BAGAKOAA; 22 November 2011 What Would I Do With 500,000 Dollars?

Post 542 CLICK HERE To See Past PostsNovember/2011

The Big Dog Is Sick

 

With Devin running around with Kristin to make sure she was healthy, I was not surprised when I called after a long day at the salt mines and asked if I could bring anything home and she said "Yeah, DINNER." We picked up some BBQ at Woodranch (Dave Hanna just fainted. Trust me I need a Hanna fix BAD.)

 

After dinner we got Kristin on the road and Devin got a call about Big Dog, that is her 17.3 hand Hanoverian Warmblood horse Pedro. I call him big dog, because that is how he acts. He is loveable and cuddly, unfortunately he weighs in at about 1,900 pounds.  

pedro

When we first met (to make a very long story short) I nuzzled up against his head with my knee and he pushed back a bit and I pushed back a bit and he swiped his head and all 225 pounds of this chubby little body was lifted off the ground and tossed like a rag doll against his stable wall. His head weighs about 350 pounds. But I digress.

 

Pedro was having some kind of reaction to something and Dr. Devin thought it wise to have his skirted off to the equine hospital about 90 miles from here. You would not believe it, but there are equine ambulances. The good news is he is doing fine. He got a nice trip towards San Diego and a couple of day away from his stall and he will be home in time for Thanksgiving.

 

It is a fairly quiet week at PADI as a lot of people are extending the holiday weekend into a full week. This is a great opportunity for me to get caught up on PADI business, some article writing, scuba environmental scanning, and things I cannot share with you or I'd have to hunt you down and remove your memory. It is a great opportunity to get caught up, but not sure how much of that I will get to. 

What Would I Do With 500,000 Dollars

 

We know a lot of you who read this do not have the time or the interest or the desire to spend as much time reading the market as we might. Quite honestly, we do not too many professionals in the industry that spend as much time as we do. (Really, they have told me as much.)

 

We really do love doing the homework. Last night after we finished the blog, for fun we went back to the first 5 trades of this month and did forensics on the buys and sells we made. We printed out charts for the life of the trades, penciled in out entry points and exits, and calculated our gains (or losses) and then looked at the news of the day for those entry and exit points to see what we could learn for next trade executions. Sad, I know.

 

So let's pretend I am not me. Let's say I have a retirement fund of say $500,000 and I am recently retired or about to be retired. If I am a normal person, I either have that money in a self directed 401K or in some kind of IRA plan. Most likely the monies are in Mutual Funds. If you have been reading this blog for a while, you know we do not like mutual funds. However if you do not have the interest or desire or time to do the necessary homework, we understand your choice to use mutual funds. After all, I am not a professional. We like ETFs better than MFs. (Just think about the fee structure for one second if your advisor and the MF is taking 1.5-3% off the top, well in this market that could be all the profit you make in the course of a year. We know we are busting our butts trying to beat a market that is flat on the year.)

 

You may say, I have no control over where my money goes because it is in a Mutual Fund. Pedro Crap! This is your money! You have all the control in the world over your funds. There are a gazillion93 funds to choose from. I know because I have counted them. You can choose a fund that is 100% cash with 100% no return. Well ok you might get .00034% return and after fees you are down about 1.7%. (Did I mention I do not like MFs.) You can choose a fund that specializes in companies that refine guano (Bird Dung) and sell it to alternative energy companies and they might show a return of 327% if you want to risk it all.) Literally you can find all kinds of funds.

 

If you think a MF means that it has a lots of stocks in the fund you are wrong. If you are stuck in a fund that is too heavy in stocks with all the volatility that is permeating this market, get out and find a fund that is more bond based or treasury based. How do you do it? Use Morningstar.com. Their fund screen is the best on the market. They have all the details on more than 2,000 funds in 60 categories. There is no excuse to have a fund shoved down your throat by an FA unless if you have checked that fund on Morningstar and like it.

 

Now you might be saying "I don't know what to look for." We would disagree. Here are few things you know. The US Government has been on a cash printing binge for two years. You know the house of cards in Europe is about to fall or at least has most people convinced the house of cards will fall. You know, because they told us last night, the US will allow a triggering mechanism go into affect that will trim 1.2 tillion in expenses from our budget. You know the world is concerned about a recession next year. You know that corporate earnings are doing well (Admittedly not as nice as the last two quarters, but still strong.) You know that corporate coffers are full. (Global public companies are holding and estimated 2.5-4 Trillion in cash on their balance sheets.)

 

With all of that knowledge you can make some really intelligent decisions. Look at the funds in your 401K or IRA. Look them up in Morningstar and see what you got. It is easy and enlightening.

 

Let's say somewhere along the line your FA or 401 Plan advisor talked you into some small growth fund. (That means these are small companies with a small market captializaition-think outstanding shares times price of less than 500 million dollars-and are growing their revenues and or their profits) Let's say that fund was MBRSX (Ok you can play along with me if you want just go to Morningstar.com). just enter MBRSX into the Quote Box at the top of the page. I'll bet you have money if funds and you don't even know what they are. Well now you will. NO MORE EXCUSES.

 

MBRSX is put out by Essex and is a small micro cap fund. Take a quick look at the performance table and you will see that they are underperforming the market YTD. -15.43 vs

-12.04. Now let's take quick easy look at the asset allocation. (What does your money buy?)

MBRSX Allocation

You can see from the chart I stole, this fund is 90% US stocks. (We know from the category they are micro cap stocks. You can verify this by clicking on the portfolio tab and then clicking on the holdings tab. I just did and can say out of the 40 or so stocks listed, I did not know any of these. Now keep in mind when you have no life and enough time, using this kind of page and doing the REAL homework on the fund holdings might turn up a diamond or two.)

 

Now from all you said we know from up above (cash being printed the eurozone crazies etc) do you want to have a fund that is 90% micro cap equities. Heck No. You probably want to consider shifting your portfolios into some nice balanced high yielding stock/bond portfolios. Use the Morningstar screener to find them.

 

A quick screen shows you 625 funds that are balanced (between stocks and bonds) and are conservative in nature. That means they won't go up as much as the market in good times, but typically they won't go down as much of the market in bad times. Let's be really simple and use the Morningstar rating system. The First 4 star rating you get to is AOCIX American Century One Choice Cnsrv Inv. What does the asset allocation look like?   

2011 acoix

 Hey that is nice and balanced. If you like what you see, call your FA and say hey I want to get out of MBRSX and move those fund to AOCIX. Can you do it? They better have a really good reason why or we would suggest you start shopping for a new FA.

 

If you are not interested in doing the kind of homework to beat the market on stocks, at least do some basic homework on the funds you have. Make sure they match up with your needs and what you know about the world economy and your risk tolerance.

 

Remember this is your money and tuning up you portfolio, even a fund based portfolio is your job. No one else is going to do it. It is easy. You should consider putting on your calendar everything 3 months. Our recommendations would be about two weeks before Alcoa announces their quarterly earnings. Alco kicks off the earnings season so you have a good chance of seeing what the previous earning seasons have done to you funds.

 

I really hope this helps and we offer to kick the tires on any fund you might have monies in as long as I can use it for fodder here in the blog. If you have any questions, don't hesitate to ask.

  

Today In The Market

 in the market

Well we gained another half of a percent towards our prognostication of a 4% down week. Here is what the heat map for the market looked like today.

 2011 11 22 heat map

There we no surprises on the market today so this is just a reflection of the uneasiness still in the market. (But that Darn VXX option won't move and it is really annoying me?) Yeah we had a weaker than expected 3rd qtr GDP report, but that could not have been the cause for the slippage.

 

Be nimble and be patient work your plan and the plan will work. We will probably drop you a note tomorrow before the big US Holiday and even though we are on the wagon, here is a wine tip for the big day. Try a nice French Chablis for your white wine. In our collection we would be serving something like 2005 Joseph Drouhin Chablis 1er Cru. It runs about 30.00 bucks a bottle and it will bring your toughest wine critiques to their knees. If you can't find the 2005 look for the 2007 and 2008. The 2008 is rated a 91 and should be wonderful. From the chardonnay grape you will see a pale straw colored wine with a smell of green apples and in the mouth a nice minerally feel and peaches will come flowing through.

For the red, Pinot Noir is a forgone conclusion. It is a great match to the Bird. We would be serving our 2006 Freestone Pinot Noir Sonoma Coast. The recent community price on this is about $60.00, but it is a gem. Be sure to give this baby some time, at least two hours open before you serve. The tannins will settle down and you will get some nice spices and florals on the nose. It should be a nice deep purple but not black in the glass. You will get some cherries and all of the neat things about a good burgundy type of grape like vanilla and berries and a hint of chocolate. If you are patient with this, it will reward you.    

If I get lazy, have a great holiday and be thankful for what you and for those around you.

 

        

Salve Lucrum

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brian Ireland
BAGAKOAA;

I am not a professional investment advisor. Anybody reading my blog and investing accordingly must be out of their minds. I have made more money than I have lost. There are many more qualified people than I to actually tell you how to invest your money.

BAGAKOAA=Boys And Girls And Kids Of All Ages

Salve Lucrum=Latin for Hurrah for Profit.

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