October 2008

“Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years. "

Warren Buffett

The Professional Opinion

This month in the interest of accuracy and lack of available time:



Rock Climbing

Rock climbing  along Donner Pass in September.

Personal Portfolio
Ending September, 2008
A month dedicated to Bulimia Nervosa

Binged: GE, MAS, C, RF, AIG


Panic selling into a downward spiral is a losing proposition.

Selling losing funds into an up tick, having a bit of patience and then buying bargain basement stocks on a down tick can yield some interesting results.  

Call it a sideways move with emphasis on the negative for the long term positive.  Will this have been a prudent path?

Hindsight into Foresight

Broad diversification over a wide spectrum of mutual funds has not been working real well during the last twelve months, unless of course you like staring at the color red.

Hindsight is good for something if a repeat opportunity presents itself. I've spent the last nine months looking at financial stocks and thinking back to the bottoming process after the Dot.Com bust in early 2000. Financials appeared to be ripe for the picking and a way to
stop the general bleeding that has been going on since late last year.

The problem was how to determine which banks were going to go under next, which banks would be too big to let fail and which banks appeared to be doing relatively well, all things considered.  If a bank failed and its assets were picked up on a Monday by another bank, I considered that bank a prime candidate for purchase.

How to finance these buys....

I was heavily weighted in commodities and international funds.  The commodity bubble appeared to be bursting earlier than I thought so I started selling the commodity fund into market rallys. I am now out of commodities.

Mutual funds with an emphasis on Europe were prime candidates as well. These funds were outstanding performers the last couple years.  Interest rates there have been too high too long and Europe's economy is beginning to suffer. These funds were sold into market
rallies as well.  I am now officially totally out of Europe and international exposure has been reduced to less than 10%.

The incredible market gyrations provided numerous opportunities to buy quality stocks at what I view as rock bottom prices, prices I may not see again in my lifetime, especially with respect to Financials.

As of this writing, congress failed to get the votes for the bail out package and the market cratered @ 700 points, which provided the ideal time to put the rest of the cash to work. There doubtlessly will be more opportunities before this is behind us.

Here is my list of stocks worth considering:

Buy on Weakness as a hold: Bank of America (BAC), Citigroup (C), Regions Financial (RF),GE (GE), Masco (MAS)

Buy on weakness as speculation: Ambac Financial (ABK), MBIA (MBI), ETFC (ETRADE Financial), AIG (AIG).

Spilt Milk:  Washington Mutual (WM)  - I am now the proud owner of 1k bankrupt shares valued somewhere @ .16 cents apiece.

Other:  Silicon Imaging (SIMG) - Worth it I think, at these prices.  Wireless Ronin (RNIN) - maybe.


Thanks to the large gains in the Financials and a little trading, losses currently sit at around 12% which is considerably better than the market as a whole.  It has however skewed the investment allocations in ways I am unaccustomed to. The 5% rule in any one stock
I think is going to have to be waived until we see some kind of normality.

The mutual funds have been moving inversely to individual stocks, which means the stocks are in some cases rapidly moving past that 5% recommended allocation. Selling to maintain that recommended percentage means buying what.....

The best course of action it seems to me is to do nothing for a while and let everything sort itself out. It may be some time well into next year before we see some kind of normality.

In the mean time, all dividends are set to reinvest and perhaps there will be some more great deals at the time the dividends are issued as stock.


Anything else?

How about a 5% stake in Ginny Mae's.  Seemed like a good idea to me.


There is no bias in the media in preference for presidential candidates, right?

I have been residing in a motel for the last week that has extremely limited TV coverage of anything financial.

CNN is the only channel available and what a bunch of garbage. Their juvenile coverage of just about everything of importance is enough to make one gag.

Anyway, CNN on their early morning show has this changing montage of images as a backstop for their intellectually challenged reporters and reporterettes.

A reporterette was spewing her fourth grade level tripe (not meaning to denigrate 4th graders) at a so-called financial expert who was displayed in the montage in a small panel on the lower left corner.  You could hardly see the guy.

In the center of the montage at the top in a large panel were colorful images of a dynamic Obama moving, gesturing, speechifying and appearing very vivid and dramatic - a man on the move.....a man of action.  

On the lower right side of the montage was a smaller panel which showed stills of McCain in repose, contemplative.....reflective perhaps. These images were subdued, a couple were in black and white. The effect was one of looking at photos in a history book.

No bias, right?

What a choice this election year - a socialist liberal trying to pass himself off as a Kennedy, and a progressive liberal trying to pass himself off as conservative.

To add insult to injury, neither of these candidates know anything about finance. 

What to vote for....100% symbolism or 50% substance. 

I can hardly wait.