Wave Chasing

I should be finishing a mid-term essay exam. If I am typing this, then I am obviously not finishing the exam. (Bonus: It’s for a class that will likely never do me any good, and I should have simply audited it.)

Instead of writing the exam, I keep thinking about the new fridge, having to clean out under the sink for the water line for that fridge, how to increase my Avon sales (did get a new online order today, woot!) why the hell I seem to have no ability to monetize the internet (please, click something!), wondering why the county isn’t accepting applications for substitutes until August 23rd (wouldn’t you want to have them lined up a touch sooner?) and generally thinking things like I should have just installed the bathroom in the basement 5 years ago instead of putting it away and watching the crash eat it. At least I’d have a bathroom in the basement.

More than anything, I just don’t want to have to go back into accounting and finance just to make a living. It was so wrong for me, and I am so NOT cut out for corporate America.

On the upside, my inflows have kicked up to $3.68 a day with the new sale.

OK, time to get undistracted and go finish this damned exam before I lose another 10 points for not getting it finished.

Hard to reconcile the market not liking the AIG bridge loan and then LOVING the no-shorts-in-London rules and the possibility of an RTC solution not 24 hours later. It’s all government intervention on way or another.

Granted, a lot of it was fueled by short covering, but I also don’t have a problem with some of these shorts getting shaken out of the market. I do not have a problem with shorting stocks in general. However, I do think naked shorting is terrible and I do believe that there are those out there that are driving stocks and companies to their death with shorting & rumor-mongering.

The biggest test of today’s rally will be if it holds tomorrow.

While I am not the biggest fan of the government getting in and mucking around with things, I recognize the need for rational and reasonable regulation. The problem is, most regulations seem to only come about in a panic and don’t end up really doing much good. To me, SOX is a good example – while it’s done a great job increasing anti-ulcer medications for accountants, it certainly hasn’t prevented where we are today.

So, I am sure that we’re going to see a bunch of new rules and regs coming out of this – what I HOPE is that they are short-term to give the government the time to rationally and calmly come up with permanent regulations that will actually be effective.

Opened: 3 GTrades picks, 2 long, 1 short, all with protective puts/calls in place. Downside limits ranging from 2.29% to 3.56%

Month to Date:
My ports: -10.65%
Brokerage: -9.32%
BBE Overall: -10.23%
S&P -6.77%
% of Trading Targets reached: -317.22%
I’m screwed ratio: 48.4 to 4.6
Long to Cash %s: 110.80% to -10.80%

At least that’s what I keep hearing – that all the reporting of the various rumors and news surrounding the ABK bailout is what has caused the volatility in the markets.

I don’t know about anyone else, but I can’t go along with the cries of “irresponsible journalism!” that are being bandied about.  Rumors abound and especially with the current market conditions – personally, I don’t think I have heard any rumors reported as hard fact.  Rumors have been presented as that – rumors.

Markets run on information – and information changes fast and furiously.  If you can’t deal with that, then you probably shouldn’t be active in the markets and instead stick with index funds or mutual funds.

There were many times in other jobs that I hated Sunday evenings.  That, “Oh jeez, do I HAVE to go back to work in tomorrow??”

It’s nice to have that change.  Sunday nights I pop up the futures for the US markets, take a look at the Asian markets and generally look forward to Monday morning.

Very nice.

Today the President and Treasury Secretary held press conferences talking about what steps are going to be taken to keep people in their homes. Rate freezes, refinancing, etc. As someone who has always paid her bills on time and never had a mortgage that was bigger than she could afford, this annoys me.

Don’t misunderstand me – the last thing I want is for a family to end up out on the street. I am not that much of a heartless bitch. And having recently gone through the fun and games of selling a home in a crap market, I do understand that there are problems out there. But this whole mess does leave me with a lot of questions.

Whatever happened to the 28/36% rule? The last time I refinanced (2003), that seemed to have gone out the window. The guideline was that your prinicpal and interest payments should be no more than 28% of your gross income, and principal, interest, taxes and insurance should be no more than 36% of your gross income. If you were looking at ARM’s, you should be basing the calculations on the max/capped rate you might encounter over the course of the loan. The only time you should only consider the teaser rate was if you were CERTAIN you would be selling the home before the rates reset. And that was how I evaluated my options with ARM’s and fixed rate loans when I refinanced. (FTR, went with a 30 year fixed.)

When did that all change? They were good rules and reasonable rules, and I know I never felt stifled by them. (And I was hardly making a ton of money when I bought my townhouse or when I refinanced it.)

If I still had a mortgage, I would be in no way, shape or form eligible for any type of relief. If I had an ARM, I would have only gotten a mortgage of a size that I could still afford when it reset.

The time has come to get those rules back as the norm. Homeownership CAN be something that everyone can strive for. But maybe we need to dump this idea that everyone is entitled to a $500K starter home. Start freaking small like your parents did. There is no reason that you NEED to be in a gated community for your first house. Tough it out in an apartment for a while and save up a downpayment. Pay your bills on time. Don’t get in over your head with the credit cards. Don’t buy more of a house than you can afford.

Simple stuff, really. Why do we always seem to abandon the simple stuff?

I hear people complaining that the help being offered to homeowners is just a bailout for the rich who are in the stock market. (Yes, I have actually heard that.) Personally, I am taking the positive pin action as my reward for not getting myself in over my head in the first place.

Gotta love the early close. Well, if it’s like today and we’re up 1.7% on the S&P and 1.42% on the Dow.

Don’t know about you, but I’m celebrating “Buy Nothing Day“. OK, not really, my brother & I are passing on our traditional Black Friday lunch & window shopping cause we’re both tired, it’s really cold out and since Christmas is going to be all travel, there’s not much actual shopping to be done between now and the holiday.

So, if nothing else, this is a good time to think about long term. Though I trade, I still have to think long term. It’s not like I’ll be trading forever, and I need to think about where I want my long term equities so I don’t have to think about them too much. I don’t mean only look at my brokerage accounts once a quarter, but where I am not having to constantly re-evaluate things.

The first challenge is deciding exactly what is long term money vs. trading capital.

I have one big chunk of long term money that is managed by my broker. It’s doing well enough, beating the S&P for the year and all that. I still can’t decide if I like it or not. I don’t *dislike* it, and I’m not uncomfortable with it by any means, but what can I say – I like control. But, that is long term money.

Retirement accounts? Somewhat harder call. Yes, it’s long term by it’s very nature, but I also trade in those accounts. Should I be trading in those accounts? Well, there is the tax advantage, which is a plus. But, it would be bad to piss away my retirement on a bunch of bad trades.

Having given it quite a bit of thought of late, I’ve come up with a rough calculation of what my long term money is. Total assets less the brokerage money, less the profits from the townhouse sale, less required cash/fixed income = long term money. As a result, profits get rolled into long term, I’ll be building a stable long term base and as that port grows, it’s all good.  Any additional income from any source would be split between long term and trading capital.
The other big question is – where to put that long term money??

My long term holdings (other than the managed money at the brokerage) are in ETF’s. Oh so sexy! At the present time, it’s SPY, DIA & QQQQ. I know that there is a lot of overlap between SPY and DIA, but I like the monthly dividend on the DIA. I am thinking about adding one more issue to the long term stuff when the next “buy for long term” window comes around. It’s not an ETF, but in my mind it might as well be – and that is BRK.B. (That’s why it’s now in the Lazy Port – trying to get a feel on price movement on it.) Sure, I’ll probably be only buying a share or two at a time, but Warren Buffet is obviously doing something right, and I’m hard pressed to try and argue with the man. The allocation I am aiming for is 10% in DIA & QQQQ, 55% in SPY and 25% in BRK.B. No buying all at once – scaling in, and only after 3 down days.

Like I said, I’ve been giving the long term picture a lot of thought, so none of this is a snap revelation by any means, but it feels good to have a firmer handle on the long term plan.

From what I’ve seen, people either love Jim Cramer or hate him. There doesn’t seem to be much in between.

I like the guy. I think he’s smart. I enjoy his show. I highly recommend his book, Confessions Of A Street Addict.

I don’t use a lot of his plays off Mad Money, as they’re longer term and I go short term, it’s just how I operate. I do use his Action Alerts Plus service and am happy with the returns. Some picks are great, some are dogs. That’s simply how it works. You aren’t going to get a winner out of every trade. (It’s the case with all the research/pick services I use – some trades are great, some suck.)

What I take great exception to is when the Cramer bashers come out to play, they make an assumption that everyone who likes him and pays attention to his analysis just blindly follows him.

I do my own research. I have multiple sources of information that I use. I make my own decisions. I don’t always agree with Jim Cramer. I don’t buy every stock that comes out of his mouth. I think if Cramer’s critics could actually sit down and speak with the people who do follow his show, they would discover that these are people who do not just follow along with everything he says and do not just buy whatever stock he mentions. These are folks that do research, make their own decisions, and take responsibility for their own trades.

In the Q&A section over on Stockpickr.com there are SO many really good questions by folks who ARE doing their own research and doing everything they can to make informed decisions. You can tell who it is that has decided to just jump in headfirst without looking, as they’re the ones that become screaming mimi’s saying that Cramer screwed them over. However, the good questions far outnumber the idiots looking to blame someone. (There is one persistent troll, but we can’t figure out exactly what his problem is, so I can’t count him in either camp – he’s just disturbed.)

So, to the Cramer critics out there – start getting in touch with real people and get the real story.

Yeah, had one of those “I am a moron” moments this evening.

I’ve been trying to avoid going into pattern day trading status.  Why?  Because I’d managed to completely misinterpret it – every time I read it, I kept thinking it would make it more difficult to trade, but it actually wouldn’t.  I meet the equity requirements on it, and rarely use margin anymore, other than using it in lieu of restricted cash in the other accounts.

So, I guess it’s not really an issue after all.  Just gotta keep an eye on the IRA accounts, cause they can’t go margin, which is a requirement.

I’ve been thinking about how I’ve been setting my targets and measuring my progress. At the moment, it’s based on YTD results and basically I’m attempting to “make up” for prior bad months. This makes me wonder if I am overreaching on some of my targets. This is the first full year I’ve been trading, and yes, I’ve made some errors along the way, but with each error, I get better.

The timing of these musings is a good one – given that we’re right at quarter end, I think that for Q4 I am going to base my targets on the Q4 performance only and leave the first 3 quarters behind. It wouldn’t be that I am just sweeping those results under the rug, just more staying in the present so to speak. So, if I’m shooting for a 30% annualized return, I’m not going to muck around with trying to make up for Q1-3, just shoot for a 30% annualized return in Q4. And if I hit it and/or go above it, trading ceases.

Had I used this strategy all year, I probably would have missed out on a lot of the July pain.

I’ll still be doing the pick service report card on YTD numbers, cause that spreadsheet hooks into another calculation, and I don’t want to have to reinvent the wheel on that one. It will only require a few minor adjustments in my main calculations. I think this could work better for me on many fronts. So, I guess I have my project for the weekend getting all everything switched over to QTD calculations. Nice that Q3 ended on a Friday, isn’t it?

I’d also considered only working on a MTD basis, but that seems too narrow. I realize the daily postings show MTD progress, but those are just “how things have changed over the course of the month” and do not factor into how my targets are calculated – this change will be on how I calculate my targets and if/when I stop trading for the quarter, as well as for comparisons against my broker & SPY on a QTD basis. Also, average hold times will be based on QTD trades, not on YTD, which is important as my hold strategy has changed over time and I don’t feel that it is fully being taken into account.

The only wrench I see getting thrown into things this quarter is the sale of my townhouse. That influx of cash is going to push down my returns, but there are much worse reasons to have returns go south.

And hopefully we’ll have a big honkin’ up day to start off the new quarter.

ETA:  And yes, there is the mental aspect of starting off with a clean slate quarterly vs annually that has a lot of appeal.

We’ve got roughly 20 minutes until the Fed announcement.

I can’t help but have this sick feeling in the pit of my stomach that they’re watching the tape today and going, “Well, hell, things are up, why should we cut rates?”

At least my 2 div plays I opened yesterday worked out nicely and have already been closed.