired take another lower price position in this stock.
SCCO.. Southern Copper is another excellent company. It mines copper in several countries and pays a 6.5% dividend. SCCO is a volatile stock and can go up and down $3 to $5 per share in a week. Copper is absolutely necessary to the wired world and will always be needed. The emergence of China and India in the developed world and their need for copper makes this stock a roller coaster, but great for option traders. I currently am $2700 down in value at a purchase price of $40. However I am not concerned about this trade as it will be back at or above the purchase price when the sentiment about the economy improves as it always has done. I continue to make serious option money here. I bought SCCO too high, but that does not make it a bad trading vehicle.
FTR..Another legacy wire line telephone company. Similar trading mistake here as noted in Windstream above. I continue to get a nice dividend and option income from FTR. I am down about $4100 in this security and frankly do not have the available options opportunities to move out of this security. There is the chance I might clear this holding with a sizable loss too. I will sell before year end if nothing happens and take the tax loss. Trading in this stock was a mistake due to the lack of trading range so once I am out of FTR will not take a future position. If one is looking for dividend and a stable price for income this security is still a solid holding.
NYB...I am not currently carrying a loss in this stock. But their results this past week have caused me concern about their ability to hold their present over 6% dividend. I do have a put option on this stock that expires in May. At that time I will be dropping this security from my trading if I am not put on the stock. If put I will work my way out of this holding as soon as possible. It has now become clear that the recently passed Obama financial regulation bill has made investments in small banks not smart. The big banks can spread the additional costs over a larger footprint and eventually pass on those costs to customers.
Tuesday, April 19, 2011
Rules for being a Good Salesperson
My files have a wealth of information built up over three decades of sales management and employing people. From time to time I will use the Small Town Investor blog to disseminate that info in case someone has interest. Today is a list of rules for salespeople that for some might seen obvious, but frankly few salespeople apply. Management, is a practice like medicine or law, and therefore a contined learning cycle with errors of judgement and improvement of decision making as one grows more experienced. I made numerous hiring mistakes early on and over time got much better at hiring staff.
Sales, contrary to what others might opine is an honorable profession, and until something is sold no one else has a job. I learned early on most salespeople are born, it is generally not a learned exercise. The two traits most salespeople have are ego drive and empathy. Ego drive to succeed and overcome obstacles and empathy to care, really care, about your customer. One can learn skills, but if you do not arrive at the job with ego and empathy you likely will never be a success at sales.
Most of my former employees will recognize this list as I have passed it out to every salesperson I have hired since 1986. I call it "Building a Opportunity Culture." Because being a salesperson offers you the opportunity to make compensation beyond normal pay. A good manager builds an Opportunity Culture where salespeople not only survive, but thrive. Part of that building is getting rid of staff not suitable for sales and hiring quality staff. Your customers deserve nothing less.
1. Show concern for your customer by giving first rate service. Service means handling your customers payment to you for a product as if it was your money. Actually some of it is. Checking to make sure the customer receives what they paid for and solving problems past the original sale show appreciation and concern for the customer. Appreciation and concern build customer loyalty past any price.
2. Act to make sales. Go see prospective customers, bring them ideas that might help build your customers business. Never, never allow night to come without returning calls, e-mails, or your customers efforts at contacting you. Act when problems arise and alert your customer even when they might not be aware, especially before they contact you.
3. Be organized in your sales approach. List in writing who you want to sell and what you believe the customer needs. Prepare in advance your time with the customer. Their time is valuable and they will appreciate your wanting not to waste their time. Do not be caught using the phone, e-mail, and such to contact your customer regularly. Nothing replaces personal face to face visits as often as can be arranged.
4. Be persistent in reaching your sales goals. Do not take a "no" for an answer the first time. If you have done your research and really believe your product can help your prospect assume they do not understand that your product is an investment and not an expense. Take time to understand THEIR business so as to better address the customer. Address their concerns over a period of time if needed so as to make the sale. If nothing else go see them and ask "how is business" every time you see them.
5. Make yourself more valuable by taking on new responsibilities and becoming cross-trained at your employment. Being more valuable enhances your career prospects and most importantly makes you more confident.
6. Do all your work with integrity, be in your co-workers or customers. Tell the truth, accept blame when it is yours, and have accountability. Nothing improves your self worth like knowing you have integrity.
7. Fully understand your areas of responsibility and the product you are selling. Use that knowledge to create sales opportunities that fills your customer's needs.
8. Be result oriented. Do not just go through the motions of selling and say I have done all I can do to sell. Our goals are made only when we sell the most product the most times to a customer, not when we have made the most commission.
9. Create long term relationships. Do not sell for "sales" sake. Make sure your product is satisfying your customer's needs. In that way they will remain a customer and contribute to your sales base indefinitely.
10. Be enthusiastic. Want to make money doing sales and be excited at the prospect of doing so. Set a goal and go for it.
Sales, contrary to what others might opine is an honorable profession, and until something is sold no one else has a job. I learned early on most salespeople are born, it is generally not a learned exercise. The two traits most salespeople have are ego drive and empathy. Ego drive to succeed and overcome obstacles and empathy to care, really care, about your customer. One can learn skills, but if you do not arrive at the job with ego and empathy you likely will never be a success at sales.
Most of my former employees will recognize this list as I have passed it out to every salesperson I have hired since 1986. I call it "Building a Opportunity Culture." Because being a salesperson offers you the opportunity to make compensation beyond normal pay. A good manager builds an Opportunity Culture where salespeople not only survive, but thrive. Part of that building is getting rid of staff not suitable for sales and hiring quality staff. Your customers deserve nothing less.
1. Show concern for your customer by giving first rate service. Service means handling your customers payment to you for a product as if it was your money. Actually some of it is. Checking to make sure the customer receives what they paid for and solving problems past the original sale show appreciation and concern for the customer. Appreciation and concern build customer loyalty past any price.
2. Act to make sales. Go see prospective customers, bring them ideas that might help build your customers business. Never, never allow night to come without returning calls, e-mails, or your customers efforts at contacting you. Act when problems arise and alert your customer even when they might not be aware, especially before they contact you.
3. Be organized in your sales approach. List in writing who you want to sell and what you believe the customer needs. Prepare in advance your time with the customer. Their time is valuable and they will appreciate your wanting not to waste their time. Do not be caught using the phone, e-mail, and such to contact your customer regularly. Nothing replaces personal face to face visits as often as can be arranged.
4. Be persistent in reaching your sales goals. Do not take a "no" for an answer the first time. If you have done your research and really believe your product can help your prospect assume they do not understand that your product is an investment and not an expense. Take time to understand THEIR business so as to better address the customer. Address their concerns over a period of time if needed so as to make the sale. If nothing else go see them and ask "how is business" every time you see them.
5. Make yourself more valuable by taking on new responsibilities and becoming cross-trained at your employment. Being more valuable enhances your career prospects and most importantly makes you more confident.
6. Do all your work with integrity, be in your co-workers or customers. Tell the truth, accept blame when it is yours, and have accountability. Nothing improves your self worth like knowing you have integrity.
7. Fully understand your areas of responsibility and the product you are selling. Use that knowledge to create sales opportunities that fills your customer's needs.
8. Be result oriented. Do not just go through the motions of selling and say I have done all I can do to sell. Our goals are made only when we sell the most product the most times to a customer, not when we have made the most commission.
9. Create long term relationships. Do not sell for "sales" sake. Make sure your product is satisfying your customer's needs. In that way they will remain a customer and contribute to your sales base indefinitely.
10. Be enthusiastic. Want to make money doing sales and be excited at the prospect of doing so. Set a goal and go for it.
Sunday, April 17, 2011
Profits over Politics.
Anyone who knows me likely knows my opinions on the issues of the day. But rest assured, as I mentioned when I started this blog, I will never place politics over profits. Currently there is one industry where one can make some serious money by playing the political angle. I noted this in a posting earlier this week when I posted some changes in my holdings and that a new holding would become on Monday April 18 my largest position.
The oil industry is on the receiving end of punitive tax and fee treatment, not only in the US, but lately in the United Kingdom. The UK raised the oil industry supplementary charge from 20% to 32% last month. That is on top of the already sizable 26% corporate tax , so that means a combined rate of about 58% on oil companies. Makes me wonder why any oil company would base operations in the UK. Maybe that is why the oil recovery rate in the North Sea is dropping quickly.
In the US we continue to see what is for all intents and purposes the Obama administration led shutdown in Gulf of Mexico oil drilling and not only does that limit current and future supply, but places thousands of workers out of jobs. Add in that many drillers are taking their deep sea drilling platforms to other more friendly areas of the world. Just last month President Obama assured Brazil that oil pumped from their deep sea discoveries would be welcomed in the US. Makes no sense, but that adds to your profit opportunities.
The new discoveries of oil in North Dakota and the huge and growing oil finds in Canada can not get to refineries and into use in the US market since the Obama administration refuses to allow a pipeline to be build from the current terminal in Oklahoma to Texas and Louisiana where refineries are located. Again makes no sense, new pipelines add jobs and help keep down oil prices, but adds to your profit opportunities.
All of these actions and the punitive taxes in the United Kingdom and threatened punitive tax in the US just pushes up prices for current and long term contracts for oil. The unrest in the Middle East also adds a premium on the price of oil.
Monetary policy in the US, lots of deficit spending by the current administration and uncontrolled printing of money by the Federal Reserve also adds a premium to oil prices. Deficit spending puts money in the pockets of many people who go out and buy gas . The continue printing of money inflates the value of oil on the market as more dollars chase limited supply. Oil suppliers across the globe see the dollar declining in value and thus keep oil prices high and pushing higher to earn the same value for more dollars.
One more point here is President Obama has stated that he wants gas at the pump prices to go up. He believes that would encourage less consumption, but that unfortunately that makes prices for goods that must be transported by truck go up as well.
Frankly I do not see any of these policies ending anytime soon and as an investor one would be foolish not to take advantage. Higher oil price per barrel means additional profit for oil drillers and companies who possess oil in the ground.
The only risk to investing in oil currently would be an all out world recession and right now that will not happen as long as the Feds keep printing money. Growth of the economy will be stagnant, but that too works in your favor as stagflation only enhances oil in the ground value. The other risk is for a change in political control and that can not happen until November 2012. So if you invest in oil and want continued and increasing profits in oil one would prefer the current administration to stay on past 2012, one would even prefer Congress to revert to Democratic control which would increase the chances for punitive taxes that would increase at pump prices and add to oil company profits. Out of US oil companies profit even more highly when the US punishes domestic oil, being able the pocket the difference in tax as profits.
Of course somewhere along the current upward trajectory of oil and gas prices the US economy will not be able to handle the higher price and the economy would sink. That risk is there, but current deficit spending keeps that at bay by encouraging out of work people to keep buying high priced gas.
Being no fool here I am willing to profit, and profit handsomely, from the other person doing foolish things. So I would encourage you to highly consider oil company investing. I currently own a significant position in Enerplus (ERF), a Canadian oil driller and supplier. I also will have Monday morning a put option on ERF to build an even larger position should the price decline. They pay a 7% dividend and pay it in monthly installments. They have a large and growing footprint in Canada and the US oil basins. They also are, in my opinion, undervalued. Note that the dividend is taxed 15% Canadian tax before you get it, but that tax can be used against your tax liability with the IRS. What's not to like, low valuation, high dividend, Canadian based company that the current administration can not touch, and a friendly oil driller government in Canada.
Now with all of this said, note as a purchaser of gas at the pump, the current administration is not your friend. But frankly as an oil investor you can more than make up for the increaed gas price with profits from your investments.
Finally if would encourage one, if buying for a long position, to wait for a pullback to initiate a position here. Wait for some market sell-off to buy in. I am doing that with the put option. One note of caution Goldman Sachs, the largest financial brokerage house in the US, suggested that their clients dump their oil based holdings last week. I do not agree with that, but it is info you need to know. Goldman Sachs also talked down municipal bonds all last year, while building positions there. As I said it is smart to take advanatge of foolish moves by the other person.
The oil industry is on the receiving end of punitive tax and fee treatment, not only in the US, but lately in the United Kingdom. The UK raised the oil industry supplementary charge from 20% to 32% last month. That is on top of the already sizable 26% corporate tax , so that means a combined rate of about 58% on oil companies. Makes me wonder why any oil company would base operations in the UK. Maybe that is why the oil recovery rate in the North Sea is dropping quickly.
In the US we continue to see what is for all intents and purposes the Obama administration led shutdown in Gulf of Mexico oil drilling and not only does that limit current and future supply, but places thousands of workers out of jobs. Add in that many drillers are taking their deep sea drilling platforms to other more friendly areas of the world. Just last month President Obama assured Brazil that oil pumped from their deep sea discoveries would be welcomed in the US. Makes no sense, but that adds to your profit opportunities.
The new discoveries of oil in North Dakota and the huge and growing oil finds in Canada can not get to refineries and into use in the US market since the Obama administration refuses to allow a pipeline to be build from the current terminal in Oklahoma to Texas and Louisiana where refineries are located. Again makes no sense, new pipelines add jobs and help keep down oil prices, but adds to your profit opportunities.
All of these actions and the punitive taxes in the United Kingdom and threatened punitive tax in the US just pushes up prices for current and long term contracts for oil. The unrest in the Middle East also adds a premium on the price of oil.
Monetary policy in the US, lots of deficit spending by the current administration and uncontrolled printing of money by the Federal Reserve also adds a premium to oil prices. Deficit spending puts money in the pockets of many people who go out and buy gas . The continue printing of money inflates the value of oil on the market as more dollars chase limited supply. Oil suppliers across the globe see the dollar declining in value and thus keep oil prices high and pushing higher to earn the same value for more dollars.
One more point here is President Obama has stated that he wants gas at the pump prices to go up. He believes that would encourage less consumption, but that unfortunately that makes prices for goods that must be transported by truck go up as well.
Frankly I do not see any of these policies ending anytime soon and as an investor one would be foolish not to take advantage. Higher oil price per barrel means additional profit for oil drillers and companies who possess oil in the ground.
The only risk to investing in oil currently would be an all out world recession and right now that will not happen as long as the Feds keep printing money. Growth of the economy will be stagnant, but that too works in your favor as stagflation only enhances oil in the ground value. The other risk is for a change in political control and that can not happen until November 2012. So if you invest in oil and want continued and increasing profits in oil one would prefer the current administration to stay on past 2012, one would even prefer Congress to revert to Democratic control which would increase the chances for punitive taxes that would increase at pump prices and add to oil company profits. Out of US oil companies profit even more highly when the US punishes domestic oil, being able the pocket the difference in tax as profits.
Of course somewhere along the current upward trajectory of oil and gas prices the US economy will not be able to handle the higher price and the economy would sink. That risk is there, but current deficit spending keeps that at bay by encouraging out of work people to keep buying high priced gas.
Being no fool here I am willing to profit, and profit handsomely, from the other person doing foolish things. So I would encourage you to highly consider oil company investing. I currently own a significant position in Enerplus (ERF), a Canadian oil driller and supplier. I also will have Monday morning a put option on ERF to build an even larger position should the price decline. They pay a 7% dividend and pay it in monthly installments. They have a large and growing footprint in Canada and the US oil basins. They also are, in my opinion, undervalued. Note that the dividend is taxed 15% Canadian tax before you get it, but that tax can be used against your tax liability with the IRS. What's not to like, low valuation, high dividend, Canadian based company that the current administration can not touch, and a friendly oil driller government in Canada.
Now with all of this said, note as a purchaser of gas at the pump, the current administration is not your friend. But frankly as an oil investor you can more than make up for the increaed gas price with profits from your investments.
Finally if would encourage one, if buying for a long position, to wait for a pullback to initiate a position here. Wait for some market sell-off to buy in. I am doing that with the put option. One note of caution Goldman Sachs, the largest financial brokerage house in the US, suggested that their clients dump their oil based holdings last week. I do not agree with that, but it is info you need to know. Goldman Sachs also talked down municipal bonds all last year, while building positions there. As I said it is smart to take advanatge of foolish moves by the other person.
Friday, April 15, 2011
Joe Battipaglia Passes
Sad news yesterday to hear Joe Battipaglia passed on. It was my great pleasure to meet him just last week at a conference in Pinehurst NC. I found him engaging, upbeat, and a joy to chat with during my brief time with him. The posting on April 7 entilted "Small Town Investor does American Idol" is actually about my meeting Mr. Battipaglia. Very surreal to realize that he was the person I was talking to just about one week ago. My condolences to his family and friends. I will miss seeing his regular visits, and great insights, on CNBC.
Thursday, April 14, 2011
Investing Rules and maybe some Life Rules too.
Since I am just a lowly blogger I am going to "borrow" some investing rules I picked up from a trader who I admire for his frankness and simplicity. Jeff Macke has been a professional trader for over a decade and has in the past run a hedge fund. His articles appear all over the web, but few people past serious traders see his wisdom. His rules are generally the first sentence, then I will add some comments and add the last two rules.
1. Long term holdings that are losing money means nothing more than long term hope. Be prepared to take a loss and move on. You can not make money on invested capital that is just sitting there and doing nothing. Move it somewhere it can be making money for you. I have a former auto dealer friend who used to describe this way. "A bad used car investment is like a bitter pill sitting on the corner of your desk everyday. Each day you come in you look at it and think how bitter it is and avoid taking it. Each day you experience the same bitterness. The best way to get rid of it is to take the pill, experience the bitterness or loss one time and be done."
2. Anyone can make money, the key is to keep it. Live below your means and save the rest. You are constantly hit by media telling you if you buy this or that you will be happy. You also think expensive vacations, the latest tech gadgets, the biggest house, or most expensive car,will convince friends you are doing well. None of this works. The surest way to wealth and eventual true happiness is to save as much of your income and buy your early independence. Many refer to this as "go to hell" money.
3. Love your kids, family, and friends, everything else is a trade. No investment, no company, no stock, is forever. All things have a point where the best long term value is a sell or trade to something else with value not yet recognized. I sold advertising to two extremely successful auto dealers who were offered several million dollars for their dealerships in the mid 1970's, one sold, one did not. The one that sold now lives on Emerald Isle and has been retired for over two decades. The other, who experienced the bad late 1970's interest rate enviroment, is still working at a marina doing regular work. The guy retired I remember telling me that everything he had was for sale at the right price except for his family. I rest the case.
4. Smart entry point, dumb down exits. It takes research and due diligence to know when is a good time to buy something. Be it a news house, a new car, and most importantly a investment. If you just buy when you want it or on a whim that it might be good time you will almost guarantee a financial loss. On the other hand if you are smart on the buy, you can be dumb on the exit because if you bought low it is a good bet you are selling high. You might not even sell at the highest price, but nothing is wrong with ever taking a profit.
5. Everyone is brave until you punched in the face. Nothing like the first time someone punches you in the face, it changes your idea of fighting fast. As Dalton said in Roadhouse " no one ever wins a fight". You can talk a sweet game and tell everyone how smart you are until you get hit with a loss or the reality that you are wrong. So be brave, but again do your due diligence so you are better prepared for the loss if it comes.
6. A lousy plan beats panic. Any plan, and I do mean any researched plan, means you did your research and know the score. So when you see your investment getting hit hard you can make reasoned decisions about the future of your investment and that will keep you from panic at just the point it means the most. Panic will only bring sorrow and wish I had not done that regrets. Hard to do in theory, but necessary for future profits.
7. This is not a game of perfect. If you believe you will never make a mistake you are a fool. I can look back to many investments I regret. One time it produced a loss of six figures. Yes, I regret the loss and wish I had the assets back, but I also know it gave me experience and knowledge I would not have now that made me money later. I have a friend who shared in one of my losses and when we talk about it now we just laugh together at our foolish efforts. That in a nutshell is the way to handle a loss. Nothing ventured, nothing gained.
8. Take a chance Get out of your comfort zone. Break down your walls. The sooner you do this the better opportunity to improve your life. Most people do not succeed at their dreams, not because they do not dream, but because they limit themselves by not taking chances for success. Think about it, how often do you consider if I had done this or done that how much better off I would be now. Learn a skill you have considered, start that small business, make a career move, and try make your life better. If you do not do this, do not blame others who have achieved better for your non-achievement. I have a friend, who I expect will read this, that came to my employ with high and solid walls. Through the years I implored her to break down those walls and rip open that comfort zone. To date she has done so to some extend and achieved likely more than she expected just a few years ago. Fear is the largest impediment to your future. F stand for false, E stands for evidence, A stands for appears, R stands for real. Do not let false evidence appearing real limit your opportunities.
9. Do not care what others think of you, except for being a person of integrity. Anything beyond keeping a good name is useless. If you allow yourself to be fenced in on your actions and attempts at life success you will never succeed. You must use your own talents and mind to make your life. You are just as important and special as anyone else. Any success in my life was brought on by the simple fact I did not need anyone else to tell me I had done something right or well. I knew it was so by my own internal beliefs and frankly lack of the need for approval. Set a goal, be honest with yourself and others, and go for it.
1. Long term holdings that are losing money means nothing more than long term hope. Be prepared to take a loss and move on. You can not make money on invested capital that is just sitting there and doing nothing. Move it somewhere it can be making money for you. I have a former auto dealer friend who used to describe this way. "A bad used car investment is like a bitter pill sitting on the corner of your desk everyday. Each day you come in you look at it and think how bitter it is and avoid taking it. Each day you experience the same bitterness. The best way to get rid of it is to take the pill, experience the bitterness or loss one time and be done."
2. Anyone can make money, the key is to keep it. Live below your means and save the rest. You are constantly hit by media telling you if you buy this or that you will be happy. You also think expensive vacations, the latest tech gadgets, the biggest house, or most expensive car,will convince friends you are doing well. None of this works. The surest way to wealth and eventual true happiness is to save as much of your income and buy your early independence. Many refer to this as "go to hell" money.
3. Love your kids, family, and friends, everything else is a trade. No investment, no company, no stock, is forever. All things have a point where the best long term value is a sell or trade to something else with value not yet recognized. I sold advertising to two extremely successful auto dealers who were offered several million dollars for their dealerships in the mid 1970's, one sold, one did not. The one that sold now lives on Emerald Isle and has been retired for over two decades. The other, who experienced the bad late 1970's interest rate enviroment, is still working at a marina doing regular work. The guy retired I remember telling me that everything he had was for sale at the right price except for his family. I rest the case.
4. Smart entry point, dumb down exits. It takes research and due diligence to know when is a good time to buy something. Be it a news house, a new car, and most importantly a investment. If you just buy when you want it or on a whim that it might be good time you will almost guarantee a financial loss. On the other hand if you are smart on the buy, you can be dumb on the exit because if you bought low it is a good bet you are selling high. You might not even sell at the highest price, but nothing is wrong with ever taking a profit.
5. Everyone is brave until you punched in the face. Nothing like the first time someone punches you in the face, it changes your idea of fighting fast. As Dalton said in Roadhouse " no one ever wins a fight". You can talk a sweet game and tell everyone how smart you are until you get hit with a loss or the reality that you are wrong. So be brave, but again do your due diligence so you are better prepared for the loss if it comes.
6. A lousy plan beats panic. Any plan, and I do mean any researched plan, means you did your research and know the score. So when you see your investment getting hit hard you can make reasoned decisions about the future of your investment and that will keep you from panic at just the point it means the most. Panic will only bring sorrow and wish I had not done that regrets. Hard to do in theory, but necessary for future profits.
7. This is not a game of perfect. If you believe you will never make a mistake you are a fool. I can look back to many investments I regret. One time it produced a loss of six figures. Yes, I regret the loss and wish I had the assets back, but I also know it gave me experience and knowledge I would not have now that made me money later. I have a friend who shared in one of my losses and when we talk about it now we just laugh together at our foolish efforts. That in a nutshell is the way to handle a loss. Nothing ventured, nothing gained.
8. Take a chance Get out of your comfort zone. Break down your walls. The sooner you do this the better opportunity to improve your life. Most people do not succeed at their dreams, not because they do not dream, but because they limit themselves by not taking chances for success. Think about it, how often do you consider if I had done this or done that how much better off I would be now. Learn a skill you have considered, start that small business, make a career move, and try make your life better. If you do not do this, do not blame others who have achieved better for your non-achievement. I have a friend, who I expect will read this, that came to my employ with high and solid walls. Through the years I implored her to break down those walls and rip open that comfort zone. To date she has done so to some extend and achieved likely more than she expected just a few years ago. Fear is the largest impediment to your future. F stand for false, E stands for evidence, A stands for appears, R stands for real. Do not let false evidence appearing real limit your opportunities.
9. Do not care what others think of you, except for being a person of integrity. Anything beyond keeping a good name is useless. If you allow yourself to be fenced in on your actions and attempts at life success you will never succeed. You must use your own talents and mind to make your life. You are just as important and special as anyone else. Any success in my life was brought on by the simple fact I did not need anyone else to tell me I had done something right or well. I knew it was so by my own internal beliefs and frankly lack of the need for approval. Set a goal, be honest with yourself and others, and go for it.
Wednesday, April 13, 2011
Two added positions, two subtracted positions.
I will be adding 2 stocks and subtracting 2 stocks from my trading list when the market opens Monday April 18. As part of my full disclosure I am posting this today two days prior to initiation of positions. I am not recommending these positions, just that these stocks fit my trading requirements at this time.
PBI added...Pitney Bowes..this is one of the oldest stock companies in the country. Most people are familiar with their mail processing equipment. I have been opposed to investing in this stock for many years as their product mix is in decline mode and the use of mail was declining. However I have decided the decline of mail has begun to bottom out and PBI's competitors have fallen away due the inability to compete with PBI's larger size. Some company will survive in this sector and I believe PBI is the one. Frankly this has some of the same approach of tobacco investing as being in business with the government via the Post Office. PBI also has a solid almost 6% dividend and is a dividend aristocrat.
LLY added...Eli Lilly is a main line pharmaceutical company. It has huge patent problems this year and has been beaten down significantly due to assumed sales and profit losses. I now think LLY has reached the bottom and now has no way to go but up, not that it is going up anytime soon. But it is safe and right now as with the other add above safe is important since I am concerned about the market going forward the next few months. LLY also has a nice near 6% dividend.
PGH subtracted...Pengrowth is an excellent Canadian oil driller and pays a good dividend. Frankly nothing wrong with the stock or company. I have just decided to place more position in ERF another Canadian oil company with a larger footprint. Upon the next options cycle ERF will become my largest holding.
RGC subtracted...Regal Cinema upon the next options cycle I will likely be called from my position in RGC. Regal is a good movie company, but frankly I am not a movie investor and only held RGC due to a huge special dividend back in December 2010. That dividend and another dividend has been gained, in addition to several option premiums. I will take a capital loss in this stock if sold this cycle, but pocketed a nice overall gain with the special dividend.
PBI added...Pitney Bowes..this is one of the oldest stock companies in the country. Most people are familiar with their mail processing equipment. I have been opposed to investing in this stock for many years as their product mix is in decline mode and the use of mail was declining. However I have decided the decline of mail has begun to bottom out and PBI's competitors have fallen away due the inability to compete with PBI's larger size. Some company will survive in this sector and I believe PBI is the one. Frankly this has some of the same approach of tobacco investing as being in business with the government via the Post Office. PBI also has a solid almost 6% dividend and is a dividend aristocrat.
LLY added...Eli Lilly is a main line pharmaceutical company. It has huge patent problems this year and has been beaten down significantly due to assumed sales and profit losses. I now think LLY has reached the bottom and now has no way to go but up, not that it is going up anytime soon. But it is safe and right now as with the other add above safe is important since I am concerned about the market going forward the next few months. LLY also has a nice near 6% dividend.
PGH subtracted...Pengrowth is an excellent Canadian oil driller and pays a good dividend. Frankly nothing wrong with the stock or company. I have just decided to place more position in ERF another Canadian oil company with a larger footprint. Upon the next options cycle ERF will become my largest holding.
RGC subtracted...Regal Cinema upon the next options cycle I will likely be called from my position in RGC. Regal is a good movie company, but frankly I am not a movie investor and only held RGC due to a huge special dividend back in December 2010. That dividend and another dividend has been gained, in addition to several option premiums. I will take a capital loss in this stock if sold this cycle, but pocketed a nice overall gain with the special dividend.
Tuesday, April 12, 2011
HDHP for Health Insurance
Most of us get our health insurance through an employer, however if the current health insurance law remains fully in force that will not be so in less than a decade. This posting involves a current form of getting health insurance that might or might not be available in the future.
HDHP's or High Deductible Health Plans are currently being used by an increasing number of employers for their employees health insurance needs. These plans in my belief are excellent alternatives for many people for covering health insurance needs. When you are using a HDHP to cover your health care needs you generally pay a high deductible amount before insurance kicks in to pay the rest. The current deductible has to be at least $1200 for singles and $2400 for family coverage. Most plans work like this. If you go to the doctor, go to the hospital, buy prescription drugs, any approved health care you pay the full amount up to the minimum. Note that all plans cover an annual physical without any payment. Once you reach the deductible, the plan kicks in and pays everything after that. This works really well for those who are young and use little or no health care each year. Consequently it also works well for those who use lots of health care each year as well. The middle ground may or may not do as well. If you are considering using a HDHP you need to take a good look at your annual expenses and plan accordingly.
I had a HDHP the last few years I was employed and it worked very well for my wife and I. As an early retiree I have also signed up for one with my local BCBS agency and find it is much less expensive than having a plan that has co-pays. HDHP's are excellent for catastrophic insurance and frankly that is what insurance is supposed to cover. You buy your auto insurance to cover accidents and large losses, not for regular oil changes and wipers. For some reason we have gotten the idea that health insurance is supposed to cover your regular maintenance expenses if you will. As in any insurance purchase if you cover more you pay more.
If you have a HDHP plan you can also have a Health Savings Account, or HSA for short. These offer similar tax benefits that IRA's or 401-k's offer with one extra little kick money deposited in a HSA is not subject to FICA or medicare tax either. You can contribute up to $3050 if single, $6150 family coverage, and if you are over 55 years of age you can add $1000 each to those totals. You can invest those funds any way you like and withdraw them for approved medical expenses to cover the amounts that are not covered by your HDHP. if there is excess you can hold that amount over to the next year and let it accumulate over the years.
Once you have had a HSA for a few years you usually have more than enough money to cover any expense and still have some left over. So your only annual expense the deductible is well covered. HSA's are not only good for health expenses, but offer you good pre-tax savings vehicles, particularly young people. If you begin a HSA when young and healthy and max out your contributions annually as you age you will have abundant money for health expenses. You can continue even after age 65 to use these funds for health related expenses tax free.
Despite the current health insurance market and uncertainly I believe use of a HDHP and a HSA is an excellent way to pay for health care expenses.
HDHP's or High Deductible Health Plans are currently being used by an increasing number of employers for their employees health insurance needs. These plans in my belief are excellent alternatives for many people for covering health insurance needs. When you are using a HDHP to cover your health care needs you generally pay a high deductible amount before insurance kicks in to pay the rest. The current deductible has to be at least $1200 for singles and $2400 for family coverage. Most plans work like this. If you go to the doctor, go to the hospital, buy prescription drugs, any approved health care you pay the full amount up to the minimum. Note that all plans cover an annual physical without any payment. Once you reach the deductible, the plan kicks in and pays everything after that. This works really well for those who are young and use little or no health care each year. Consequently it also works well for those who use lots of health care each year as well. The middle ground may or may not do as well. If you are considering using a HDHP you need to take a good look at your annual expenses and plan accordingly.
I had a HDHP the last few years I was employed and it worked very well for my wife and I. As an early retiree I have also signed up for one with my local BCBS agency and find it is much less expensive than having a plan that has co-pays. HDHP's are excellent for catastrophic insurance and frankly that is what insurance is supposed to cover. You buy your auto insurance to cover accidents and large losses, not for regular oil changes and wipers. For some reason we have gotten the idea that health insurance is supposed to cover your regular maintenance expenses if you will. As in any insurance purchase if you cover more you pay more.
If you have a HDHP plan you can also have a Health Savings Account, or HSA for short. These offer similar tax benefits that IRA's or 401-k's offer with one extra little kick money deposited in a HSA is not subject to FICA or medicare tax either. You can contribute up to $3050 if single, $6150 family coverage, and if you are over 55 years of age you can add $1000 each to those totals. You can invest those funds any way you like and withdraw them for approved medical expenses to cover the amounts that are not covered by your HDHP. if there is excess you can hold that amount over to the next year and let it accumulate over the years.
Once you have had a HSA for a few years you usually have more than enough money to cover any expense and still have some left over. So your only annual expense the deductible is well covered. HSA's are not only good for health expenses, but offer you good pre-tax savings vehicles, particularly young people. If you begin a HSA when young and healthy and max out your contributions annually as you age you will have abundant money for health expenses. You can continue even after age 65 to use these funds for health related expenses tax free.
Despite the current health insurance market and uncertainly I believe use of a HDHP and a HSA is an excellent way to pay for health care expenses.
Thursday, April 7, 2011
Small Town Investor does American Idol (sort of)
Last night I did the celebrity market analyst thing, sorta American Idol for those of us who are stock market people. The scenario is that if you are a highly valued customer with a stock broker they want to keep your business. They do so by offering you access to information, market forecasts, and if possible star market analysts. So a couple of weeks ago I was invited to an event in Pinehurst at the County Club of North Carolina where Joe Battipaglia was going to speak. Now Mr. Battipaglia is a very well known stock market who appears at least weekly on CNBC and other financial shows. He knows his stuff and is a very good speaker. Now I am not a big celebrity person, believe it or not I have never watched American Idol, could care less about meeting movie stars or sport stars, and certainly do not consider knowing someone well known as a feather in my cap. Seems stupid to me to waste valuable time in life panting after such, and since I do not have an ego to massage that does not come into play either. Frankly I believe we in American have traded true heroes for celebrity, true honor for fame, and success and achievement for popularity. But with that said off I go to Pinehurst to spend time with such people I suppose.
Upon arriving at the Country Club of North Carolina I immediately realized this is how the other half lives as they say. Gated entrance, I mean a REAL gated entrance no name on list NO admittance. Of course the people I rode with had a name on the list so we go in. As we rode in I realized the houses here are a bit more than I could afford. Heck, I could not even pay the property tax, never mind the monthly payment. Anyway we park, go into the club, and here it is 70 degrees outside and they got the fireplace on, and I do mean ON, high flames and looking good. I suppose if you got money to burn, literally, why not enjoy the sight of a fireplace anytime. We go inside the big hall and I make a beeline for a back seat. Besides the fact the room is full with maybe a couple hundred people, I figure I can observe everyone else better from the back. I like to look at other people being themselves. Anyway I sit down and see that in this whole room of people I and maybe 15 others are the only ones under 65 years old. I suppose it helps to be over 65 to have lots of cash? The first speaker, I would assume you would call him the opening act, gets up and speaks. Seems to be nice gentleman who is smart and happens to be CEO of the whole stock broker company. He IS smart as his talk is short and he introduces the real act for the night, the stock market star. Mr. Joe, I will call him that since that last name is a real bitch to type, speaks for maybe an hour on a variety of topics. He covers stocks, bonds, commodities, inflation, and just about anything you would want to know about the market. You can tell why he is a star analyst, he knows how to speak to keep attention, he knows his subjects well, and most importantly he knows how to avoid any political angle. Do not want to piss off anyone here tonight and lose their business you know. After speaking he takes questions and they the range a variety of topics and Mr. Joe is johnny on the spot knowing answers or opinions on every topic. One question at the end bordered on what I wanted to ask, what is going to happen when the Federal Reserve quits printing money June 30. Mr. Joe, is real good here too, he answers the question so no one knows exactly what his answer was. Frankly Mr. Joe does not know either, but being a star analyst no way was he going to say "hell I do not have the foggiest idea what they will do".
Anyway the show, er speech is over, and everyone gets up oooing and aaaing about how smart our speaker was tonight. Besides it is time to hit the goodies, free liquor and finger food. Me, I make another beeline to Mr. Joe to ask him point blank my question. When I get up to him I realize he is 6 foot 7 inches tall and big as a mountain. Now I am no little fellow, but no way am I going to pick a fight with this dude. But I will ask my question. "Mr. Joe, ( I did use his real name here), could you fully explain just who is going to buy 125 billion dollars of government deficit debt when the Fed quits doing it in June?" The answer I get is basically someone will. I further ask him "you think the Chinese are actually stupid enough to quadruple there current purchasing and buy it?" The answer again is someone will. It is clear here he does not know either and just needs to give me an answer. I step away knowing he does not know and frankly no one else knows either.
Now it is time to participate in the great American liquor and finger food orgy for me too. I head to the nearest bar and order up a beer, A BEER!?, when there is so much high priced wine and liquor available. As I said I am not a celebrity type, I prefer a good beer. The finger food is real good, lots of meaty small pizza, some chicken wrap, a spinach wrap, and a buffet of meatballs, a really good spinach salad of some sort, cheese, veges, and desserts to die for. I wonder out onto the patio and I do mean a patio. Folks I used to work with lawyers and they know how to PARTY and do it in fine places, but this patio is something else. Big with nice tables, more food, more alcohol, made of brick not cement, and a gorgeous lake to see.
It now is time to leave being here about two hours. Now what I do not know is the night's adventure is just starting. On the way back the group of four I am riding with decide to take a quicker route through the back of Fort Bragg. About half way through, BOOM, our tire blows out. All of us get out preparing to change the tire, only to discover this make of car has NO spare! I will leave out the make here due to certain sales drop, but frankly guys not putting even one of those doughnut spares in a car is taking the cut expenses a bit too far don't you think. So we call the tow truck, we call someone to pick us up and we wait. Now this part of Fort Bragg is dark at night, no street lights, no one for miles, it gets REALLY DARK there at night. You could not see your own shadow as they say. BOOM, BOOM, what is that, they are shooting at us! No it is the soldiers setting off bombs or something in the distance. Trust me when it is this dark, you think strange things. We did have a good number of what appeared to be army people stop and ask to help. Just reminded me what a great group of people we have defending our little butts, so we can go party in Pinehurst. Anyway we finally get picked up and I get back to my car none the worse for wear.
Needless to say I enjoyed the experience, met some nice people including the retired doctor I rode with and will likely do it again next year if invited. This is a annual thing I found out later. I also appreciate the company I do business with inviting me I enjoyed the night and I would highly recommend them to anyone. I also left thinking it is clear to me anyone who wants to spend the time and do the research can be just as smart as any celebrity analyst. However I still not did get the question I came for answered and after my celebrity encounter still have no desire to watch American Idol.
Upon arriving at the Country Club of North Carolina I immediately realized this is how the other half lives as they say. Gated entrance, I mean a REAL gated entrance no name on list NO admittance. Of course the people I rode with had a name on the list so we go in. As we rode in I realized the houses here are a bit more than I could afford. Heck, I could not even pay the property tax, never mind the monthly payment. Anyway we park, go into the club, and here it is 70 degrees outside and they got the fireplace on, and I do mean ON, high flames and looking good. I suppose if you got money to burn, literally, why not enjoy the sight of a fireplace anytime. We go inside the big hall and I make a beeline for a back seat. Besides the fact the room is full with maybe a couple hundred people, I figure I can observe everyone else better from the back. I like to look at other people being themselves. Anyway I sit down and see that in this whole room of people I and maybe 15 others are the only ones under 65 years old. I suppose it helps to be over 65 to have lots of cash? The first speaker, I would assume you would call him the opening act, gets up and speaks. Seems to be nice gentleman who is smart and happens to be CEO of the whole stock broker company. He IS smart as his talk is short and he introduces the real act for the night, the stock market star. Mr. Joe, I will call him that since that last name is a real bitch to type, speaks for maybe an hour on a variety of topics. He covers stocks, bonds, commodities, inflation, and just about anything you would want to know about the market. You can tell why he is a star analyst, he knows how to speak to keep attention, he knows his subjects well, and most importantly he knows how to avoid any political angle. Do not want to piss off anyone here tonight and lose their business you know. After speaking he takes questions and they the range a variety of topics and Mr. Joe is johnny on the spot knowing answers or opinions on every topic. One question at the end bordered on what I wanted to ask, what is going to happen when the Federal Reserve quits printing money June 30. Mr. Joe, is real good here too, he answers the question so no one knows exactly what his answer was. Frankly Mr. Joe does not know either, but being a star analyst no way was he going to say "hell I do not have the foggiest idea what they will do".
Anyway the show, er speech is over, and everyone gets up oooing and aaaing about how smart our speaker was tonight. Besides it is time to hit the goodies, free liquor and finger food. Me, I make another beeline to Mr. Joe to ask him point blank my question. When I get up to him I realize he is 6 foot 7 inches tall and big as a mountain. Now I am no little fellow, but no way am I going to pick a fight with this dude. But I will ask my question. "Mr. Joe, ( I did use his real name here), could you fully explain just who is going to buy 125 billion dollars of government deficit debt when the Fed quits doing it in June?" The answer I get is basically someone will. I further ask him "you think the Chinese are actually stupid enough to quadruple there current purchasing and buy it?" The answer again is someone will. It is clear here he does not know either and just needs to give me an answer. I step away knowing he does not know and frankly no one else knows either.
Now it is time to participate in the great American liquor and finger food orgy for me too. I head to the nearest bar and order up a beer, A BEER!?, when there is so much high priced wine and liquor available. As I said I am not a celebrity type, I prefer a good beer. The finger food is real good, lots of meaty small pizza, some chicken wrap, a spinach wrap, and a buffet of meatballs, a really good spinach salad of some sort, cheese, veges, and desserts to die for. I wonder out onto the patio and I do mean a patio. Folks I used to work with lawyers and they know how to PARTY and do it in fine places, but this patio is something else. Big with nice tables, more food, more alcohol, made of brick not cement, and a gorgeous lake to see.
It now is time to leave being here about two hours. Now what I do not know is the night's adventure is just starting. On the way back the group of four I am riding with decide to take a quicker route through the back of Fort Bragg. About half way through, BOOM, our tire blows out. All of us get out preparing to change the tire, only to discover this make of car has NO spare! I will leave out the make here due to certain sales drop, but frankly guys not putting even one of those doughnut spares in a car is taking the cut expenses a bit too far don't you think. So we call the tow truck, we call someone to pick us up and we wait. Now this part of Fort Bragg is dark at night, no street lights, no one for miles, it gets REALLY DARK there at night. You could not see your own shadow as they say. BOOM, BOOM, what is that, they are shooting at us! No it is the soldiers setting off bombs or something in the distance. Trust me when it is this dark, you think strange things. We did have a good number of what appeared to be army people stop and ask to help. Just reminded me what a great group of people we have defending our little butts, so we can go party in Pinehurst. Anyway we finally get picked up and I get back to my car none the worse for wear.
Needless to say I enjoyed the experience, met some nice people including the retired doctor I rode with and will likely do it again next year if invited. This is a annual thing I found out later. I also appreciate the company I do business with inviting me I enjoyed the night and I would highly recommend them to anyone. I also left thinking it is clear to me anyone who wants to spend the time and do the research can be just as smart as any celebrity analyst. However I still not did get the question I came for answered and after my celebrity encounter still have no desire to watch American Idol.
Tuesday, April 5, 2011
My Family Jewels.
If you did not read the prior posting on "YOUR family jewels" this one will make no sense, so go read it first.
In this posting I will discuss my family jewels which I believe are some unique investing and trading skills. Frankly it is proof that anyone, even someone who started life as poor as me, can achieve some measure of financial success today if that is your desire.
During my advertising sales and management career I worked, saved money, and invested it in tax favored retirement assets and other long term holdings as many people do. As the years went by my assets grew, primarily invested in blue chip stock funds, individual municipal bonds, and corporate bonds funds. Thus what I was doing was using my selling and managerial skill sets to produce income for current consumption and savings to accumulate assets.
That skill set served me well for well over three decades. While I was selling those skill sets to an employer I was using my free time to acquire other skill sets through life long learning. Those new skills were learning about stocks and bonds, and trading options. These skill sets are not taught in schools, but learned over many years of trial and failure. They were learned when everyone else was out on the town Friday nights, I set at home in front of a TV listening and absorbing what Louis Rukeyser was saying on his television show. (I expect many of you have no idea who Louis Rukeyser was, go google it) They were further learned by spending my spare time reading financial books and literature, when others were doing more leisurely activities. My choice, my future.
When I retired early from newspaper work over two years ago I was prepared to apply my learned trading skills to the market and achieve my goals. Now two years in and starting my third year of trading I am more than pleased with the results. My wife, who endured Friday nights of Louis Rukeyser, is happy since she got to retire early as well.
What I do is run my own personal hedge fund trading what is known as derivatives. Yes, I know that word has gotten a bad name in the last two years, but only because some traders decided to take on too much risk. However truth be know derivatives are necessary to a smooth running markets, assuming risk or actually offering insurance when it is needed. People willing to take on this risk are compensated for doing so. I personally specialize in put options, which are level four of the five level option ladder. I believe it is my stock selection skills and the unique way I handle what are known as assignments that make me successful.
I make 15% to 25% on the assets in my hedge fund annually. My best year was 2009 where I made a 32% gain. I have never had a losing year in options trading. My family jewels, my skill set, have allowed me to retire early and start a charitable trust.
The true measure of a person is not how well they succeed, but how well they take advantage of the opportunities presented in life. The key is seeing opportunity. where others see problems. Your choice, your future.
In this posting I will discuss my family jewels which I believe are some unique investing and trading skills. Frankly it is proof that anyone, even someone who started life as poor as me, can achieve some measure of financial success today if that is your desire.
During my advertising sales and management career I worked, saved money, and invested it in tax favored retirement assets and other long term holdings as many people do. As the years went by my assets grew, primarily invested in blue chip stock funds, individual municipal bonds, and corporate bonds funds. Thus what I was doing was using my selling and managerial skill sets to produce income for current consumption and savings to accumulate assets.
That skill set served me well for well over three decades. While I was selling those skill sets to an employer I was using my free time to acquire other skill sets through life long learning. Those new skills were learning about stocks and bonds, and trading options. These skill sets are not taught in schools, but learned over many years of trial and failure. They were learned when everyone else was out on the town Friday nights, I set at home in front of a TV listening and absorbing what Louis Rukeyser was saying on his television show. (I expect many of you have no idea who Louis Rukeyser was, go google it) They were further learned by spending my spare time reading financial books and literature, when others were doing more leisurely activities. My choice, my future.
When I retired early from newspaper work over two years ago I was prepared to apply my learned trading skills to the market and achieve my goals. Now two years in and starting my third year of trading I am more than pleased with the results. My wife, who endured Friday nights of Louis Rukeyser, is happy since she got to retire early as well.
What I do is run my own personal hedge fund trading what is known as derivatives. Yes, I know that word has gotten a bad name in the last two years, but only because some traders decided to take on too much risk. However truth be know derivatives are necessary to a smooth running markets, assuming risk or actually offering insurance when it is needed. People willing to take on this risk are compensated for doing so. I personally specialize in put options, which are level four of the five level option ladder. I believe it is my stock selection skills and the unique way I handle what are known as assignments that make me successful.
I make 15% to 25% on the assets in my hedge fund annually. My best year was 2009 where I made a 32% gain. I have never had a losing year in options trading. My family jewels, my skill set, have allowed me to retire early and start a charitable trust.
The true measure of a person is not how well they succeed, but how well they take advantage of the opportunities presented in life. The key is seeing opportunity. where others see problems. Your choice, your future.
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