Duration risk

There has been much made over the years about the magic of “Rip Van Winkle investing”. We are told that the greatest of investors buy and hold long term and forget about it. From my experience if an investment goes south quickly if I do not immediately take a small loss I end up holding for a larger loss. With fixed investments where the dividend is the key, it does little good to get the dividend and pay taxes on the income and then take a loss on the investment. In cases of high yield oil stocks or REIT stocks this is commonplace. So. Duration has risk. If you could hold a stock for 15 days rather Han 90 days between dividends and got the dividend and then exited flat or with no gain it would appear that the actual yield would be 6 times the displayed yield. By cutting the duration the effective return improves vastly. The trick is to sell the position at no loss.

Nobody ever calls to tell you when to sell: When a market tops:

In a market where there are buyers and sellers, it is pretty amazing that no investment firm every calls investors and tells them to sell...Maybe an investment firm might be so bold as to change their "allocation" from very aggressive buy to neutral. That would be a disguise for an outright sell recommendation. But they would not want to offend any of their institutional clients....after all, they are in bed with all concerned. Thus...it is up to the individual investor to use some technical tools to decide for onself when there is a market high or when the market is turning...and avoid losses.. Some years ago, in 2007, my youngest daughter was in high school. I had a project for her each week, for pay, to graph and post the advance/decline line, the High/Low line and the the S and P. Every Saturday, when Barrons arrived at the door, I gave it to her and she did the posting. I think I paid her $5 a week. My only instructions were to tell me when the charts were all turning over and falling. When she first approached me with the news that the charts had turned down, I was a disbeliever..."Lets just wait a week" I said.. Anyway, the next week, when the trend continued, we exited all equity positons....and you all know the rest of the story. We avoided the plunge in the stock market. In reviewing my investment in the technical posting....those three indicators were worth their weight in gold. And today, in 2017...it is deja vu all over again...Stay tuned..

The "Failure to Supervise" Con:

Well audit time is here again...somewhere...and whether it is the securities business, or virtually any audit of a commercial enterprise, it is important that young employees understand the "failure to supervise" con, or maybe it is a movement or mode of business.... As a young man I worked in a public accounting firm...I well remember the young students that were attending a private two year accounting school that was attended by many young men who had returned from the Vietnam War and were going to school in the morning and working in the accounting practice in the afternoon...no blue bloods here...and many days they were at the clients offices doing their work... Some of these students, who were in introductory classes, were asked to participate in "audits", that were to my view of it, very underbid...in fact, I felt that the fees charged were pretty amusing considering the amount of work that was expected...and yes the students were rushed, and rushed to get the audit done... Whether it is on Wall Street, or Main Street. the strategy of business done at the top of organizations is many times organized so that problems are not found....and senior staff of these corporations just smile... On Wall Street, there are strict rules for senior "principals" who are charged with supervising the actions of brokers...and I remember during the 1980's my boss reviewing my trades with me to understand what the trade was and why it was appropriate for my clients.... Several months ago a major Wall Street firm was fined 5,000,000 for failure to supervise its staff in a whole multitude of initial public offerings...and indeed if one just looks over the press for the past 10 years there is just one fine after another...seems like nobody has learned, or maybe nobody wants to change....or nobody has any intention of changing, and that this is the nature of the game...intentional "Failure to supervise." This is not "Hogan's Heroes" and these are not "Sargent Schultz" who always seemed so funny when he kept saying..."I know NOTHING,,,I see NOTHING"...What every investor needs to know is that this failure to supervise is a critical orange alert matter....and it is important to take action...

The Olympic Spirit...Focus on the Gold

A lifetime of investing will give each individual a hint of what the best investments were..in the past tense...think back to 1900 or so...and what were the companies that were in existence that are still around and prospering...ok..just start in 1930....Maybe of all the 30000 companies that one can see in the newspapers today, maybe GE, F, GM, come to mind....in as far as indexes go, maybe the SPY, the standard and Poor Index comes to mind.... I have put a few ideas on a 3in by 5 in. card....and when it comes to high quality stocks with high quality dividends or an index that can survive over the next 30 years after I retire....the ideas that are available neatly fit into the 3x5 card...no rocket science...no long Harvard lawyer stuff...pretty simple...the real effort in focusing on quality, is beating off the riff raff slop that comes to you with exciting opportunities....turn off the tv...keep it simple....enjoy.

Never Trust an investment that has the word "Trust" or "Royalty" in it.:

Ever since the American people faced the crash of 2007, by the way which Bernanke recently bragged was even bigger than the crash of 1929...a fact that he was a little late in recognizing since every man, woman and child in America knew this...anyway...investors after the crash of 2007 faced the 1% interest rate on their savings were lured into investments that promised 10,12,13,14% interest through the magic of "fracking"....or something like that...maybe it was mispelled: anyway....those investors have suffered terrible losses since these "Royalty Trusts" were really "wasting" assets, and the investors found that their investment got "wasted." So the rule..."If the investment seems too good to be true...it probably is."...or "If they smile and promise you the moon, they are lying."

Champions Manage Their "Losers"

If you follow the Wall Street pundits, you know that every authoritative pundit will say that the trick is to "Manage Your Winners." Any person who has actually traded or invested knows that this is bull. Any two year old can take gains...that is the easy part...What is left after the gains have been gotten, is the losing positions...And the solution to those losing positions is the difference that makes one a champion... Directly facing the losing position, and taking additional options positions or stock positions to mitigate the potential loss is what distinguishes rookies from successful investors. The worst of all worlds is to DENY or COVERUP the losing position...Ah the memories of the famous "London Whale" saga....Those who cover up or deny when working for a trading firm end up in shame or jail or both. Champions manage their losers.

A bit on "Hedging" and "Trading":

Most all products produced for international destination points are hedged for price and or currency risk....Hedging is done as a Insurance risk matter, and a routine matter, and can be found in many sourcing chains of command.... For example, the notional value of one (1) contract of coffee is about $60,000 and a futures call placed daily would over a month would create futures hedging of the amount shipped of 1.200,000....When a 90 day period ends and the futures are rolled to the next period, the value could reach 3,600,000 as far as notional value...the purpose of the future premium is to hedge the risk of coffee price rising, and this is hedged since if coffee price rises, the future rises with it.. Coffee futures trading is the most volatile of all futures....The risk of trading these actively and intraday is enormous, and the risk is bourne by the firm's capital...traders earn 200K plus percents of profit....They are trained and may have extensive registrations as brokers etc ...In short---trading is not hedging...Different risks...different temperament....