patrick.net

@E-man

I found the same thing with the Forex trading. The people who did ok, did ok. I expla ined it to my friend who is in forex trading as playing poker with a master player, and a table of idiots. If you can dodge the master player, you'll do ok. But if you end up going against him, you're dead. I figure most forex traders are small enough that they can skirt the master traders, while taking pennies from the idiots. The idiots lose to the big players regardless. I figure the same is somewhat true with day trading, or technical trading.

From what I've learned, but not yet practiced, is how to bail on a stock effectively, without getting too emotional about my losses. I've read that winning 1 out of 5 times is all it requires to do pretty well, but that means getting used to losing 4 times before picking a winner, which needs practice. I figure the only way to learn is to be with others who are doing similar investing, otherwise it's a massive uphill battle, with an expensive learning curve. All other techniques seem to rely on getting out of a stock, they have all kinds of great ways to get in, or know when to get in, but every technique has the same stop loss strategy, like you just stated here. Buy, put your stop loss in right away and let it go.

I agree it's a waste of time to often talk with the nay sayers. I agree we aren't going to see another housing bubble. We'll see another get rich quick scheme in the next couple of years, hopefully I know more now and can jump in/out of it! Back in 1998 I looked at the stock market and said this can't last, these numbers don't make sense. Then in about 2002, I said the same thing about housing. But I totally missed the momentum bubble, and the fact that I could have gone 3 safe years on both. What I find, is that I hone my skills on thinking about these investing strategies, and that does help me see things from different lights. It also helps me see "why" the herd is heading in a direction, and what it will likely need to see before it changes direction, which can be pretty useful information.

I'm going to look at some of the stocks you've mentioned. See what I can come up with for them. I dont think i have the patience for day trading, but 3-4 days holds, or few week holds would be "enjoyable", and thus a great learning experience as well.

I'm actually hoping for a good run into November, and then moving money to my wifes brazilian account. They are having elections down there, and losing lula. So I figure their currency is going to take a major hit during that time period, even though their fundementals are pretty strong. Hopefully I can make a house purchase down there before things come back in line. Their elections appear to have a couple of semi crazys up. Think about putting palin on one ticket, and say one of bushes daughters on the other ticket. They can't do anything too insane but the possibilities are endless.. it's going to spook the investors. I'm hoping I can jump in there, and get a great exchange rate for a purchase. The house will be kept for an investment, and long term. Eventually we might even use it our selves. If the economy doesn't recover, we'll have lots of strong usd's to live off of, if it does recover, we'll have a cheap house.

The warren buffet book is probably #2 on my favorite book list, withe #1 being stephen hawkings universe in a nut shell, and #3 being allen greenspans book.

The warren buffet stories are just funny. He would collect bottle cap tops from around vending machines to sort them based on favorite drinks, times of year, and collect other data points. He ran lots of small businesses when he was real young, including buying pinball machines and putting them in businesses and splitting the profits 50/50 with the owner, and 50/50 with the friend who would fix the machines. He talks about taking all the nickles out and splitting them down the center and telling the guy to pick which ever side he wanted, and why he did it. He discusses his foray into track gambling, and then into creating his own horse odds sheet and selling them. He talks about finger printing nuns, and recording license plate numbers in case the bank was ever robbed, he figured the robber would have to come down his street, and he would have all the plates for the cars that came by.. He is quite a character.

Very well put. I started practicing when I was in my early twenties, but managed to do more damage than good as well, but didn't lose everything. Luckly, it's still sitting around, it didn't fair too badly during 2008, but I managed to dump a lot more in 2008/2009, which helped.

I would agree that any kind of day trading or technical training requires work, and a different type of mentality. Books are interesting, but every book I've read pushes their strategy as the way to go, while showing how others are useless (which are coincidentally missed in the other books dealing with this strategy). In the end I've realized it comes down to practice like you said. Pick a strategy, and practice it if you want to try that. For me, I would like to keep track of 20-25 companies like you're saying and predict whats going on, to keep sharp and ensure I'm always on the right path eg green/yellow/red light mentality at the very least. However, without having some skin in, it's hard to really be sure you're practicing and not playing delusional tricks on yourself.

I fully agree on finding strong people to be around. It's never failed me. Others in different walks of life I know, have been pulled down by their peers, essentially doing exactly what you stated above. It's hard to explain alternatives to those people! I try because they're friends and they sometimes make some changes. I also know that for me to make some of these changes, like become more in tune with my investing, I'll need to change some of my priorities as well. Spending more time investing and less time worrying about nickels and dimes. I have way too much in personal accounts now to ignore my ignorance levels.

Even though many hate Jim Cramer, he has good ideas for the average person. As for telling you what to do, he's obviously not too useful, because people have learned to game his picks, and obviously he's large enough that anything he says distorts a pick for awhile. His books on his life are pretty interesting, he is a pretty decent writer and they are easy reads. I liked the one about his life, which really explains his TV personality pretty well. But beside that, he has good ideas, like you need to keep on top of your stock picks. You need to spend an hour a week at least going over them. You need about 5 of them, many more and you'll need to put in too much time and you'll stop doing it, or ignore a few of them to make life easier. You need a stock you love, or risky because you need something going crazy to really keep you into it. All great ideas. After you're seasoned and have your first big chunk in the bank, these rules are probably not what you need. But for the 20 year old, it's probably a great rule to go with. I wish I had done it back then, it would have been cheaper :)

Mind sharing some of your 20-25 stocks you watch? You shared some of your preferred shares picks, but I'm looking for some that behave semi "normally" so that I can start making some of my own predictions during earnings season and during the year. I'm going for about 10-15 stocks that are likely to move around a bit, so I don't get bored.

These last 2 years have been pretty good to me in the stock market, I figure we've got awhile longer to go, thus I'm picking stocks that will likely all go up, it's a matter of how much. Do I win small, average or big.

I've gone through several different investment strategies, and keep coming back to the brute simplicity of earnings and dividends. Especially after reading "Margin of Safety" by Seth Klarman and "The Intelligent Investor" by Warren Buffett's teacher Benjamin Graham. The Klarman book is good, but _wildly_ overpriced. I just happened to find someone to loan it to me.

Anyway, all I look at these days is a consistent record of good earnings, actually paid out as dividends, and low debt. That has worked reasonably well.

I agree about tech. They just never seem to pay a dividend. Microsoft shareholders had to actually organize and demand a dividend (shocking!) rather than just let Microsoft sit on a giant pile of cash forever.

It would be nice if more shareholders could get organized to force the company to work for shareholders rather than simply for management bonuses.

I know, dividends are double-taxed blah blah, but I invest in my 401k rollover, so the taxes are not really a consideration.

Thanks for the stocks! Obviously being in tech, I've been drawn to them over the years. I've known for a long time they aren't the best area to be in, even though they get a lot of attention. They were in my "comfort zone" though, this is going to be the year I leave that zone. My investments have a potential to augment my income by 40-50+% this year and I do okay salary wise. I should really be spending a lot more time handling these investments, penny wise, pound foolish.

This is one stock we should all be watching:
http://finance.yahoo.com/q?s=LULU

Unfortunately I didn't pay attention to it last year :( It's a killer clothing company, and every woman who gets conned into buying one piece, then drops 90% of their clothing budget into this company. Believe me, I've seen it repeated time after time. They're started to get larger and larger now, more celebs are wearing their clothing now too. If you doubt me, buy your wife/gf a piece and watch what happens. It might still be a good buy though.

You've obviously never given a woman lulu lemon clothing :) This isn't a crox/brand thing, this is just a line of clothing that gets bought because it's extremely comfortable, and lasts. The only reason I know this is because the company was based in Vancouver, and when we visited family they started pawning this stuff off on my wife about 6 years ago. Every time my wife went back, she would get more. Then all of a sudden an IPO and they're down here. Now every time I go to the gym, I see more and more of this being worn on a daily basis. Last year, I noticed almost no one wearing it, this year, I"ve noticed about 30% of the people wearing it. The women who do wear it, slowly change their habits to wearing this all the time.

I haven't bought into this stock because I really don't trust my analytical skills yet on reading balance sheets, sadly. I've had the security analysis book on my desk for awhile now, along with 3-4 other books. I've relied far too much in the past on what I knew of a stock and less on the low lying fundamentals, more on product line ups, and how well they're executing.

I'm not really sure where the fundamentals sit on this company, because it does have momentum, but it's also growing at insane rate.

I would tend to agree with you, and one reason I didn't invest in it. I looked at it and thought it had gone far too high in valuation already, even without digging into anything else.

The yoga side of things is where they get the women hooked. They make a killing off the fact that the women don't wear these items to yoga. I would normally agree that knockoffs would come, however every woman who has tried them says they fit so well! Others could copy this, but they don't seem to. If the "fad" gets large enough, I could see them easily holding onto this lead for a long long time and making a solid presence like nike. Just a name that isn't going away. It is slightly risky, there is a high premium. Without that premium, I would definitely jump on it, but you're right the 3B valuation is just out there.

I have another question. I'm using you guys for a lot of information here, and thanks!

Any sites you would recommend for finding interesting stocks? The sheer number of stocks out there has always been fairly intimidating to me, and so I've only stock with some of the basic, ignoring sectors I didn't understand and sticking mostly to tech. While it's done me ok, it's probably a dangerous place to leave myself in for the next 5-10 years.

I'm always bombarded with montley fools news letter, gurufocus news offerings, and many others. Are there any worth reading/using/paying for? Like any system, they cherry pick their wins to show great profits. Like any large scale system, it becomes ruined by the sheer number of people doing the lemming walk. Essentially the level I would love is exactly what you just posted on lulu. Balance sheet looks good, high premium, slow growth. Niche markets will likely fill in the gaps if they get large enough.

I was afraid you had far too many insider friends!

That is one reason I like tech, because that is where "my" insiders sit. I have a large holding with AMD, which has done !@#$ all for me for a long time. I held it forever it went up, but without reading the financials I didn't realize I should have sold :( Now I'm sitting on it, and waiting for a good push again. They have a major release coming out next year, and they're lining up wins left and right now with major competitors. When I called up Dell last, they pushed AMD on first, then after telling them I needed Intel, they pushed AMD again. I went to my managed hosting provider, and they're now pushing AMD, where as I couldn't get one AMD option with them before. The lineup they've got coming out looks very impressive, debt levels look ok now. And many more technical reasons. Anyways, I foresee about 18 months of potential growth for them. But that is all due to being fairly intimate with Intel, AMD, Nvidia, and the partners who resell their products. I was hoping to find an outside source for other companies!

The sheer number of stocks makes it fairly difficult to find and follow good ones. I'm hoping to investigate fully the list you gave me, because I figure that is probably better than whatever MSN is peddling for the day.

Gurufocus is fairly interesting, and I bought into C, when I saw Soros had taken a large position in it. Basically the same reason you went with DNDN. It's hard to tell if it will be a good bet or not. I'm going to look at other banks this month, and then look to construction for later in the year - as you pointed out, it will likely be the next to come out of the recession, so I would like to gain knowledge of that industry before that happens!

Fantastic!

Although it's 10-K's look dreadful, but getting better. The losses have been astronomical, and for so long. However, I believe that could be changing next year. It profitability and stock price are completely cyclical. Next year there is a completely new architecture + new fab process + fusion chips (GPU+CPU). The netbook market looks great, but very low profit. But those would be something like 1W dual core, 64bit cpus with a GPU onboard.

With the whole litigation with Intel over with now, it looks like they have a decent chance of making some good inroads. I noticed in other countries that Intel was used almost exclusively in small shops, where as it's more better than 50/50 here.

I suspect they are going to take a major trimming in stock value over the next couple of weeks. They're going to hurt a lot of stocks as well, but in the end they're going to be quite a value.

I'm just wondering if I should shed my citigroup for a few weeks and see where this all ends up.

@e-man,

I would avoid all drillers (offshore and even the ones that operates the lesser rigs) and probably upstream oil right now. There is already clear sign that instititions are lightening up, a mass exit among all drillers including the big four (RIG, noble, Diamond and forgot the other one) There are signs that the big money wants to exit these positions as fast as possible as orderly as possible. I feel there is a liklihood that institutions would not buy at support level thus we may see it penetrated. Insitutions generally take a few months to lighten up and will not come back for at least six months thereafter. I would wait for things to develop and believe opportunity is further down the road, not right now.

Hint,notice that no one is downgrading any oil, gas, drilling industry right now, when clearly the situation warrants downgrading. I see mass exiting for awhile. IMO. On the other hand, wait for the downgrades to come, that is a pretty good sign the institutions will load up thereafter. (I know it's counter intuative, but trust me on this one, this is how institution often buy millions of share at a time. Big $$ buys after downgrades and sell after upgrades in these kind of situations. It takes big $$ to move stock price of these companies so these are institution driven)

Dendreon was a ten bagger in three years. I was in Atlanta one night and I got a phone call that certain institution bought x amount. This was an institution that knew what they were doing, when provenge looked bleaked, they forsaw what was eventually coming, I just let the money ride hoping provenge will succeed and it did. I knew someone way smarter than me with way more information resource did all the homework already. It doesn't make me rich but it does pay for my next car. now Im trying to figure out how much that drug is worth and see where I should exit.

@pkennedy, I'm still looking into AMD. Preliminary I do not like AMD as an investment stock. They make too little money when times are good, Whatever money they make during good time are spent huge investment in capital and research. When times are bad they fall into debt and stock dilution. This is a classic company that does nothing to the shareholder but sustain huge paycheck to executive managers and employees. In other words, good to work for but bad to invest in. Just look at how much the shares have been diluted the last 20 years and you realized this is not an investor friendly company. Having said that, the company is a cyclical play so it would rise along with the semiconductor industry, but I suspect you can do better than owning AMD.

Actually, the only thing that AMD is good at is growing the capital account consistently, that is just a terrible and long history of dilution and I want no part of it. In a nutshell, AMD can double their market cap, but if they also dilute you in half as well, you're no better off as an investor. Essentially, this is pretty much the history of AMD thus far. I personally despise these sort of companies as a shareholder.

Caveat, My opinion only.

@sface
Yes I want out of it, I have to take a loss on it to get out, but I believe they are in a decent cyclical pattern right now, with a good number of products lined up to bring the stock up more than others. It's been a poor investment, and I'm looking for a decent exit strategy. I am decently confident that it'll raise over the course of the year, less confident on my ability to find other good stocks.

@e-man
What exactly tells you an institution is bailing in a chart?

@sf/e-man
GS, what are you takes on this?
BP,, the drillers might be exiting, but what about BP? Seems like a good inflation company to be in, as OIL will follow inflation for sure. As the economy recovers, I suspect oil to become more expensive as well. Zephyr believes inflation is going to come into play, as the only real method to bring down the deficit, as it's at a high enough point that tax gains during the good times won't be enough, and tax increases won't be enough.

@E-man
Always good to bounce ideas off people!

My brother in law is a trader at GS, I'll give him a call to see what he thinks about the internal workings of the firm currently. I already have enough shares of GS already. Looking from the outside, this security fraud things is quite a stretch (fraud is quite a hurdle), never-the-less, it is bad publicity to the commoners. To the rich clients, they love Goldman's so that is all that matters in the end and it will be business as usual.

The thing about the market is things change every day, every week. I rather generalize things than make it too specific.

For oil, I recommend PTR and PBR. Buffet once owned PTR but had to divest due to bad publicity only, I'll pick up where he left off.

@e-man
Thanks for all those graphs!

I'm sort of a bumbling gambler, so semi rational gambling sounds like a step in the right direction!

Hence, why I want to get away from tech which is far too much gambling and get into more value investing. My hindsite is awesome.. I fully understand my mistakes afterwords..

PBR is one that I want to get into, but also one that worries me a little bit. I'm going to ask my wife a bit about this one, and perhaps her father. He is a big pusher of PBR as well.

It's a government owned entity, setting prices, etc. New found Oil but no new found "riches for the poor" is probably going to be a political band stand in this upcoming election. With promises to share the wealth with the poor. I'm not positive on this, but it is something I could see happening. Whether they would do anything, is unknown, but Lula won be making promises and payments to the poor. The next person up is likely to continue with those promises. I'm betting the conservative party won't stand behind this, but the workers party could push something like this.

Btw, turmoil like this is what I'm hoping for during these elections. :) Brazil has enough multi nationals + enough growth for the last decade that they won't give it up easily, but fear will be strong during these elections due to workers party members promising the world like lula did. Their political system has run offs, so if one party doesn't get a clear majority, then minority parties are kicked out and new voting happens with the new subset for the president. So we could get several rounds of this.

hmmm

How about answ? This one I quickly looked at once. Some one at my office pointed it out, and we were discussing it. It's small cap with limited volume. I'm not sure if it's track record for sales is going to continue, but it's a massive site on the internet according to quatcast. It's ranked #15 right now. Market cap of only 65M. p/s of 3.37.

I'm not sure if it will continue to make money, but it has so much traffic behind it, that they only need to come up with a small improvement in their business model to generate significant income.

It's ok, not good not terrible. I don't like the 6% convertable (around 4-6 dollars) preferred's A and B hanging around as a common shareholder. That financing last year (not great timing) improved their balance sheet but the cost was too great. It will impair the value of the company signifcantly if someone else wants to buy it.

However, the variable cost is so low that growing the base and monetizing the user base would flow right into cash. The key is whether that could be executed and will be worth a lot of money for potential suitors. I have used answer.com to primarily seek/ask questions about fixing cars but the potential is limited as well. I'll wait until Q1 comes out to see where they are at.

The site im really bullish on is linkedin.com. It is going to destroy monster international and whatever yahoo, google and MSN has as equilvalant, someone will pay big bucks to acquire that one. That is a sure IPO buy for me.

Let's throw another similar one out there, thoughts on loop?

That is funny, because i've ended up on answers for car repair issues as well!

Interesting, I'm going to look over their financials a bit more to pin point your concerns and see if I can see them (knowing they're there... see if I can even get it in hindsight...)

linkedin is interesting. It's very large internationally, almost everyone I know over seas uses it. It's highly used for consults I've found. All other job engines are just full of spam unfortunately. I've never used it for finding candidates, or for looking for positions, but I keep in touch with people there, who I would rather not keep in contact with on facebook :) I've been spammed by recruiters, trying to get me to introduce them to management, other than that I haven't really figured out to use it for anything beneficial for myself.

loopnet.com? Are you looking at this one, I've never heard of them. Quantcast shows they are heavily skewed asian and 100K earners. Traffic has been flat for the last 2-3 years, actually it's dipped by about 15%.

Traffic is low enough that hardware costs should be minimal, depending on the quality of their engineers it should be less than 10K/month. Probably 1 engineer to maintain it, maybe 2-3 if they're really sloppy. I'm guessing that programmers aren't a major expense either, as the site probably doesn't change that much.

Income looks good, 65M means they're making doing something correctly. I'm not exactly sure what they are selling. PE seems high? Year over year it doesn't look like much growth, maybe even a small decline due to higher expenses? 65M, 75M 62M?

Ok, that would have totally gone over my head. I would never have seen that red flag.

I had a roommate that had a PHD in pharmacology, and basically drug making seemed like a bad investment. At best it takes about 12-14 years to get a drug out the door, that leaves a 6-8 years to recoup what is essentially 1B in R&D. If they're stalled for several years, that eats into the 6-8 window. I own a bad drug company, bought high, holding it still. I figure I'll hold it until I need a tax reason to sell - otherwise it's not worth selling, the money is so marginal. Ugh!

Anything else interesting to look into?

If it's such a great product, one of the big firms would swoop in and grab it for pennies. If all they need to do is drop a bit of money into it to grease the wheels..

I used to watch the news with my friend, and essentially news advertising = drug companies. Every fancy looking drug that came up, he would say "so-and-so drug" essentially once he decoded what was in these ads they were saying "cure aids with asprin.. "

We're really scraping the bottom of the barrel now with drug manufacturing (actually drug discovery). We're taking what we have and trying to find new uses for it, new drugs are far and few between. I'm pretty skeptical on all drug companies now... Doing new studies takes time, if it requires "changes" good luck.

It seems that they just need strong management at this point. Clinical trials are expensive, but hundreds of millions expensive? for a final stage? Time consuming, yes, but that expensive? That seems high. If they pare the company down, then the burn rate wouldn't be so bad. I don't know why the fda is concerned, but I would assume it's in one particular area not a "umm not good enough! do it all over!" type of failure.

Ugh, I'm always holding stocks when I should be selling. I have to learn to sell more efficiently!

Now that this sell off has been going on for a few days, I'm starting to wonder if we're heading down for a correction or if it's going to tapper off.

Even generic can be expensive. I learned that from my room mate too! Apparently there is a lot to be said about knowing what is in a cake, and actually putting the ingredients in the proper order and baking/cooling at each step, etc. Some are easy, some are extremely complex to make, even when you know what to copy. Although, I'm betting generics will fair very well over the coming decades.

Personally, I have a gut feeling that this downturn will last quite a white.

Then again, I had that same feeling before it ran up so much in the last year. I was very wrong.

On the third hand, a lower market is just a buying opportunity for solid dividend-paying stocks, most of which seem to be drug companies.

Buying opportunity is nice, I would rather have my money out, so I can have more fun during a buying opportunity though...

Hm I asked Zephyr for some places for more balanced information, and he gave me www.rtable.net, have you guys read this site before? It's like patrick.net, but for economics. Having all that news in one place, so easily to sort through is nice! It seems to be linking to mostly quality articles as far as I can tell.

Do either of you follow european politics?

I'm just wondering how the changes in germany might effect the euro. I'm wondering if the other side might try and sabotage the other side to gain seats at a huge expense to the euro.

Thanks for the updates guys, it's one thing to read about the market, it's another to try and figure it out yourself and have some feed back.

I had the same impression, that a few things had lined up, greece/germany/euro, bp, gs fraud news, and people were just looking for any reason to bail. I also feel that we might trade within a range this year. A couple of the rtrable.net articles said we were at around our 100 year average for stocks right now, and with this market i don't see us breaking through those averages that easily either. I believe they quoted 20:1 for the 100 year average, with us being around 20.3 or 19.6? with bubbles usually peaking around 23:1.

I don't see any reason to plummet, but I dont see any reason to make giant leaps forward either.

Kennedy,

This reminds me of the Asian contagion in 1997. A few months before that contagion I had moved to all cash because I had got laid off. Then when I got another job it was right when the contagion hit and I went all in. It was a huge windfall. I am open minded that it is the beginning of a contagion like with Austrian debt default in 1931, but that took another almost two years to unravel to our shores. For the meanwhile there's some similarities (not the same thing as "it's the same situation all over again") to overreaction to Greek sovereign debt crisis.

Well looks like we're heading up again for awhile. With 1T pumped into Europe, we shouldn't see too much instability over there.

That leaves BP, which isn't getting better, but isn't getting any worse either. http://news.bbc.co.uk/2/hi/uk_news/magazine/8664684.stm

GS could cause problems with the banking side. In hind site, I ended up selling my C at the lows! Sigh. Not a huge loss there though, and probably a reasonable selling point anyways. I sold it about an hour before the 1K dip on thursday, I didn't see any good news coming out and things were heading down. Is there something I should have considered before selling then? Or just waited things out?

I agree with you SF. From what I've been able to gather, things appear fairly evenly priced. I was hoping last thursday that we might be entering into value territory.

That being said, I was just starting to get into things, and was hoping to continue learning a bit more. Now it's basically 'on hold' it seems :(

What examples do you have of high yield bonds? What are you looking at? What do you generally look at, and what do you avoid?
I assume bonds/preferred stock are fairly similar in terms of investing purposes? Is there a clear differentiator, other than bonds have a pay out date?

Btw, I'm glad I was able to "agree" with you before you posted. And I also appreciate that my ideas aren't insane.

Whenever I go looking for more indepth information on what is happening, I just get one sided biased media looking to drum up readers and fanatics. So it's nice to see you saying you think everything is fairly valued, that it's likely to go side ways for awhile.

What I couldn't figure out what to do, is where to invest. So your comments about switching to high yield bonds makes sense. Granted I've never looked at them before, so I have no idea how to value, judge them.

Btw, I received an amazon kindle from my wife last week. I used to think "waste of money, use a laptop, or buy a book", now I think, what a fantastic device this is. The screen is simply amazing, and if you do a lot of book buying, reading, especially lugging around books... this is the device for you guys!

While I believe the economy is stable, which is itself a recovery from falling, it seems that there are many problems afoot. I don't see us tanking, but I also don't see where our investment money is going to go.

From what I'm reading now, is that the Euro has gotten a big bucket of money dumped into a leaking bucket. The leak isn't being fixed, and the fix could be painful yet unlikely to be addressed. Which isn't too surprising. Cuts will likely lead to a deeper recession in greece, which will require further cuts. Those cuts will chew into Germanys exporting business, which will hurt them. Like wise, spain/portugal will likely have similar issues, causing further damage to France/Germany and other stable EU nations.

China will be hurt by a pull back in Europe. China also has a few of it's own issues, including their own housing bubble.

Every day we dump more money into the market, which needs investing. For the most part, housing doesn't seem to be all that safe of a bet - while individuals can find good deals, buying in bulk might not yield those same consistent deals.

The stock market looks fairly valued. So where are we likely to keep dumping all our investment money? It seems that the stock market almost has to go up, with competition from investors to find places to put their money.

I'm kind of hoping for a stock pullback, to buy in. I'm sitting on cash now, and I'm not used to that :D I should learn to do it more often though! I like the idea of bonds until something haywire comes along to knock things into gear, either up, or down. I'll ride the market further up, if it starts heading in that direction, or buy in after a fall. What kind of time frames do you think we're looking at, for anything "new" to happen?

What "new" thing is building that might be a cause for concern/jubilation?

I have another question regarding bonds.

How do you purchase those, I think you mentioned you used tdameritrade, which I use as well. I tried doing some preliminary searches on google for bonds, but couldn't find anything useful. I searched for bonds on ameritrade using the names above, a few symbols from those companies, but nothing showed up. Is there an "easy" way to sort through the offerings? Are they essentially all unique, due to terms?

I'm going to keep looking, I thought they would be pretty easy to find, and found it odd that they weren't just prominently displayed somewhere!

pkennedy,

with these you want to use CUSIP # so there is no confusion. I get a report listing thousands of bonds from my firm so I never have trouble finding them.

In TDA, go to dropdown trade > Bonds & CD's and there is a variety of search method including name, CUSIP, rates, maturity etc. I think you can download it on the spreadsheet so it is easier to review.

For example,

METLIFE INC CUSIP: 59156RAT5
7.717% 02/15/2019 non-callable

Coupon & Yield
Coupon 7.717 Pay Months Feb,Aug Current Yield 6.500
Frequency Semi-Annual First Coupon 08-15-2009 Yield to Maturity 5.040
Yield to Worst N/A

Offer & Pricing Information
Quantity 150 Price 118.726 Principal $11,872.60
Min. Qty 10 Settlement Date 05-18-2010 Accrued Interest $199.36
Total Cost $12,071.96

This is a 7.717% bond so it will pay 772 in annual interest (assume 10 units) paid semi-annually. It will cost 11873 (price is 118.73% to reflect bond premium) and 199 in banked interest (buying the three months accrued from previous owner), effective yield is 6.5%. The premium is as a result of recent run-up in bond price. yield and premium has an inverse relationship. In essense, when yields go down, price go up and vice versa. Bonds are puchased in 1K increments. I bought 10 of these Tuesday for a total cost of
11,985.

go to investinginbonds.com to learn more.

Ah thanks.

I got to the CUSIP# and there was a search functionality, but I wasn't able to come up with anything! I thought it might more resemble options pricing and/or naming.

1K increments is handy, I was wondering how they were priced as well, and paying the accrued interest makes sense as well. That pretty much sums up everything I was wondering about.

I'm a messy investor. Investing without enough knowledge and dangerous :) I'm very good at savings, and I'm very value orientated, vs super deal. Super deals are generally priced that way for a reason, I like to get value and get a good price on things. I also min/max my living standards. If i'm not getting the best, I'll often buy the worst and see if I like it, if I do, I'll probably end up with the best next time. Investing, I spent too much time reading crap I didn't need to read. I should have been value investing for the last decade. Ah well, live and learn. I'm still making mistakes, but taking in everything you guys have said and others! I'm currently waiting for the market to make a move somewhere. I think it's going to head back down again, just because of momentum. I don't think any massive crash, just a drop, and then back on up. I'll see if I can figure out this dip and try and buy in as it's returning.

As for the housing deals, you're basically having this guy find a house for a 30% discount, then flipping it and paying him a 30% commission? Will he resell it, or do you need to introduce realtors in there again? Are you planning on renting them out? Even at 500K it seems like you would need some hefty rent to make it worth while.

E-Man,

In the end it is about risk vs. reward. What is the reward for the dow 15% to bring to 12.500. what is the downside, 9800 or 10%? In retrospect, I currently rather take 7% bonds. Bonds have been flying off the shelfs lately and is reflected on the yields. I may consider selling bonds and buy back stocks if Dow can break 11K and we have more encouraging economic news or bonds yields are going up.

Investment strategy is pretty flexible. I was very agressive early in my life, but I had a lot less money and no family to deal with. I have a lot more to play with now, including taking about 200K from HELOC alone. a 10% return adds up to a median salary of most people. I am working hard to add to the base yet protect it at the same time. Also, I need to protect my spouse' $$ and my kids $$. In my field, you can make money for 12 straight quarters, lose money on one quarter and nobody remebers the good work the other 12.

We cannot count on having good earned income forever. Who knows, we survived two down cycle and there's no gurantee we can survive two more or desire to survive. I was fortunate to start my career when all it takes was being able to breath, now these 23 year old coming in the door have incredible upside potential and will be harden even more over time. It'll be nice to be able to live off of working capital and not worry about working, financial independence if you will.

I was wiped out in the stock market the first time, fortunately it was just chump change then and the return on education investment is well worth it. I left hundreds of thousand in home equity in 2006, on secondary home and that is a pretty costly mistake as well. But mistakes make you wiser, ignorance doesn't.

I was thinking about buying a house in the Sacramento area, but that would make it a fourth home and decided that it was not worth it from a time perspective, not financial perspective. Those 8% yield are an awful lot of work and it is just too darned illiquid right now.

In this forum, you see a lot of anger towards banker, realtors and whatnot and you see all kinds of cynacalism toward them. To me, you want bankers to be your friend, you want realtors to be your friend, etc. It's not hard to figure out

I'm halfway between sface and you eman. I would like to be where sface is play a little more conservatively, but I'm also looking at these coming 3-4 years as possible good money makers and possible a good chance to buy and sell a couple of times.

I agree with your assessment of the ups and downs. Since we're a fairly valued market right now, the upside seems to be growth and/or momentum bubble. Downside is negative news and possible a dip in the recovery. I would like to play both sides, but playing one side safely is probably going to net me more, as I'm more likely to lose on both sides :) but as Warren Buffet said, buying a good value stock when the whole market is down is much easier than buying an excellent value stock when it's up. So waiting for a dip might be easier for me than trying to time the top.

I'm not sure about your returns though sface, I'm guessing your downside and upside are much greater. The market might go to 12500 as you said, but will it take a year? More likely it's going to jump up there with a nice run up, giving a better return within a year, at which point 15% gains will be compared with your 4% gain. I think the downside is much greater threat though. Too much bad news is likely to come out in the coming months that will push down consumer sentiment. The difference is, it will be single failure points, perhaps a couple of banks, or a construction company, it won't be 2-3 full industries blowing up at the same time, causing havok. But sentiment will be negative for awhile.

I'm wondering, if the market goes down, won't people bail on your bonds, making it harder to get out? You'll make say 4% but the under lying value will crumbling because people won't be offering as much, once the market tanks. Or is that when people start buying bonds (eg at the wrong time)?

As for real estate agents and other "frowned" upon professions, people are on one side demanding the best results, and on the other crying foul when they find out how they're getting those results. It's best to play with the winners, than with the losers though... so I'm going to stick around the bankers!