Put me down on the ‘ambassador’ list. How can we give credible hope to the bottom billion? Alliance of Compassion & Enlightened Self Interest. Watch this until the end, think hard about the Nokia advertisement at the end, and have a good weekend!
Archive for May, 2008
Alliance of Compassion & Enlightened Self Interest
Saturday, May 31st, 2008How I Run Money & My Current Watchlist
Friday, May 30th, 2008Mad Hatter wrote a post and Ross has covestor. I know my friend Thiago is more informed than I, with a better memory, but a bit of a cowboy, and Howard likes to see all time highs and good price action, and Joe told me a while back that he reads and buys quality. Any time any of them say they are buying something I get a better picture of what that means, how much work they’ve done, etc. Its useful, to me at least…sooo…here’s my story:
I buy on 1. ideas/trends 2. fundamentals 3. momentum 4. recommendations. 5. volatility/liquidity of derivatives
My ideas come in the form of trends and observations I read about happening all over the world. Fundamentals are a high priority, I use morningstar premium to help me with that, I find their research great and useful. Momentum is great, and can be scary, I won’t touch momentum if it’s in a field I don’t understand, nor stupid high PEs, but ~25 and under – I’ll look at. Recommendations are high on my list, that means managers of hedge funds, money managers, friends, family and reader(s?) all get a high priority in my infinite search for good stocks. If a stock is trading with liquid options, it will get a higher priority than the one without, especially if implied volatility is generally higher – I like writing calls / shorting puts. I rarely ever use technical analysis, although I probably should. My holding time frame plans range from weeks to 50 years. Once I buy, I feel committed and prefer to hold through anything. Like my AAPL buy at $178 a few months ago – held right on through. I don’t use stop losses, I get that from my dad, he retired at 42. “If you liked it at $40, you gotta love it at $30″ is what he’d say.
I have a checkpoint set at 18% a year, but a goal of 26% per year…after taxes.
I currently have two accounts. The first holds positions in 19 tickers, right now. The only tickers where I’m not long the stock is FSLR and FCX I’m just short the $210 and $90 puts. I have 6 other open option legs where I offset the downside of my long positions by writing out of the money calls. I’m doing this to CCJ, JCI, and ITU. I’m also long calls on JCI and short puts on CCJ, these are both separate legs, aside from a long position in the stock. Right now this account is 14% cash, and no holding ever gets larger than ~8%.
I’ve just recently opened up an account at Interactive Brokers. I added more almost immediately because I liked them so much. I opened it to program an algorithm to manage a buy-write for me, on several ETFs. That is going slowly, and looks like it might not work that well. Regardless, I’m going to manage a less complicated version of the algorithm, manually. I own four ETFs, that I actively trade the front month calls on. HXU.TO, SSO, VWO and FNI. I know HXU and SSO have issues with losses/slippage, but I’m sacrificing that slippage for volatility in the form of capturing option premium. I’m 103% invested right now, if you don’t count the fact that i’m twice exposed with the two double longs. I plan to keep this account nearly 100% invested running my buy-write.
Equity is broken up ~63% (Investments) /37% (ETFs/Buy-Write)…I plan on keeping a ratio close to this, and if I beat the markets in the “Investments” account – cool, but right now, if I lost it *ALL* my “Investments” account and never added cash to the other, so long as I get index like performance on my “ETF account”, I could still retire in less than 30 years…no matter what.
My current watchlist which basically means I’ll write puts out of the money on these stocks all day long (and hopefully get assigned) include: FSLR, FCX, JCI, VE, CVA, MIL, CCC, IBKR, MORN…as well as a few others I can’t remember right now.
FSLR: I’m short puts, yes, I’m a bull
Friday, May 23rd, 2008Everybody always gets confused when you say you’re short puts. It’s a double negative, and it’s rightfully confusing. Let me explain.
When you’re short any asset, you profit from it falling in value. When a stock goes up, or stays flat, or doesn’t fall fast enough, the puts fall in value. So if you short them, you’re bullish. In my opinion, you’re less bullish, than if you actually owned this stock.
Yesterday, I was watching FSLR at $270. I thought to myself, “I want in, but that’s an expensive stock…I don’t want to pay $270 per share, but I would pay $210.” So, instead of putting in a limit order to buy it for $210 (and obviously never getting hit) I sell a put contract for someone to force the shares onto me at $210, in the future. They gave me $1.35 per share in exchange for me essentially selling them insurance to take the losses if the stock goes down lower than $210. BUT, since I’d buy it if the market took it to $210 anyway, then I really don’t mind having that downside. Infact, I kind of hope I get the chance to buy FSLR at $210, that’d be a treat.
There’s more perks. I don’t put up any cash, I only put up margin. My broker only requires me to keep 1/4 of the cash on hand to buy the shares should they hit $210. So, I have ‘invested’ $210/4 = $52.50 per share, and stand to profit $1.35 if FSLR doesn’t fall lower than $210. Now, it’s prudent to make sure you could make $210 per share available, if you’re forced to buy the stock. But I’d sell AAPL to get cash available if FSLR fell to $210. My point is, I can easily get a hold of the required $210, if the position goes against me. Now, if you can’t anti up the $210 per share, then you shouldn’t be doing this strategy. It can go horribly wrong if you don’t actually want to get assigned the shares at a cheaper than market price.
So, as of yesterday, there were 21 trading days, 30 days including the weekends. $1.35 / $52.50 = 2.6% in one month. That compounds to 36% per year…and I’m ‘invested’ in solar. While, I won’t make 200% a year, slow and steady wins the race. Its basically a good way to put excess margin to use. AND, the position can be closed early, if the stock moves up.
The nay sayers will tell you, that my upside is $1.35 per share, while my downside is $208.65. Wow, that looks horrible. But, you can’t think about it like this, because I make money, even if FSLR falls, so long as it doesn’t fall too much. Basically, if you’ve ever put in a limit order, and walked away, it’s the same thing – but my limit order lasts a month, and I get paid for leaving my order open.
Howard Lindzon hates this strategy, he calls it ‘assanine’. I’ve never heard him have a good reason for calling it that. Maybe he’ll chime in.
I plotted a 3-D Profit/Loss for this strategy, but I used today’s data. My short was for $1.35 per share yesterday, today they fell to $1.08, since the stock moved up. I expect them to expire worthless, or be worth $0.10 very soon.
Yes, I would have made more if I would have bought the stock yesterday, hind sight it 20/20. I also would have had to put up cash, and in my opinion I would have had more downside, downside I don’t especially like in FSLR from $270 to $210 – I leave that downside to somebody else. I’m really leaving what I call, ‘the most likely downside’ to somebody else. Ie, it’s more likely that FSLR falls from $270 to $210 than it is to keep falling from $210 to I don’t know, say $150.
What the HEK? A Chinese Water Bottler, Blank Checks
Friday, May 23rd, 2008So, ‘Blank Check’ Company, Heckmann Corp. (HEK) recently announced they bought a Water Bottling company in China. I’m like – wow – what a great business to be in right now. Probably a scam. The chart exploded this morning. Some heavy money traded the shares north of $8.50, then it pulled back to ‘pre-publicized’ levels of $8.25. I figure 1. What a scam, these guys are investing in a likely trend/shell company, which their brother in law probably owned. If it is legit, it’s likely a great investment – anybody in charge of a ‘blank check’ likely knows what they are doing. If their crooks – no way did they go to all that trouble for the shares to peak at $8. If they aren’t crooks, same holds. So since it went back to pre-publicized levels, I bought a few shares at $8.2799. I especially liked the fact that I could consume everything in current circulation, in english, in less than an hour. It has just become my smallest holding, my biggest gamble, and most un-researched purchase. According to Lindzon, due diligence if for underperformers, lets see if he’s right. I’m literally gambling with ~1.5% of my portfolio…so blow on the dice for me…I know it’s wrong…and I’d never do this with other peoples money.
Plus, the downside shouldn’t be worse than the lows during the chart where the company was just a blank check. That’s $7.22. Soooo…yaaah. D
Who wants to play the ‘oil end game’? I DO, I DO, I DO!
Thursday, May 22nd, 2008I specifically watch the advertisements on TED, because the companies sponsoring this stuff, deserve my eyeballs for a few extra seconds. Watch this video.
Buffett on stuff
Thursday, May 22nd, 2008Buffet was in London, Ontario…I was like hours away from the man…anyway, he spoke, and somebody took notes. These are the notes.
Solar Power Heading for Grid Parity: Who Wins?
Thursday, May 22nd, 2008I can’t for the life of me own a stock where the PEs are higher than the temperature of the energy source they are trying to harvest from. Solar stocks are in the stratosphere, I thought about buying FSLR and writing the calls, but I don’t quite want $27.5K dedicated to one position….nor the downside.
That leads me to thinking about the companies who will benefit from Solar.
During the tech boom, we all poured money into innovation, and it’s why the internet runs so smoothly today. Without the fiber optic cable all the big boys paid to lay with share holder money, well, I might not be blogging right now. Most of the guys that did the leg work to set up the networks had major problems reaping the revenue when they commoditized their product. Turns out, some of them went bankrupt, and since you can’t pull up already laid cable the bankrupt companies were sold off by banks for pennies on the dollar.
Same thing is likely starting now, we’re pouring money into solar stocks, and the innovation from the money will eventually lead to grid parity solar energy prices.
So when this grid parity happens – who wins? That’s a million dollar question we got a little time to think about.
Anybody want to discuss? Any ideas? I’m looking for names who are going to install these products and improve margins as they sell un-used energy back to the grid.
WindLift & Cleantech
Thursday, May 22nd, 2008I was just chatting with Robert Creighton, founder of WindLift Engine Company. He’s looking for engineers and funding to get his wind kite power solution, off the ground 
. He tells me that Larry Page has spent $40M investing in the space, and there are two other companies to watch – KiteGen and SkySails out of Italy and Germany. Robert has two 8 kW prototypes and has sunk a quarter of a million into his business already.
He’ll be at CleanTech, in Boston, for the start of June. Since Ariel Mutual funds is being dumb, I might go down and check out his work and the rest of the conference.
Check out 30 seconds into this video.
I’m Thinking about Becoming an Expert: Which Field?
Wednesday, May 21st, 2008In a global economy, if you’re not adding value, you’re going to be left behind. If you don’t carve out a niche for your own importance, well…there’s a bunch of Indians and Chinese who are going to out-run you. Totally serious, trends are scary, education is being commoditized. Make no mistake, if you are not a leader, you will be forced into the opposite. For the followers, or the ones not adding value, the world will make sure to it that your life will suck…I’m talking to the growd under 30 and not a millionair or happily married.
I’m 23, ready to start making impact. I’ve got a modest advantage compared to my peers financially, so I’ve got to put it towards good use. Nothing was ever handed to me, I worked hard…so don’t hate.
The question is, what niche do I carve myself?
Right now, I’m thinking Solar, Wind, or Water. These are areas that are going to be important for the next 100 years, at least…(right?)
Thanks to my diverse degree in engineering, I’d understand the technology deep at the roots of every one of these topics, but now which one should I run with?
Yah the capitalist in me knows that if you become an expert in any of these fields, it should lead to amazing returns in the ‘folio…BUT it will also lead to opportunities to contribute to society some way some how – obviously, as an engineer, I’m speaking in context of innovation but, but I mean I don’t want to waste my brain, time or money on designing the next UI for RIM, or checking sodium meta bi-sulphate levels at Ontario Power…been there done that. That work is for [educated] zombies. Like, actually do some good for the world….somehow…down the road. And maybe, i’ll never get my shot at it, but experts are tomorrows’ change agents…so I’d rather open the door, leave the option, to potentially become a change agent reather than definately stay a zombie.
I’m talking about marrying a trend here, for life, and serious about it…like…live, eat, and breath a trend…so I can have a chance to make impact. I’m talking present value.