What's Up With The Animal Print Trend?

The market has me slightly weepy, so I'm changing the topic.

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?

Why?

Light At the End of the Tunnel...!

Finally...? Job Vacancies Jump 5% In August...


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53% of Employers Looking to Hire...

Trust Fund Babies Are So Lucky...

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.

Time Is Critical...

I've wasted a lot of time this year. Trying to be more selective, I've cut down my trading a lot, which means that every position I still hold becomes much more important. Every time I make a critical mistake like what I did with C and AIG, I'll be undermining my annual profitability.

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.

Last Week's Trading Was A Disaster...

Not only did I let go of C at precisely the wrong time, I ended up doing the same with AIG. I believed in C more than AIG, but given my lack of conviction on where the market is actually headed, I had to make a choice and unfortunately, I made the wrong one. LOL. At a cost. COL. That's crying out loud.

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.

The Karma of Trading

I have been pondering the subject of karma in trading more often ever since I've been confronted with the Colossal Failure scenarios mentioned below (i.e. Finlay, Ambac, Metaldyne, et al).

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.

What Did I See In ABK & Finlay?

So just what did I see in the Ambac and Finlay bonds I bought? In hindsight, buying these bonds appears to have been an AAA rated bimbo move. However, after purchasing these bonds, I was able to collect about a year's worth of interest.

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 Hate AIG!

This can't be real. +$10 today? That's up 28% in one day and I did inadvertently bump into a winner for once, but unfortunately let it go.

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.

AIG: Additional Salt On the Wound...

AIG made a new high today... +$2 from the price I got out.

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.

I Apologise, ABK!

So apparently the Ambac bond issue that I own (CUSIP 023139AF5) has a very special term included. Ambac can apparently defer payment for up to ten (10) years without triggering technical default.

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...