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Mark Bern, CFA  

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  • The Time To Hedge Is Now! November 2015 Update - Part II [View article]
    petrom714 - Thank you for point out that I missed answering the question by sharbador. I'll get to that in a minute.

    I explain the rules I use in my exit strategy in detail in Part X. I could not do it justice in a comment. Here is the link:

    I don't use calls in my hedge strategy. I do use them to create additional income by selling calls above the current price of stocks that I own but generally only do that when the stock is above what I consider to be its fair value.

    I hope this helps.
    Nov 19, 2015. 07:18 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update [View article]
    Tex - That's about it. With the recent volatility in stocks the premiums on options has gone up making it harder to find as many bargains, though. Now that the volatility has returned to global markets I will be watching more closely and reporting more often.

    Thanks for the question.
    Nov 19, 2015. 07:13 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update - Part II [View article]
    mtnpapa - Appreciate your thoughts on that comparison. A good asset manager would hedge your portfolio against risk in more ways than one, as I try to do for myself. The problem is that most advisors are more sales oriented than trained analysts. Over the long term many have done very well for clients compared to what those clients might have done on their own. But about 80% of managed funds under perform the index ETFs, so doing better than a managed fund is easy to do with Vanguard or other no load funds. It's getting that extra 2-3% over the index over the long term that separates the "good" from the average advisors.

    None of us can beat an index all the time, but the good ones should be able to do better if measured over periods of ten years or longer. Is it any wonder that funds are required to show results for the last 1,3 and 5 years? That does not tell an investor enough to judge a manager, imho.

    I don't manage funds for anyone but my family, so my results are not public. I also don't track my results but twice a year.
    Nov 19, 2015. 04:32 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update - Part II [View article]
    tarunvarma - You are right. I did not include it for the following reasons:
    1. The open positions do not expire until March 2016. The summary of results and what to do section was about those positions that expire in January 2016.
    2. Right now, the pricing is not good enough to give me an adequate return. To keep costs low enough I would need to drop the strike price to $32 and I do not want to do so when my target is only $28.

    Currently, JNK is trading at about $35.35. It was at about $37 when I first recommended the put option. I then recommended it again after it fell and subsequently rallied back to over $36. I potential reward is not great enough to enter a new position at the current level.

    My two positions have strikes of $35 and $34. The $35 strike is still attractive if one is able to get contracts at a premium of under $1, which is possible. But the current ask price is $1.15 and the numbers are not as attractive at that price. The $34 strike for a March contract would be attractive under $0.70. It is trading at about that level.

    I hope this helps. But the article was getting too long and I was wanting to keep from adding more. I may include JNK in another article over the weekend with more specific info, especially if there is any sort of rally between now and then in the share price.

    Thanks for asking.
    Nov 19, 2015. 04:07 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update - Part II [View article]
    I like for simple, easy to understand explanations on investing. When you get to the site, just search for any term you want to understand more about. There should also be related items off to the right that you might find interesting, if I recall correctly. I haven't been there in a while, but find it good for terminology and understanding different types of assets like options. It also has explanations and examples of many common option strategies like butterfly spread, bull spreads, etc. I hope you find what you need.
    Nov 19, 2015. 02:27 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update [View article]
    carlson - You have the concept outlined in your comment. I look for high beta stocks that perform much worse that the general market indices during an economic recession. The same stocks sometimes tend to do better during an economic expansion. So, it is important to not give up on the strategy in mid-stream, so to speak. Recessions are inevitable and being prepared for the next one at this point in a recovery just makes sense to me. It has worked for me in the past and I have no reason to expect a different outcome in the future. I have tried many different hedging strategies with varying degrees of success. This is the one I am most comfortable with.

    For a more detailed explanation of my philosophy the first couple of articles in this series lays it out better.

    Thanks for the question.
    Nov 19, 2015. 12:31 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update [View article]
    yeti - I am sorry to say that I doubt that I have mastered anything completely, but I do my best. Thanks for the comment.
    Nov 19, 2015. 12:26 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update [View article]
    Marty - That would make for a good article. Using the KISS strategy to invest. I'll have to think about it. I use a rules-based approach that I have explained in other articles. I'm not my rules are simple but they do ten to keep me grounded.
    Nov 19, 2015. 12:25 PM | Likes Like |Link to Comment
  • Quick Chat # 285 [View instapost]
    dapizz - The internal divergence is actually a good thing in my opinion. Poor performance is no longer awarded nearly as well as good performance. It's almost as if fundamentals were coming back into vogue! Of course, there are definitely some over valuations to the extreme which need to be adjusted, but hey - it's a start.
    Nov 19, 2015. 09:31 AM | 3 Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update [View article]
    chewy - I have tried both. I explain why I don't use index funds in Part V of the series. I have tried using leveraged funds but the decay factor is alarming. It really only works well when you know the direction of the market and can get in and out quickly (a few days). Holding a position for an extended period can be a painful ordeal unless the market is cascading in your direction.

    The individual positions can break down even while the index is climbing as has happened for me three times in the last year and a half. Those situations help to defray the cost of hedging.

    That may not be a complete answer, especially concerning using index funds, but I hope it helps.
    Nov 19, 2015. 09:28 AM | 1 Like Like |Link to Comment
  • Major Indices At A Crossroads... Again [View article]
    kovnat - You may very well be right.
    Nov 19, 2015. 09:19 AM | 1 Like Like |Link to Comment
  • Quick Chat # 285 [View instapost]
    I took a quick look at the list of new highs (46 at the close) and recognized 20 of the names, not all of which are components of the S&P 500. Interesting though, as I agree that the blue chips are probably getting bought by foreigner investors, but just not near enough to highs yet.
    Nov 18, 2015. 05:41 PM | 2 Likes Like |Link to Comment
  • The Time To Hedge Is Now! November 2015 Update [View article]
    FIER - There is, of course, significant risk in several of those stocks, especially those with little or now profitability yet. OTOH, some are rock solid growth engines with excellent prospects. I might consider some of the extremely high P/E companies with little or no prospects for profitability in the next couple years as potential candidates. I am, however, staying clear of biotechs because I cannot tell which ones will produce a blockbuster and the index is heavily weighted toward a few established, profitable companies. Any one of them could hit a home run with great trial results.

    This is a case of stick with what you understand. If you understand some of the high flyers better than I do and want to use one that you believe has no chance of returning a profit within the next few years, by all means be my guest.

    Thanks for sharing your thoughts.
    Nov 18, 2015. 05:34 PM | Likes Like |Link to Comment
  • Major Indices At A Crossroads... Again [View article]

    You make a good point. The only rates that may increase is the fed funds rate charged to banks and the discount rate (and all consumer rates that are connected to one or the other of those two rates). L-T bonds may actually fall. There is the argument that emerging markets will take a hit to currencies and need to sell some more foreign reserves to use to prop up their local currencies by buying. That could mean sales of Treasuries since that is the largest reserve holding for many emerging nations. But I suspect that it may not be enough to counteract the natural flow toward safety. Just a thought.

    L-T rates could fall, if what you say holds, and if S-T rates continue up a few more bumps we may, in fact, see an inverted yield curve. But I dount that the Fed will increase S-T rates by enough. It would need to be over 1% and I do not expect to see anything higher than 0.75% by year-end 2016. It will be interesting, though.
    Nov 18, 2015. 05:26 PM | 1 Like Like |Link to Comment
  • Quick Chat # 285 [View instapost]
    Noticed that even though DJIA is up nearly 200 pts and S&P500 only 2.5% off record high, only 37 new highs and 94 new lows today. That just seems strange!
    Nov 18, 2015. 03:40 PM | 4 Likes Like |Link to Comment