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outcastsearcher

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  • 4 Costly Investment Themes [View article]
    Interesting. Both Sonia's comment, and the responses from tomsum and sarichter (who think that Sonia is so wrong as to be unwise) below assume that:

    a). They can time the market -- or at least have a good feel for what the market is likely to do.
    b). They can time interest rate changes -- something even harder to do than time the market.

    I have no dog in this fight -- I just find the arguments and the confidence shown by those making the argument that "they are right" rather interesting and somewhat entertaining.

    How can any of us accurately predict what the Fed strongly influences in the short to intermediate term, egged on by Capitol Hill despite their purported "independence"?
    Nov 20, 2013. 01:41 PM | 1 Like Like |Link to Comment
  • Tesla: Learn From The Mess [View article]
    Whatever you do, never buy a Prius with a much better life cycle energy footprint and very well proven technology and service for under a third of what you can buy a rich man's Tesla for if -- it has a bump in the floor.

    If you have to stretch this far to make your case for Tesla, good luck with that.
    Nov 19, 2013. 12:05 AM | 3 Likes Like |Link to Comment
  • There Is More Than A Mere Bubble In The Stock Market [View article]
    Timmy: Well, economics is CERTAINLY not perfect -- not by a long shot. That's why they call it the "dismal science" and my favorite joke about economists (since it is largely based on truth) is: "If you lay 10,000 economists end to end, you could not reach a conclusion".

    I remember pointing out in my micr-econ class in college that using all these supply and demand curves and the theory extrapolated from them assumed that people behave rationally. They don't.

    To which my econ professor (35+ years ago) replied something like -- you're right, but we don't get into that until more advanced econ classes. Feel free to sign up for some and learn how we deal with that.

    That's all well and good, but if you feel like the attempt at ANY economic analysis is a moot point -- what are you doing reading articles on S.A.? Instead of bashing John for a nice effort, why not just invest in an asset allocation basket you like including appropriate index funds, and spend your time doing something more productive?

    I applaud John's effort and find it interesting and thought provoking -- even if I realize that trying to divine future financial charts from past charts is a less than scientific enterprise.
    Nov 13, 2013. 03:41 PM | Likes Like |Link to Comment
  • There Is More Than A Mere Bubble In The Stock Market [View article]
    Pathfinder's: You're right, of course. However, given the political and economic direction of this country, feeding off of the "political correctness" and the "we are all 'winners' and therefore deserve something for nothing" (i.e. regardless of merit or contribution) mentality -- I would expect the majority of voters to hurl insults at you instead of being willing to simplify the system in a way that encourages productivity.

    If in doubt, consider all the hate spewed at "evil" profits and especially "evil profits on medical care". It's as though medical care improvements come from unicorns instead of productive people and corporations willing to shoulder risk for profit.

    Sadly, we sow what we reap, and then the "something for nothing" crowd screams for more governmental interference to "fix it".

    Ayn Rand predicted all this in "Atlas Shrugged" of course, but THAT is certainly politically way out of favor and of course having people read it would be "mean" because that would be "hard" in the era of the 30 second internet article being our primary information source.
    Nov 13, 2013. 03:30 PM | Likes Like |Link to Comment
  • Leap Secured Options Writing - The Ultimate Safe Investment Strategy [View article]
    For those interested in LEAPS (I have been using them for a variety of trading strategies for years, including calendar spreads) -- instead of using a one-article approach, where the article seems light on research, specific examples, and systematic disclosures on risk, etc., one might consider a book on options.

    One on LEAPS I like is: "LEAPS - What they are and How to use them for Profit and Protection" by Harrison Roth. It's a bit dated (C: 1994), and a bit simple (you won't find a lot on the Greeks, for example) -- but it systematically and clearly goes over a WHOLE LOT of viable strategies, and is very clear about the key concepts like relative time decay between long and short term options.

    I think before investing money in such a strategy, some time spent reading books like this and doing some hard THINKING is a very worthwhile investment of time and effort.
    Nov 12, 2013. 02:40 PM | Likes Like |Link to Comment
  • Leap Secured Options Writing - The Ultimate Safe Investment Strategy [View article]
    Erickaye, I don't think that's feasible for single options. I use Tradeking, which charges $4.95 for the first option, and $0.65 for additional options. They also don't penalize you for, say, rolling over 10 options -- treating it as one trade ($4.95 plus $.65 times 19).

    So you can approach about $1.00 an option, if you trade in some size.

    Disclosure: Tradeking is great EXCEPT they have some failures which can cause you to be unable to trade or even log on for part of a day or even a whole day. Their marketing responses that they are hard at work fixing this are less than convincing as time rolls on and the events keep occurring on random days. Thus I have another brokerage account I can use if needed if Tradeking is down.
    Nov 12, 2013. 02:34 PM | Likes Like |Link to Comment
  • Leap Secured Options Writing - The Ultimate Safe Investment Strategy [View article]
    Craig:

    There are a lot of such buy/write funds from the likes of Nuveen. Unfortunately, most come with high ( over 1% and some much worse) expense ratios. Also unfortunately, over the long run, most do worse than the S&P 500 index funds (even before expenses). Many use ROC to entice investors into the "high dividend income", but long term, substantial capital erosion inevitably occurs -- even in up trending markets.

    You can find a lot of these things with Google searches. As you can likely tell, I am NOT impressed in general -- though discussions of these in S.A. artlcles will being out vociferous defenders of them claiming they make a ton of money using market timing of the discounts/premiums, or that they're just great "because of the high dividends".

    Trying to introduce arithmetic or logic into the discussion merely invokes the "hate" response... And why market timing these should somehow be easy escapes me...
    Nov 12, 2013. 02:28 PM | Likes Like |Link to Comment
  • Leap Secured Options Writing - The Ultimate Safe Investment Strategy [View article]
    User 447425, my long experience trading options roughly mirrors yours. It's ITM options with tiny premiums and ex-dividend occurring that causes early expiration in the vast majority of the cases.

    I think what the author is contending, however, is that for ALL options sold, relatively few are exercised. This flies in the face of the idea that the markets are relatively efficient. 85% of option buyers are not going to just throw money away, unless they are paying for a hedge (buying insurance). However, many short options could be hedges too.

    One back-of-the-envelope way to check on this is that the delta for an option (how fast it moves compared to the underlying stock) will be ROUGHLY the odds it will end up in the money. Almost all options near the money with any meaningful time left will have a delta well above .15. Almost all option in the money will have a delta over .5.

    The 85% expire worthless estimate looks WILDLY overoptimistic for the option seller. In my experience, I roll over a lot of the options I sell against positions I am long. (What DOES happen near expiration is that the premium shrinks rapidly toward zero).
    Nov 12, 2013. 12:36 PM | Likes Like |Link to Comment
  • The Biggest Little Secret In Money Management [View article]
    Jazzy: I guess it depends on what you mean by "catch on". Since Vanguard's Jack Bogle popularized the idea of passive investing, via Vanguard's highly efficient index funds, LOTS of investment dollars have been flowing into such funds. Competitors like Fidelity, etc. have introduced similar funds, and some even occasionally have expenses similar to Vanguard.

    In theory, most ETF's were originally going to be very low cost entities, using a relatively passive strategy, or so the argument promoting them went. Of course, all the active management types jumped in the pool, so now they are all over the place.

    So now we have a mix, but last time I checked, there was still a long term trend toward passive management by many large entities. 401-K funds is a classic example.

    Sure -- the active management marketing machine, driven by LOTS of fees and high expense ratios, will continue to suck all the money out of investors' pockets as possible (for no meaningful extra return, collectively) -- but now with the internet, there is a LOT of easily accessible, objective, data, with statistics and citations to back it up. One example is the books and white papers Bogle wrote himself.

    I think the active marketing machine has an extremely large opponent in the other corner with a solid track record. Despite lots of arm waving, I think they will continue to gradually lose the fight.
    Nov 6, 2013. 02:39 PM | Likes Like |Link to Comment
  • Eeny, Meeny, Miny And Mo Portfolio: 33.3% Return Over 15 Months [View article]
    The Ugly Truth:

    So this seems to point to buying a high quality index fund or a sector fund, which is simply a disciplined way to invest.

    Better yet, DCA over time, and stick to it.

    Over a 15 month time frame when tech. was popular, you received about 110% of market returns, while taking a lot more risk by only choosing 4 stocks in one sector.

    But now you seem to be ignoring that "lesson" and doing specific things like shorting MSFT, or picking very stocks that have zoomed up already like TSLA and FB.

    So we seem to have rather mixed, short term, and random stock picking messages.

    Good luck with this plan, but it seems less like investing than speculating. (Nothing wrong with that, as long as the risk is recognized).
    Nov 5, 2013. 12:21 PM | Likes Like |Link to Comment
  • IBM: Unloved And Undervalued [View article]
    wixeywaxy:

    So now a shrinking company is a healthy company because service revenues are different? This sounds like a stretch to me.

    I was in IBM Global Services for many years while I saw the business degrade. Sure, they kept "taking cost" out of the mix -- mainly by offshoring and laying off skilled labor.

    Fine -- but there is a consequence to that. Service and quality degrades too, when the main business is providing service that requires a LOT of skill.

    This may all work out fine -- but it seems to fly in the face of the traditional business model IBM used to grow for decades. There, true quality, competence, and great customer service -- where the employees were well rewarded for doing great work made a lot of sense. Oh, and management needed to understand the business to drive that.

    Now, everything seems to be the opposite. Drive down costs, and trot out platitudes to try to cover up the problems. Customers leave? No problem -- hook more with over-promising. Meanwhile the employees become more discouraged, less productive, etc (those that are left).

    I just have to wonder how long that model can work.
    Nov 5, 2013. 12:09 PM | Likes Like |Link to Comment
  • IBM: Unloved And Undervalued [View article]
    Keubiko:

    Or, as a former IBMer who watched things operationally slide for years as customers left in disgust, and employees followed suit (or were fired to be replaced by "cheap" replacements who couldn't do the work) -- the question is really, how long can IBM keep spending much of the shareholders' equity to buy shares in the face of declining revenues to prop up EPS?

    Or using common sense, IBM is buying many successful companies, and then hollowing them out by offshoring the "expensive" (AKA productive and smart) labor. As when I left, I see more marketing and accounting games here than the successful building and SUPPORT of new technology that made the company monolithic.

    They may do fine, but I for one don't trust the model, or the management.
    Nov 5, 2013. 10:54 AM | 4 Likes Like |Link to Comment
  • The 'Catch 22' Of The mREIT Sector [View article]
    Bingy77, it's more of a two-sided coin. Yes, MREIT dividends can increase on rising interest rates if the yield curve steepens.

    However, at the same time, book values of the underlying mortgages can get pummeled (as they have in recent months) -- so the stocks could actually decline even as the dividends increase in the short run.

    In my mind, if you want to be in these things as an INVESTMENT, you need to be in for the long haul, be willing to occasionally average down (and be diversified) -- and be prepared to live with SIGNIFICANT volatility.

    This is FAR from, say, holding a savings account and earning, say 3 or 6% interest. I think therefore the caution the author cites for retirees piling gleefully into these things for the yield cites.

    Now, if you want to speculate quarter by quarter, have fun -- but unless you are very smart or very brave -- it's a tough way to make money.
    Oct 28, 2013. 05:46 PM | 2 Likes Like |Link to Comment
  • Fonzie Or Ponzi? One Theory On The Limits To Government Debt [View article]
    LKJ:

    So you're saying what?

    1). That it's fine to earn nearly zero% interest in a treasury money market account instead of holding cash?

    2). That it's fine to earn well under 4% in 30 year treasury bonds because we haven't seen high inflation in 30 years?

    3). Something else? -- You were discussing dollars vs. treasuries as "a store of value", after all.

    I agree with the less-than-sanguine posters that since we are in territory that doesn't comply with common sense, that the dollar is risky over time. If the dollar is risky over time, then so are long term treasuries. If inflation will be meaningful over time, then short term treasuries are not exactly safe at near zero%.

    ....

    Remember, the folks running the show are the same clowns on Capitol Hill led by the guy who just insisted in a speech the ACA (a recent example of rampant irresponsible spending with no credible plan (aside from empty promises) for how to pay for it) is a great thing thus far since there are telephones and that lots of people have (tried to) visit the website.

    I don't loan my money to clowns and then consider it safe. If you do, best of luck with that.
    Oct 23, 2013. 03:12 PM | 5 Likes Like |Link to Comment
  • Why Long-Term 401(k) Investing Doesn't Need Dollar-Cost Averaging [View article]
    Although I'm sure the author means well, as other commenters have mentioned (I paraphrase here) -- there is no news here.

    First, the author is comparing dollar cost averaging to (drum roll please) dollar cost averaging. Only the frequency of the buying has changed.

    Second, he is adding a positive skew to his approach, since he's buying at the beginning of the year, leaving more time for the money to work. Using the middle of the year would be a much more "balanced" approach, which wouldn't have obvious calendar skew. (And as commenters have pointed out, the vast majority of companies will not let employees "front load" like this (nor would they have the earnings to do it) and get the match -- so it's an impractical exercise to use January anyway).

    Disciplined dollar cost averaging is the ONE way to guarantee you buy below the average price. Employees, don't let this article distract you. DCAing into your 401-K to the max your employer will match, and as much as you can afford for the tax deferrals -- WILL reward you well over the course of your career.

    It's all about discipline -- something largely lost on society today.

    Do your own homework -- but in the long run, the disciplined investor/saver is well rewarded. (I am a personal example of this, retiring at 48, thanks to the lessons of my depression era parents).
    Oct 23, 2013. 02:55 PM | Likes Like |Link to Comment
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