August, 2012

'If you’ve got a business — you didn’t build that. Somebody else made that happen. '

'The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. '

~The Teleprompter

'Limited government so conceived has two indispensable advantages. It avoids inexorable European-style national insolvency. And it avoids breeding debilitating individual dependency. It encourages and celebrates character, independence, energy, hard work as the foundations of a free society and a thriving economy — precisely the virtues Obama discounts and devalues in his accounting of the wealth of nations.'

~Charles Krauthammer

The Professional Opinion

None this month - taking a subscription vacation.

Buy Recommendations

From the Compost Bin:  According to Suze, another Doomsday Prophet,  buy no more than 15% gold, buy TIPS, ETFs and Dividend paying stocks.

Hey Suze!  How's those TIPS and Gold investments working out for you???

 The Heartland
There's no shortage of churchs in the Midwest and the ones with the cross and flame always seemed kinda creepy.

Personal Portfolio

Earnings have been coming in and may of them are not that bad; some in fact have been spectacular.  Anything homegrown with little exposure to the European markets and overseas in general seems to be the place to invest.

Dividend paying stocks are working out very well in this climate.

Electronic Arts Revisited for the Fifth Month  (More Groaning)


Well, well, well - I can actually see something positive.  When's the last time you've actually seen a PE for EA?


Speaking of PE's, it's been a long time since I've seen a PE for Netflix as well.  

I decided the 25% drop was just too attractive to pass up and picked up a small percentage at  62.13 a share, which I hope is a short term investment opportunity.

The VIX - What is it Anyway?


The VIX , otherwise known as the volatility index, or the fear and trepidation index, is a measure of volatility in the S&P 500 options index.

Put simply, big spikes in the index usually means big price moves in the up or downward direction and one can use that to his advantage.  


Take Amazon, for example.  This morning there  was more bad news coming out of Euroland and the expectation of course is a tanking US market.  
This can easily knock $5.00 off Amazon's share price in a heart beat.  Buy 100 shares at or near the low for the morning and it is  probable that the stock can gain $5.00 back in a few days.  


Of course, you can also do considerably better than that  :) .

If the VIX continues to remain high, odds are that the trade will execute in a short period of time.

Granted, a $500 gain off 22K worth of stock isn't that much, but if you are holding the shares in a tax privileged account like a ROTH, that means the $500 you may have earmarked as a Roth Contribution can be spent elsewhere, or it is the equivalent of doubling up on your monthly investment if you added the additional $500 anyway.

A flat VIX generally means the market is treading water and that makes it harder to generate a profit.

One can do quite well using volatility to his or her advantage, although you do have to have the stomach and patience for it.

Trade Settlement Dates (or T+3)  - Why these should be taken seriously.

The short answer is if you don't play by the rules, you can end up trading with settled funds only, which means missing out on trading opportunities.

These are known as Reg T violations and most brokerage accounts allow only three of them.

The first two violations get you a politely worded email not to do that again.

The third violation gets you a trading restriction for the life of the account. 

Settled funds are cash that has been sitting as cash for at least three business days + the trade date.

This is what you can do if you are starting out with settled funds:

   A. Buy stock X and Sell stock X on Monday, and then Buy Stock Z on Monday.

      However, you must hold Stock Z for T+3 (Monday + 3 Days). 

      You can sell the stock on Thursday without incurring any warnings.

   B. Buy stock X on Monday, sell stock X on Thursday and buy stock Z on Thursday.

   C. Sell stock X on Monday (assuming the stock has been held for at least 3 days plus the trade       date), buy stock Z on Monday and then sell stock Z on Monday.

      You must wait until Thursday (T+3) for the money to settle, until you can trade again.

To ensure I stay out of trouble,  I prefer T+4. 

It's simpler that way.

Is 'Buy and Hold Forever'  Really Dead?

This is what the financial media would have you believe and why do you suppose that is......

Look on any financial news site and what do you see...  

You see numerous ads  from brokerage firms, all espousing reasons why you should trade with them.

You see all kinds of trading advice from show hosts, guests and other  experts - Trade of the Day, Trades for Tomorrow, how to make you a better Trader.

It's all about getting you to spend your money on trading, which is how everyone else makes their money off of you in the form of commissions.

'Buy and Hold Forever ' is not conducive to adding to the bottom line of other people's businesses and therefore it must be actively discouraged.  

The financial media does a good job promoting that.

I think it boils down to what it is that you are wanting to do:

A.  Invest for Retirement
B.  Invest for  Profit
C.  A Combination of Both.

For most people, it is probably a combination of the two. 

The best of all worlds I think, is to have a core holding of 'Buy and Hold Forever' stocks in a retirement account plus a chunk of change set aside to take advantage of trading opportunities as they arise.

This is also a very good way to leverage your assets and trading power.
Trades in retirement accounts and dividend distributions are free of tax. That is a big advantage over trading in taxable accounts.

Of course there is an element of risk involved.  Losing trades are not tax deductible in a retirement account.  Any losses incurred are permanent.

In other words, it is a good idea to know what you are doing.

Here's two examples of 'Buy and Hold Forever' stocks:

BGS Foods

I bought BGS Foods for my and my wife's retirement accounts roughly six months after the stock went public in 2008 for six and change, and have held it ever since.  Dividends were and are being reinvested in more shares of stock.

Trading this stocks on the highs and lows would be foolish. The only reason I would sell BGS Foods would be if and when the fundamentals change.  Until then, this is a 'Buy and Hold Forever' stock.


I bought Altria whilst bottom fishing in early 2008 and have continued to hold the stock, reinvesting all dividends.  I did have to sell a little last year because the position as a percentage of the entire portfolio was growing too large.

The stock is generating around 4.6% in dividends reinvested in new shares of stock for me every three months......and it's all in retirement accounts.

Now why in the world would I want to give that kind of performance up for short term trading opportunities?

Only a fool would do that.


What we have here is CNBC's
 prophet, seer, revelator - and major PITA.    Detailed Opinion Here

Financial Analyst - NOT

Soothsayer - NOT

Bearer of Practical Financial Advice - Occasional

Man's Worst Nightmare - Maybe......

Having to listen to annuity pitches interspersed with vitamin infomercials  could be worse.

Let's  keep track of just  how well this PITA's  'predictions' pan out for the rest of the year.

2012 Predicted Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Gold $2,000.00 1736.7 1716.28 1671.9 1664.2 1616.9 1604.2 1613.8
Recession  60% Chance Nope! Nope! Nope! Nope! Nope! Nope! Nope!
TIPS Current 5yr Yield Home Run - Maybe 0.95% 0.90% -.126% .125% -1.03% -1.00% -1.22

July Comment:  This individual is one of the many followers of Harry Dent who is basically a perma-bear, who had a marginal claim to fame for writing books about individual retirement accounts:


Around here, every weekend there is a certain radio show that plays a spot several times in which it is noted that 'Harry Dent is calling for DOW 3000 and  what happens if he is right?

Have you talked to your financial apartment about this? Do you have a game plan? Probably that's why you have to hire us to guide you through the trepidation and fear. '

It gets nauseating.  That's just one individual this PITA apparently follows.

Mocking Bird

This is either a mockingbird or a female western kingbird.  I'm leaning towards mockingbird.