Monday, August 31, 2009
Can self-respecting women actually pull off autumn's animal print trend?
Is it a look that only belongs on the runways?
Escada has created a collection with varying degrees of leopard print boldness... The bag's kind of cute, but why do designers do this to us?
Sunday, August 30, 2009
Jealousies aside, trust fund babies must be the luckiest people on earth.
I wasn't born a trust fund baby - far from that. However, I have been strategising on how I can one day start having real financial freedom.
To me, freedom means having enough assets that will generate enough perpetual cash flow to cover all my living expenses for the rest of my years. I wouldn't owe anyone anything. I would be able to essentially do whatever, whenever by essentially resting on my laurels. LOL.
Depending on what sort of lifestyle you're actually aiming for, financial freedom could probably be achieved by most people.
As much as I enjoy working for my boss when he's in a good mood, I've been daydreaming about The London Luxury Lifestyle for a while now and since I don't want to be all talk and no action, I've been thinking about concrete ways to implement this over the next few years. My London Luxury Lifestyle would not only involve lots of Hermes, but also housing in a fashionable area of London, whatever I feel like eating, taxi rides everywhere, a good spa visit whenever I feel like it, and a holiday every two months if I wanted - basically a very OTT + diva type of lifestyle. Suffice to say, if everyone spent like me, we wouldn't ever be in a recession.
The good news is that I wouldn't need millions in my Freedom Fund in order to get to this lifestyle. If I increase my annual ROI target, a mid to high six figure sum would be sufficient. However, the key is to ensure that your ROI target remains consistent and achievable. In addition, it also involves intelligent use of leverage.
I feel adamantly about not using leverage if you are still learning the market. Leverage should only be used if you actually know what you're doing because it is very much a double edged sword. However, I'm admittedly conservative.
In addition, discipline plays such a key role. Remaining rational is so critical to success. So far, I've been taking time off from the markets whenever I want because I can. If I had to trade full time, would it be so easy to step away from the market?
Since I'm not getting any younger, the pressure's decidedly on.
I've also got bond positions that are now MIA due to recent bankruptcies. This cash will be idle for at least another year before I can expect a definite outcome on the actual recovery. I've noticed some mid to high double digit gains on two bonds I purchased this year. I'm thinking of rebalancing my portfolio by cashing in on these bonds and using the proceeds to buy stocks. However, is this the right moment to do so?
I've only been able to book a YTD ROI of 2.4% on my entire portfolio this year. This is not good enough, but I realise that Q4 tends to be my most productive trading time every year.
I have to get myself into gear. I've been much less emotionally volatile lately and I have to keep all my emotions in check. When the market's decidedly bullish, I have to go with the flow. If the market's suddenly bearish, I have to be ready with my stops.
Interestingly, if I book all my unrealised profits tomorrow at Friday's prices, I'll arrive at a YTD ROI of 10.6%, which would be a slight improvement on last year's realised profits. However, I have to be aiming for more. Ever since it formed the recent lows earlier in the year, the market has been up much more than this. We have to outpace the market, which means I need to be much more aggressive. Moreover, the best trading advice I ever heard was if we have a small account, double digit gains are not good enough. We have to be aiming for triple digit gains or more.
My biggest fear is that I've missed the greatest sale of my life and that there will never be a market like this ever again.
Having said that, we have to still do our best. The market is what it is. We have to focus on what has proven to work for us and continue to trade what we know to be true.
1. Continue to invest only in companies with positive book values, allowing for a good margin of error, regardless of whether we're buying stocks or bonds.
2. Do not chase prices. When we do, our whole risk:reward calculations go out the window.
3. Do not settle and buy any second runner ups even if their stock prices are lower. Sometimes, you'll end up with a winner, but more often than not, you'll end up with an AMD - or worse, an ABK.
4. Like my forex broker once said, "If in doubt, just stay out."
If I can get out of ABK and AMD alive, I need to start daydreaming about how to reinvest these funds into something that does not involve... you guessed it, Hermes... It will be tempting though.
Technically, anything Hermes appreciates in value with time, though, so it wouldn't actually be a bad investment.
It did make me realise how much I want to keep BAC, NYX, and HWD in my portfolio over the longer term.
I've always made it a point to invest in companies that mean more than shareholder profitability and with AIG and ABK, I really felt like I was getting off track.
Now that I know there are actually people reading my blog, I feel even more motivated to actually stick to my plan. It'll be like someone's indirectly auditing my trading and making sure I put my money where my mouth is.
Where did I go wrong with C? I got out with a limit sell rather than trailing my stop to exit the trade with a profit. If I had used a trailing stop, I could potentially have gained more on the trade.
Where did I go wrong with AIG? I bought it in the first place, which was against my overall trading philosophy. However, having bought it, I exited with a trailing stop that was much too tight. Whilst I kept moving my limits up on the trade once I saw the market offered potential for greater profits, the tight stop limited my profits significantly.
Overall lessons: I like moving my limit up according to market volatility and market potential. If the market's bullish, there's no reason we shouldn't keep raising our limits. I should also make the trailing stop my exit strategy more often and perfect it to maximise gains and minimise losses.
Hindsight is 20/20 and I'll try not to beat myself up about it too much. However, I reckon reminiscing on these two trades will be COL moments for some time to come.
I suppose the really good news is that once I get rid of ABK and AMD, I am well on my way to having a portfolio that I could be proud of in principle. This means that all the companies will be ones that I actually believe in. Whether they end up being profitable is another story.
Thursday, August 27, 2009
I have been calling for bandaid ripping as the right thing to do. Many people might not agree because mostly there are certain niceties that investors are expected to follow. It's like the Europeans who frown upon jaywalkers because they themselves like to obey pedestrian traffic signals even when the street's empty 99.999% of the time.
Calling for bandaid ripping is a much toned-down version of Carl Icahn's strategy of corporate raiding. Usually, my bandaid ripping results in nothing more than snickering and smirking from the occasional reader of my blog, but I have been asking myself: if I one day become an influential investor, will I still be able to look myself in the mirror every day?
There's a personal, human interaction side of things. I find a management team that is really doing its best to ride out a storm admirable. They do right by their employees and investors and their CEOs don't take million dollar bonuses 90 days prior to filing Chapter 11. Ah hem, Finlay.
However, management that is just trying to buy time so that they can Madoff a few more victims does not get my round of applause.
It is not just a game for me because bandaid ripping, if done successfully, will have serious implications. It is like going in and foreclosing someone's home - only worse because here you're going in and foreclosing on possibly thousands of people's lives at once. Who has the heart to do that and who wants to be the straw that breaks the camel's back?
Apparently, the banks had no problem with it and hence the situation today. So is what we're seeing today karmic in nature? I'm pretty new age, so I have no issues with exploring the spiritual implications of trading. You can bolt now if you need to. The door's that way.
It might be hard to believe, since I'm semi-Republican and all, but there's a part of me that actually believes that a world where suffering has become a thing of the past could actually happen in the not-so-distant future. Fine, I'm a little bit airy fairy.
I suppose distressed debt investing is the darkest side of my trading. I've always made it a point not to invest in companies that are clearly wrong for society - especially tobacco companies.
I am wondering now if the high road is actually to step away from distressed debt investing once and for all - even when the reward could be astronomical.
But then, I wonder... isn't trading itself predatory in nature? Aren't we all in one way or another running other people's stops and forcing their accounts into liquidation?
Yet, there's a part of me that wants to believe trading is actually a stroll in the park where no one gets bullied and the Easter Bunny is giving away free candy and ice cream. Mmm...
Put down the flip flops please.
I know I've got the whole diva reputation to uphold, but sometimes we need some time to re-evaluate what once appeared black and white.
Trading is so much more colourful than that.
I would like to point out how the risk of a bond decreases with every interest payment the bondholder receives.
Say you bought the bond at $0.39 on the dollar. The face value of your bonds is worth $10,000. The bond pays 6.15% in coupon interest annually. With every interest payment you receive, your risk goes down by $0.0615 on the dollar annually.
So in a little more than six years, you've got your original investment back from the interest payments, which means that your investment is now virtually risk free.
If this were an ideal world, we would not have to face bankruptcy battles, but this environment is ripe for distressed debt investing. If Lehman would have survived, this would probably be a banner year for them.
Seriously, I am still so ticked off that Lehman was allowed to collapse. The whole situation made absolutely no sense to me. Why single them out? It was so unfair. Every other investment bank made mistakes as critical as Lehman. Would the world today be different if Lehman had survived?
Sometimes, I wonder if Hankie & Bernanke wanted to create The Great Catastrophe of 2008 in order to get their 15 pages in the history books. You never know. Human ambition could be very dark and honestly, I've never really particularly admired the smouldering Bernanke. He's a fair weather friend in my book and I'd like to find out if he shorted Bear Stearns and Lehman and bought a whole bunch of GS at $50.
The semi-feminist in me wishes for a Chairwoman of the Federal Reserve.
Would we get a woman President before a Chairwoman of the Federal Reserve?
I never believed in it, though. But still, it really, really hurts. It’s like… I guess it’s like those women who date guys for 7 years and then they break up and he ends up marrying someone else two weeks later? Or like the only dress left in your size, but this other woman is getting out her credit card to pay for it?
Even with my 15 shares, I could have been up another $210 or so. Maybe that's not much, but it could have made a small contribution to my Hermes Fund.
Even C's up... what exactly is going on?
I don't need an explanation, but there has to be a way to go with the flow and capitalise on the madness...
I am going to stay calm. Otherwise, I'll be all emotionally volatile.
Wednesday, August 26, 2009
Thank God I only had 15 shares. Otherwise, I'd really need a hug.
At least I'm finally profitable on my BAC position - all things considered.
I think I will hold onto BAC and NYX as long as I can. Maybe they're what my friend Eddie would call vanity positions in that you own them for the prestige more than anything. But, the emotional value of a stock is often underestimated in trading. It's like GS or BRK.A or something. They're like the Bentleys or Porsches of portfolios - collectibles.
For me, it's more HWD and Bulgari.
So, I apologise very much, ABK! You're not in technical default. You're simply deferring your payment for up to ten years. Congratulations on the ingenuity.
And once again, another ForexDiva Colossal Failure moment...
The thing that ticks me off most is that there's seemingly nothing to do about it.
Since I've had a few of these bought the cow for less than a gallon of milk situations, I am now going to be much more diva about corporate bonds. The first and most important step is to check the book value and ensure there's a good margin to work with. Scrutinise every last dot on their balance sheet and go through their budget line by line.
Hmmm... that sounds a bit familiar, doesn't it? Oh, yes, that's how you run up the 10 year national deficit to $9 trillion.
Fine, laugh all you want at my trading...
Ambac sues Bay Area Toll Authority...
$400 million was the original size of the Ambac bond issue I mentioned below (CUSIP 023139AF5). All of it is still outstanding and the interest payments are issued twice a year, which means that Ambac couldn't even make an interest payment of $12.3 million, originally due on 15 August 2009.
The strange bit is no one has mentioned this technical default anywhere else. On the FINRA site, the bond isn't even labelled as trading flat - just a subtle mention of a 0% yield.
Am I sadly misinformed - or does its book value of negative $18.80 speak for itself?
Tuesday, August 25, 2009
However, it seems he was also very good at changing the subject.
I almost got out at the daily top, yielding me about +15%. But since I only had 15 shares, I won't be writing home about it, although I will blog about it. And it was even higher yesterday, so it wasn't a perfect trade by any stretch. I hope I did the right thing though. After I let go of a partial position in C earlier on, I missed out on almost an additional $1 price move.
Could C actually get any higher? It hasn't made a new high today.
Anyway, it seems the trailing stop is very useful indeed. Especially if it can get you out of AIG at a profit. If you're choosing between a trailing stop or a limit price to get out of a trade, I would want to perfect the art of the trailing stop.
On an even happier note, I am so proud of BAC and NYX...
I just have to find a way to get rid of ABK, which was about +5.74% twenty minutes back... Why is it even going up with all its debt? I've been long since last November, but I really find this to be a case of it pays to be lucky rather than brilliant analysis - not that I'm breakeven yet, but if the market continues the way it's been going, it's certainly possible in the near future, isn't it?
Monday, August 24, 2009
Apparently, Gordon Brothers' minimum bid would be 64.75% of the aggregate cost value of the merchandise plus an amount that will cover all expenses, such as payroll and advertising costs for the sale events, according to court documents.
I'm here to say what a rip-off this is. From my point of view, this seems to be more a case of prince turned frog rather than knight in shining armour.
Finlay reported close to $443 million worth of inventory on its balance sheet recently. Most of this jewellery would have been manufactured in either 2007 or 2008, when precious metals prices were much lower. At today's precious metals prices, the value of this inventory should in actuality be considered much higher. And considering that there will probably be very little wholesale interest in the Finlay merchandise since US jewellery retailers are still holding onto quite a bit of inventory, I am sure Gordon Brother will be able to collect some decent merchandise at bargain prices.
Moreover, the Finlay auction is being held very close to the holiday season, which is when the typical jewellery retailer will ring in roughly half the year's sales. As bad as retail sales may be, consumer demand for jewellery will still be strong enough. By starting at such a low minimum bid, Finlay is simply unnecessarily undervaluing their merchandise.
There is no doubt in my mind that the actual liquidation of the merchandise at retail level will be at least marginally profitable to Finlay. Selling its assets to a liquidator like Gordon Brothers at below cost at this stage in the process is very bad news for all Finlay bondholders when there is an option for Finlay to directly liquidate its merchandise with its extensive retail distribution presence. This is very unfair to bondholders. The only winner would be the buyer.
There is no other company in a better position to manage the liquidation sales of Finlay merchandise other than Finlay. Why should a stalking horse bidder interfere when it could very well erode bondholder recovery value?
If Finlay wants to sell at cost, why not do it at retail level? Why do it at 64.75% of cost at wholesale level? Could Gordon Brothers just be acting as an agent for another party in this sale? Am I missing something critical?
Some more interesting info to consider: sale-backs in bankruptcies...
To other Finlay bondholders... remember it's possible to object to the stalking horse bidder by writing into the bankruptcy court, the indenture trustee, and committee of unsecured creditors.
How I wish ABK would do the same. If they bought their bonds back on the secondary market now at a fraction of the face value, they'd be able to offset a lot of their liabilities and boost up their balance sheet. Or maybe it won't work since they're so short on cash?
Then, GBP/JPY does the unexpected and drops 200 points for no apparent reason. Or did I miss the reason? Not that I was in a trade, but still...
Yes, I'm really hurting from the recent Finlay and ABK bond defaults and hence the extra sarcasm.
I've done the unthinkable and raised my limit sell on both ABK and AIG. I know it's self-contradictory, but I've never been above that. If there's a trend party happening, why miss out, right? Don't forget to pull out all the stops...
Sunday, August 23, 2009
Well, not really. But it seems he has a way of charming the markets lately.
Let's hope it continues. Otherwise, the market will need a new hero.
I have been asking myself the question: should Central Bank statements be considered lagging indicators in certain markets?
In an uptrend, Central Bank statements will determine when the party's finally over.
During the downtrend, Bernanke was certainly more action-orientated. Otherwise, he would have just been adding fuel to the fire with his words, which he certainly did more than twice.
Now that equities have bounced back so much, Bernanke comes along and says that the growth prospects in the short term appear good. For people already on the right side of the market, this is a lagging indicator already, but not an unappreciated one.
Whilst the markets and the Central Bank statements are a bit symbiotic, in order to really make money, we kind of have to be ahead of the Central Bank statements sometimes.
For now, I think no news is good news from Bernanke. And as long as Bernanke continues fanning the recovery, we're OK for now. Never mind how he was the fair weather friend who in a way spurred the economic collapse on. So water under the bridge, isn't it?
Whilst ABK is taking some proactive action in an attempt to stay above the water under the bridge by launching a lawsuit against Citi and Credit Suisse, the question remains: can ABK survive?
Interestingly, Citi is a top institutional holder of ABK shares. I would be shooting myself in the foot by suggesting a short on ABK shares, but it would probably turn out to be one of my better trade ideas. For a play like this, I'd think options along with stringent money management would be the way to go.
Liabilities are high and cash is short for ABK, so could it only be a matter of time?
Divine Intervention, please - for I am long both ABK bonds and shares...
Sigh, oh sigh...
Thursday, August 20, 2009
There are going to be winners in the aftermath if we see this as an opportunity. At the same time, on a personal level, everyday tensions can unfold that cause us to start doubting our own ability to survive. There's also a lot of repressed anger in the atmosphere. Where, with all the bailouts, has the government stepped in and done anything concrete to create new jobs and alleviate some of the uncertainty?
In our own trading at least we can still retain control over our account.
I took some notes during the Tim Morge workshop I attended recently. He shared with us his formula for trading success.
1. Find a setup that repeats over and over.
2. Do your homework to make sure it has a good profitability (do the actual statistical analysis).
3. Exercise stringent money management. Look at risk:reward and never chase prices.
In this environment, I think it’s most important to look at the levels that are being defended and base your trading decisions on those levels.
Hey, I know what’s happening some of the time, but not all the time. If I see something I don’t know, I’ll just ignore it and do my best, right? That's all anyone can do at the moment. Take it one trade at a time.
I got out with a limit order, but in hindsight, should have probably used a trailing stop.
Still, I am not going to add to C at this point. I'm sticking to my plan and waiting until further news presents itself on the whole new share issuance / reverse split scenario. At that point, I feel that value dilution will come into play, which would potentially enable me to purchase at better prices. If it's really heading north for good, I've still got a partial position in it anyway.
The trailing stop takes a lot of practice and experimentation to master. This is one of my weakest links right now.
Whilst the limit is important, I firmly believe that the stop is even more important.
On the other hand, what is happening to AIG? Is its current upwards trajectory going to be one of those one-day wonders, or is its new CEO actually resonating with investors?
I'm moving my target up on AIG in case I've inadvertently bumped into a winner.
Wednesday, August 19, 2009
You know The 87th Lie really got me thinking… I do feel that the economic crisis has unveiled many weaknesses in our economy. I have a very simplified view of some potential solutions and I’m going to exercise my First Amendment rights here for a bit.
Job creation. Essentially, the US economy is driven by consumer spending. The first thing we must do is to stimulate job creation in new sectors that would give us a competitive global edge over the longer term. We have to not only create a sustainable domestic market, but must also be able to go on to become suppliers to the world in these sectors. Somewhere down the line, clean energy, clean water, and clean air will be the most important and most essential aspects of human life on an increasingly polluted earth. If you ask me, our water is not clean enough. Traces of drugs and other unhelpful contaminants could be found in water in many communities. And a simple Brita does not help that much. Imagine if the US can claim leadership in the cleanest and most cost-effective energy and water sources, as well as own the most advanced air filtration technologies. Building an industry like this would not only create many new and sustainable jobs, but would also improve our quality of life exponentially.
Better education system. In order to build a stronger economy, we must have a better education system. Aside from a few years of Catholic school, I attended public school up until high school and then attended a private university. When I was in college, I always felt my public school education put me at a disadvantage compared to classmates from Andover and other elite schools. Now it’s all water under the bridge, but the subjects covered in our classes up through high school are much too narrow. Moreover, did you ever learn anything in school that has still been applicable today aside from doing some simple math? Our education system needs to evolve with the times and this involves the creation of some new subjects that will gear tomorrow’s leaders towards greater creativity and innovation. In the short term, if we create some new subjects, many qualified people who have become unemployed could now have a new career opportunity as teachers. Over the longer term, the leaders of tomorrow will be much more educated and intelligent, which benefits the economy in the future.
Legislation that encourages local employment, including lower corporate taxes and if really necessary, higher taxes for companies that outsource jobs to foreign countries.
Lower income taxes and gradually phase out social security. I was a bit unfair to The 87th Lie. John R. Talbott made a very critical comment in favour of Generation X & Generation Y. We are being over-taxed whilst the Baby Boomers remain one of the wealthiest demographic groups in the universe. Everyone knows social security is like a junk bond anyway. By the time Generation X & Generation Y retire, it’ll be worth pennies on the dollar. Why should we have to fund the Baby Boomers’ retirement accounts? I would rather take the money now and save it (i.e. for my very first Hermes Birkin or even just stash it in my IRA – potential 88th Lie right there). In my opinion, only the Baby Boomers who have no retirement savings should receive any Social Security payments. I'm sure they were not counting on Social Security to pay the bills anyway. Generation X & Generation Y would then receive nothing in the future, but it would just be like cutting our losses. We still have years to prepare for retirement.
“We are also pleased Metaldyne is moving through the bankruptcy process swiftly and
on plan. The highly competitive sale process in this challenging market is a testament to the
strength of our businesses, technology and the commitment of our employees.”
Yes, they were so strong and so committed that they had to file for bankruptcy.
Now that's south of ridiculous (original phrase coined by Lawrence G. McDonald).
On a more somber note, if Carlyle Group is involved, I fear that Metaldyne bondholders may have to be very cautious. It could be a double-edged sword.
For anyone else wanting to follow the Metaldyne bankruptcy, visit http://www.metaldynerestructuring.com/.
I get so anxious once any part of the position breaks even. Yesterday, I really felt so nervous. But I'm proud of myself for having the self-control not to call my forex broker 50 times. I didn't even call once! I really wanted to think about some solutions on my own and test out some of my own theories.
So, I decided I had to take a bit of a break from my usual routine today to get a fresh perspective, which my Big Holiday was also supposed to help me do. I went out for dinner and ordered something I usually wouldn't.
Doing something different made me realise that in addition to being a diva, I am such a fraidy cat too. I can't be in a long term trade without being at my computer and having access to real-time pricing. It kind of really gets to me.
I think part of me is still not over the fact that I blew up my forex trading account when I first started trading. I have to find a way to get rid of this feeling of loss.
A few years back, I was going through a setback in my career. I took it quite personally at the time. I started having some more free time at work and rather than doing nothing about it, I started preparing myself for the next big project. I realised that whenever I needed to get started on a new project, I would feel as if I didn't have enough time or resources to complete the project. It always got me anxious. So, I used this free time to build up my own working palette. I put together anything that I felt would be useful in any sort of project that I could potentially be working on in the future so that I can be as unemotional as possible when approaching future projects. I add to this on a regular basis so that my working palette is always up to date and always relevant.
I mentioned a while back that I was going to use any downtime I have during my trading hours to do practice trades. I need to get into this routine and play catchup since I essentially missed out on three weeks of trading due to the Big Holiday. I need to develop my own trading palette and build it up extensively and feverishly.
One of the key reasons we feel anxious when uncertainty presents itself is that we feel unready for change and therefore unready for action. However, when we strategise in advance like a lawyer would, we give ourselves a chance to put the anxiety aside and just implement.
I might have missed out on a number of potentially profitable trades because I've been such a fraidy cat.
So I'm sharing this quote to remind myself that sometimes, it's necessary to be proactive.
"Only those who dare to fail greatly can ever achieve greatly." - Robert Kennedy
Tuesday, August 18, 2009
Monday, August 17, 2009
I was tempted to sell some of my equity positions during extended trading hours around my lunch time - prior to 8 am Eastern time. But I was watching GBP/JPY and noticed something strange going on. Nikkei and FTSE were down anywhere from 2-3%, but GBP/JPY hadn't moved that much by GBP/JPY standards.
I was talking myself into staying in my trades at that point - never a good position to be in.
Is it actually fear that's driving the downwards trajectory today or is it profit-taking?
Finally, I decided to sell part of my C position out of a combination of uncertainty and impatience. I recently just received more proxy materials from C in relation to the reverse split they are proposing. First, they want to increase shares. They then want to do a reverse split somewhere down the line. I voted against all of this, but have a feeling it will still go through.
How am I ever going to get out of this entire C position with any bit of financial dignity?
This is clearly a case when it's only funny when you're not the one in the situation.
I used the cash from the partial sale to purchase some more Finlay bonds. I figured if I'm going to be trapped either way for a prolonged time period, I might as well invest in something with a better risk:reward level. I'm quite certain Finlay bonds are worth much more than their current trading price. So, I'm actually saying here that I believe more in a company that's already filed for bankruptcy rather than an equity position in C. How's that for confidence?
Is this another colossal failure of common sense? If it is, then it wouldn't be my first.
But what if C retraces drastically after more shares are issued as I expect it to? That would then be the ideal time for me to plan my escape.
Something to ponder...
Oh, I want to be free already!
Sunday, August 16, 2009
I suppose this is also the book that everyone's reading. I'm glad I bought it - against all common sense. Although I'm only halfway through the book, I've learned so much from it already. It's just so fascinating and I have to say that so much of this has to do with the author's charming style.
When I think about it, the collapse of Lehman Brothers still hurts. How can just one department bring the whole company down? Apparently, there was the whole Paulson-Fuld blowup, but risk management within the company played a large role as well.
I'm also looking forward to the release of Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase, but one book at a time. (Fine, I admit it. I've been known to read more than one book at once.)
Anyway, this book is fascinating to say the least.
However, it failed to deliver. I've been left wondering if this book should be renamed to The 87th Lie. Some of the author's arguments make sense only in the slightest degree. However, I would have liked to see some more facts and data. This book should actually have been published as a blog because no one should have to pay $22.95 + tax only to receive an opinion piece. Where are all the statistics and data expected of a previous Goldman Sachs investment banker?
One of his more radical and illogical arguments is that all the banks are insolvent. I do not agree with this argument. Whether TARP was actually necessary is a whole other argument, but TARP took place whether we like it or not. Given that TARP was going to be implemented, any bank who did not apply for TARP would have been placed at a competitive disadvantage if their competitors received substantial capital inflows whilst they did not. So, some banks were actually forced to apply for TARP funding as it was basis for survival in the sense that if they did not apply, they would be left in a weaker position than their peers. I would go so far as to say that some banks actually did not require the funding and still applied. Therefore, the whole TARP incident made all banks look weaker than they actually were.
Another scary thought that the author presents is that capitalism does not work in every industry. He is clearly in favour of government intervention, but then he goes on to argue that the government is actually corrupt and can never run anything well. Sorry to say, but if the government is corrupt and ineffective, why give it more power?
Talbott seems to be in favour of forcing all the banks into bankruptcy and forcing all people who bought property into foreclosure. He believes that the socialism that we see in Europe is actually what capitalism in the US should evolve into. I wholeheartedly disagree.
There was the whole Sino-Japanese War going on prior to the onset of Communism in China, which left China in a very bad economic state. One of my great grandfathers was working in the US at that time and another was an entrepreneur in Panama, which enabled them to become property owners in Guangdong and Hong Kong. During the early Communist regime in China, which was about the early 1950s, my family experienced downright barbaric treatment from their neighbours in China due to the property they owned. You and I aren’t that close, so without getting into my whole family history, suffice to say that my grandparents had several brushes with life / death situations during that time – all under the pretence of wealth redistribution. So, I’ve never been a supporter of communism / socialism / wealth redistribution in general. I favour the independence of Tibet, Taiwan, and Hong Kong as well, but that’s another story – one that I’ll probably never tell in front of another Chinese person (again).
Whilst income disparity is politically incorrect, wealth redistribution is never fair. Rather than resorting to wealth redistribution, we really ought to address the real issue here, which is the lack of advancement opportunities in our economy. How sad has our economy gotten? I was taking the subway and this young man who was quite talented felt he had no other opportunity other than to turn towards being a street performer. This is clearly a man who was seemingly left behind.
As the diva who was able to move to three different hotels in one city just because the lighting wasn’t quite right, I definitely felt the guilt at that moment. Money equates to freedom and in many cases can buy happiness, albeit only fleeting happiness.
I firmly believe that for those who have financial security, sooner or later, the guilt of seeing wealth disparity manifest itself throughout society will compel us to act out of the greater good and therefore do more to give back to society. Warren Buffett, Bill Gates, George Soros, and Oprah are some recent examples. However, I do not believe the government has any right to enforce wealth redistribution.
Back to the book… The worst argument presented in Talbott’s book is that our government should limit the size of companies. He proposes that any time a company gets above a certain size in market cap, we should break the company up into two or three smaller companies. That would increase competition to such an extent that it would be totally counterproductive. Moreover, it’s clearly anti-entrepreneurial. Who in their right mind would want to start a business if there’s legislation that prohibits and punishes growth?
I suppose the bit I found most amusing about this book, which I had somehow managed to miss out on was the news that the credit ratings agencies were using their First Amendment rights as a defense strategy on the whole CDO ratings fiasco. I blink for one second and I miss out entirely on this bit of first-rate gossip?
Generally, this was an interesting read and it was probably written with some good intentions, but I’d say that Talbott’s arguments are not very convincing. The solutions he offers up to end the Great Recession are also on the whole unrealistic bar one. He indicates that to jumpstart the economy, a pro-inflation policy would be suitable. I agree to a certain extent with this stance. At the same time, there cannot be runaway inflation.
I do not regret reading this book. I might not necessarily agree with most of Talbott’s viewpoints. However, his book will likely start many discussions across the nation and possibly across the world.
Thursday, August 13, 2009
At some point, I was contemplating renaming my blog to Trading for the Benefit of Others. Getting into the Great Recession, my portfolio was really undiversified. I had mainly financial stocks, some luxury stocks, and some second runner-ups such as AMD in some pretty odd sectors I knew little to nothing about. My portfolio was basically all over the place. I guess my saving grace was that I had been saving cash for about a year prior to the Lehman bankruptcy and at the time, it looked like I had made some pretty smart moves with some corporate bond purchases that were adding to my bottom line, which now don’t appear so smart since many of these companies are filing for bankruptcy. I didn’t have much saved up, but it was an amount that I appreciated having at the time. I can’t say much about my savings now after my Big Holiday this year, though.
Anyway, it turned out my pre-crisis portfolio wasn’t prepared for The Worst Case Scenario.
I was discussing portfolio diversification with an acquaintance recently and he was all international prior to the Great Recession and said diversification doesn’t necessarily help in a situation like this.
I’ve been thinking about this more and really feel there is so much truth to Warren Buffett’s “Be greedy when others are fearful. Be fearful when others are greedy.”
The best time to buy the traditional safe-haven asset classes is not when everyone’s already scared – it’s prior to that inflection point. Likewise, the best time to buy risk is when everyone shuns it.
Where does that leave us now? I’m not sure. But if it’s a trend, then I’ve got risky assets in my portfolio already and if it’s a fakeout, then I’m ready to move my stops. I didn’t get in at the best prices, but at least I’m in.
Do I have trading conviction? No, but it hardly matters at this point, especially if you’re at least semi-diva / semi-alpha-male about your money management.
On the flip side, in my diva opinion, here are some really bad things that can happen to a portfolio (aka it has at some point happened to my portfolio) and the lessons learned.
1. The Reverse Split. They’ve sold you something. It’s gone down in price. Now, they want to take some of it back and charge others more for it. Do you see any logic in this? The worst part about this is that in the odd event that the share price starts going up, you’ll end up less profitable because your number of shares have gone down drastically. Avoid at all cost.
2. Share Dilution. Any time a company wants to issue more shares would result in share dilution. Always vote against it. What they are doing is issuing more shares, which dilutes equity. Moreover, if demand was unhealthy to begin with, share prices will continue down a downwards trajectory.
3. New Bond Issues. This would most likely decrease the book value of a company by increasing liabilities. The only potential winner is the bondholder if they can buy in the secondary market at below par levels, which carries its own level of risk.
4. Bankruptcy. Luckily, I haven’t been in a situation where I ended up holding shares in a company that has filed for bankruptcy. I do actively buy bonds in companies that have already announced a bankruptcy. I have also ended up with bonds in companies that afterwards filed for bankruptcy. It’s not necessarily bad unless their book value was negative to begin with. However, I would suggest to never buy shares in a company that has a negative book value. I have a pretty iffy stock now – ABK – but it’s a small position. Do your due diligence and first check the book value of a stock prior to buying anything. If you’re into shorting stocks, I’d say a negative book value would be what you want to look for.
I suppose the biggest lesson we've got to learn is never trade for the benefit of others.
Wednesday, August 12, 2009
But I am thinking about potentially contradicting myself and saving the stop-moving for later.
Isn't the Fed basically saying that it feels OK with the current risk rally? This is a major market confidence booster. Whether the rally will continue depends on how many people buy the sizzle.
I've got a few partial positions I can take profit on, but what if the market bottom's for real?
Then, I'd be hating myself for the rest of my life if we go back to pre-Lehman style market hysteria.
Having said that, I am going to be more brutal with a few of the safe-haven-type positions I have in my portfolio. And I'm really praying that ABK will be able to weather the storm.
I know praying does not help when you're in a really bad trade. So don't try it at home.
Could NYX, C, and BAC turn out to be blessings in disguise for my portfolio?
If things line up, I'll probably be looking at a short gold play. My theory so far has been once the economic recovery is for certain, people who have rushed into gold will sell and move their assets back to higher yielding asset classes, which in this case would probably be equities.
Tuesday, August 11, 2009
One was a silver bracelet with semi-precious stones and one was a single diamond stud earring that was probably worth about $800 - $1200.
I returned both to Lost & Found, although for a brief moment, I considered actually keeping the diamond stud. But then, I thought, what if it was a gift from someone and it meant more to that lady than the $800 - $1200? You can't buy a memory back. It was the right thing to do and I believe in karma... but unfortunately, no one claimed it and it's still at Lost & Found. Nonetheless, I know I would have been so guilt-ridden if I had kept it. I wouldn't be able to forgive myself.
But finding two jewellery pieces in one day - this is just so coincidental.
Towards the beginning of the year, I nearly lost my Tiffany Charm Bracelet, but someone found it and returned it to me. So I know how it feels to find something you thought you'd lost - it's magical. And it really made me realise that what's yours is yours.
I know it's a sign and there's a lesson to be learned, but I'm still trying to figure out what that is.
This is a case where I bought the cow and barely got a gallon of milk. I initially paid almost $0.48 on the dollar for these Finlay bonds and was only able to collect about a year of interest payments. Taking into consideration the interest payments I received, I effectively paid about $0.39 on the dollar.
I'm glad they expedited the bandaid ripping process though - although they clearly should have done it even sooner.
I now have three corporate bond positions that are still above water - Ambac, Neiman Marcus, and US Steel.
Monday, August 10, 2009
First, I was at the W New York on Lexington Avenue - highly, highly overrated. It's supposed to be all hip and modern, but if a motel that charges hotel prices is your thing, then you've got the right address. There is so little lighting inside the rooms that anyone in their right mind would feel the slightest bit perplexed. Having said that, I did bump into a semi-cute guy on the elevator and yes, he was hip and modern, but I really wish the hotel was too.
I then moved to the Westin Times Square, which at almost double the price, should have been heaven. I've been to the Westin in Taipei, and the rooms there are about 100 x better than the Westin Times Square. I remember having some issue with my breakfast at the Westin Taipei and the manager actually took the issue so seriously that he sent me a bottle of wine and a fruit basket to apologise. No such service at the Westin Times Square. There was again something incredibly strange with the lighting, but the real dealbreaker was the drab and outdated decor, which looked very 1970s.
Finally, I moved into a Hilton. I know... but it was the only choice. I should have just booked a room at the Hilton in the first place. It ended up being the most cost-effective with the least to complain about except the bathroom. Shower curtains. Enough said.
I did learn something about myself though. I'm not just about idle threats anymore. I am diva enough to move to three different hotels just to find the right one. It was a complete waste of time, but it took my diva-ness to a higher level.
And I will never, ever complain about British Airways First Class and the Wynn Encore again. Oh, I'll settle for BA First and the Wynn Encore... LOL.
Most people won't understand, but getting it right is so priceless...
But rose-coloured glasses and all, I’m really getting a bit apprehensive. If the market bottom has happened, I’m not complaining. What if it’s a fakeout?
I’ve got four to five major equity positions on the verge of breakeven and two bond issues that have made medium to high double digit gains. I missed out on the whole GBP/JPY rally, but the recovery of AIG was nothing short of miraculous.
I do understand the positions that are recovering in my portfolio may not have been the best picks as there are countless stocks that have at least tripled in price since March 2009. The point is that I’m actually still in the game. If I had just been sitting on my hands and not adding to my positions, I wouldn’t be near recovery yet.
So, I did something right for once, but the implementation could have been much better.
I prepared myself while it seemed like there was nothing else to do. I’ve learned so much during this downtime and I’ve got a lot more to learn.
Most importantly, however, I do have to keep telling myself over and over one of Warren Buffett’s best trading maxims: “Be fearful when others are greedy. Be greedy when others are fearful.”
In practice, this means that if we’re averaging into positions, we need to ensure that we build up positions at the lowest price possible to minimise risk. We need to ensure that the largest part of our position is acquired at the lowest price and that the average price on our total position still enables us to profit (i.e. lower than 52 week high by a good margin so that when the 52 week high is tested, we’ll be able to sell if we so choose). We then need to sell at optimal levels – when others are so drawn into buying that logic clearly has taken a back seat.
If 2008 should teach us anything at all, it’s that it’s far better to err on the side of being too conservative rather than being too tolerant of risk.
So whilst I like the rally, I’m still going to continue moving my stops once a position moves in my favour. This is a strategy I’m going to continue to implement over the long term. And I’m hopefully going to find better and better ways of moving my stops.
If there’s anything we really need to master, I think it’s moving our stops. After all, we are only as smart as our stops.
Wednesday, August 5, 2009
I know... I know... after all they've done for me.
But the NFA regulations have me all apprehensive and concerned.
I'm thinking if my account becomes five or six figures in about a year, should I move my account elsewhere... to either Citi or DBFX where I'm guaranteed FDIC coverage?
The major long term opportunity here is for some of the larger spot forex brokers to step in and prove their innocence and compliance. They've got to be the ones initiating a change in the game. Trust is a major issue right now and they've got to actually do something about it practically pronto. FDIC coverage or even a comparable private insurance that beats FDIC would be a necessity. Don't turn to AIG though. LOL. Then, they've got to be all FINRA as well. In addition, they should offer the new CME e-Micro Currency Futures.
Or am I really as bimbo as the APRSAM (arrogant, pompous, rude super alpha male) thinks I am? Have I really been sold the sizzle and not the steak, which would mean that the brokers won't be doing anything until and unless the NFA forces them to?
I hope I won't have to cheat on my forex broker and move elsewhere, but at least my poor forex broker won't have to deal with my ongoing diva trading tantrums and stalking any more.
What the show organisers should have done was to host the event in an upscale hotel such as Bellagio or the Wynn and then place signage throughout the hotel to get visitors into the show with on-site registrations. If I were an exhibitor, I would be complaining, but I digress.
Nonetheless, I've attended a few good presentations, including Tim Morge, Kathy Lien, Boris Schlossberg, Todd Gordon, and James Chen, who turned out to also be surprisingly good. I missed out on Ed Ponsi due to the session overlaps and ended up attending two Tim Morge presentations.
I did achieve much of what I came here to do, which was:
1. learning more about how other traders trail their stops, which was my main objective. The Tim Morge and Kathy Lien & Boris Schlossberg sessions really helped here.
2. learning more about the new NFA regulations. When I stopped by their booth, it seems even their representative didn't know what was going on. So I'm going to have to do further research about this on my own.
3. learning more about trading frameworks that could potentially help me improve my trading. This I received from the Tim Morge and Todd Gordon presentations. I was surprised that Todd Gordon's Elliott Wave analysis actually helped. A lot of it is very time-consuming, but I learned a few rules that I can apply in my trading, which I'm going to start testing out. However, I am not going to deviate too much from my little black dress / little red dress strategy. What I am going to do is to use those principles to enhance my existing strategy.
4. secretly looking for a potential future boyfriend. This was a total disaster as it seems everyone's married or too young or too old. Whatever. Once I get rich, the tables will be turned. You know what they say about an heiress always being beautiful.
I did miss out on the recent GBP/JPY action though, but I'm expecting some more volatility and trading opportunities over the next two weeks, so I'm not worried.
The most unexpected thing was obviously the arrogant, pompous, rude super alpha male incident detailed below. In hindsight, that guy has me really ticked off and I'm now really looking forward to proving him wrong.
For anyone who didn't attend, they didn't miss out on much except for the beautiful weather and the great shopping.
Tuesday, August 4, 2009
His whole theory is that anyone who works for a broker is not profitable enough to trade independently and that is why they continue to work for a broker. Then, he referred us to ForexFactory.com and said that the real traders are there, not at the expo. He even told me that I've got a trading ego that's going to cost me tremendous tuition.
What hypocrisy! He indicated that his scalping strategy was yielding him 83% accuracy with 10 pip gains and 20 pip losses. Just why was he at the expo then? He explained himself by saying that he was visiting his broker.
Well, if he's really got the large account he says he's got, then why does he need to visit his broker rather than vice versa? And just what was his motive in intruding on our conversation? Moreover, where were his Hermes tie and Thomas Pink shirt?
If there's anything I hate, it is an arrogant, pompous, rude super alpha male. After getting really quite ticked off about the whole incident, I decided to stop allowing it to affect my state of mind. After attending all these sessions at the expo, I realised what I've been doing for the past 10 months is on the right path. I know this, no matter what anyone says. I've tested out my strategy and have consistently been trading it. I've managed to keep my losses to a minimum, but now need to let my profits run. Who is he to tell me that my strategy is not going to be successful?
We've got to do our own homework here and trust ourselves and our statistics above all else.
Having said that, I do rather like proving arrogant, pompous, rude super alpha males wrong.
Monday, August 3, 2009
Aside from his technical and money management style, what I really found very interesting was his consistency and his insistence on not chasing prices if your intended entry level no longer meets your initial risk:reward target. I've noticed this with the really serious traders. Brian Dolan definitely also has this quality. Simply put, it's about having your standards and basically adhering to those standards. Don't be afraid to do it.
It is now the second day in a row that I've had to get up at about 5:30 am Las Vegas time and I'm a total zombie, but attending the Tim Morge workshop was such a good decision. I really feel a lot more inspired and I even feel like I can tone down the bimbo factor of my trading with a bit of conscientious effort.
I am however going to skip the live trading event of the Expo, which is not hosted by Tim Morge anyway, and opt for a really good and leisurely breakfast instead. How serious am I about trading, right? But that part of the event doesn't seem worth my time, especially since Tim Morge had us looking at charts all day yesterday.
I suggest that anyone who hasn't heard of Tim Morge to check out his articles and videos on MoneyShow.com. He is definitely someone to learn from aside from Brian Dolan.
On my recent flight to Las Vegas I was delighted to find that British Airways automatically upgraded me to First Class! How lucky was I? I've been travelling with BA for about 5 years and never have I been upgraded. This made my ticket seem much less costly and more than made up for the 'cargo service at business class prices treatment' I received earlier on in the year. In fact, I have never been treated better by BA. I barely had to lift a finger throughout the entire journey and even had a rendezvous with 1999 vintage Bollinger La Grand Annee Champagne and a bit of caviar. I don't know wine very well, but the champagne had a bit of a creme brulee richness with just the right touch of acidity.
There is much more personal space and attention to detail in BA First Class compared with Business Class. I received an Anya Hindmarch amenities kit as well. However, I honestly don't know whether I would ever consider purchasing a future BA First Class ticket, which is approximately double the price of a Business ticket. Is it worth it? Possibly when I start to accumulate considerable wealth. Then again, if I do accumulate considerable wealth, I'd then be in the market for private jets hopefully.
My suite at the Wynn Encore is quite modern and comfortable. I really like the overall design concept of the suite from the modern furnishings to the swivel flatscreen TV. As far as practicality is concerned though, I prefer the marble bathrooms at the Palazzo a bit more as there is a vanity set, which the Encore lacks. Moreover, the lighting within the Encore suite bathroom seems to create a very dull and lifeless ambiance, which in turn downplays the luxury aspect of the materials - essentially making everything seem less immaculate. I was also expecting a Hansgrohe Axor Starck Shower at the least, but was instead greeted with a standard one. Another ultra important detail they seem to have missed out on was soundproofing. My neighbours are loud in an OMG TMI kind of way. I'll spare the details, but suffice to say that soundproofing would have been ideal. The perfect design would combine the Palazzo bathroom with the Encore bedroom and living room.
My verdict is that both British Airways First Class and the Wynn Encore are just slightly overrated.
In years past, experiential luxury has been something I devoted a lot of my budget to. I would now rather spend on tangible assets that will preferably appreciate in value. So, it's possible I have gotten older and wiser. But, it does not take away the pain of realising my entire holiday budget has skyrocketed due to some immensely diva + bimbo moves. I've really kind of outdone myself this time as far as running up bills is concerned.
How is it that - without even really intending to - my first shopping destination in Las Vegas ends up being Hermes? They just opened a new boutique at the Encore Esplanade. No matter how I try to avoid it, I always end up being totally captivated by Hermes.
For now, I'll enjoy my three-week holiday and save the bean counting for later.
Oh, there will be tons of reconciliation to attend to...
But I have a good feeling that what I've learned today at the Tim Morge workshop during the Las Vegas Forex & Options Trading Expo will help me recover my holiday budget fairly soon.