Gentlemen's Stock Picking Club

[greg]

Ha:

For your amusement. I see this as directly related to your randomness issue:

Randomness - Wikipedia, the free encyclopedia

Hidden variable theory - Wikipedia, the free encyclopedia

Bell's theorem - Wikipedia, the free encyclopedia


Absolutely no further comment from me about the above.

But . . . I'm about fifty pages into The Black Swam and DW is picking up one of Taleb's earlier works at the library today. As best I can tell at this point, he appears to be a story teller--at least in this book.

[greg]

I'm still on break from reading. Here's my fake (Bull) 'Black Swan $100K portfolio:"

yckat.x $140 DIA options 10 calls (1000 shares)= $10,000 If you look at the ask-bid spread today, I think I'd have a reasonable chance of getting these things at $10.

IEI 3-7 year treasury etf. (I'll price it out at the end of the day: $90K) I went out a bit on the duration curve because I suspect a Fed rate cut is fairly likely soon. I might make an extra $100 on that move--or lose that much if rates aren't cut and the etf settles down again. Anyway, pretty stable stuff.

But this two position thing really is a dumbbell (sp?) portfolio as I see it, one end weighted toward capturing upside volatility and the other as stable as can be. The risks are weighted in my favor if something extreme happens in the general markets. If something really bad happens, then I lose $10K in option money and make a small amount in the bond etf; If something very good happens such as a 15% rise in the market, then I probably do a bit better than those with a moderate index fund portfolio. If we have a moderate market, then my guess is that I probably do a shy less well than a moderate indexed portfolio. Moderation appears to be the enemy of this portfolio.

The biggest advantage that I see is that it allows me to remain flexible. If some largish Black Swan event happens and the market tumbles, I have access to a bunch of cash in the etf that can be used to buy Rydex bear market funds or puts after I get a better handle on what happened.

[greg]

I like luck when it's good. Today is close to one month since starting my fake portfolio. Nice pop on PWI today. But because it's going to be sold, I'm exchanging it for HTE, a similar CanRoy. So tomorrow's end of day total for PWI will be used to purchase end of day tomorrow HTE. A 10% gain in one month so far. If this continues, I'll be able to fake retire in a couple years. I'll start rolling in divis in a month or two. I blame DW for the semi-visible portfolio picture. Click on it to enlarge:

[haha]

Greg, I think when you started the other Canroy discussion you should post your decision and reasoning on that thread also.

Ha

[greg]

Ha:

The problem is that I chose HTE without any real deliberate thought. I read a couple recommendations by brokers and liked the two year chart (and it seems to be in a bit of a dip right now). Not the best criteria for choosing a stock--even in a fake portfolio. But I may buy it for real in the near future. At this early stage of discovery, I like both PWE and HTE.

I think emotions are an important constituent in picking stocks, at least for me. My personal goal with this game is to learn something about my self in a formalized set up. The choice of HTE was a push for me, a sort of dart throw, based primarily on intuition and gut feel (but in a non-random way). I haven't chosen a stock this way in some time. I hope I'm exploring Warren Buffett type hunches and intuitions. Probably not, but worth looking into for me.

It always bothers me a bit when folks use stock screeners as the sole criteria for choices. It's like cutting the heart out of the matter--to me. For example, if in choosing a date or a wife or a girlfriend, you relied solely on objective, shared criteria such as, um, a nice bum, quirky smile, or good looks, you would be missing out on the best part: the personal and subjective emotions, the stirring of the heart (and loins?). (But the heart and the mind are certainly related and tightly tied together during normal experience.) In the early days of Apple Computer, it had no significant objective criteria to examine. But what it really had--to some--what was experienced by a few folks was a good feeling, a hunch, an intuition, some insight into what good stuff might be coming their way and to others also. One might say that those who bought into Apple early saw a positive black swan headed their way. That many others didn't see. Emotions which are a significant share of hunches and intuitions are important in choosing things.

This thinking stuff doesn't belong on the other thread. That would be hi-jacking.

[kcowan]

Quote:

Originally Posted by greg One might say that those who bought into Apple early saw a positive black swan headed their way. That many others didn't see. Emotions which are a significant share of hunches and intuitions are important in choosing things.

My DW bought AAPL at $13 and Jones Soda at $.88 based on her hunches and my DD. We got out of JSDA at $9.15 and 900 AAPL at $78 (still holding 300). Just got into Lulemon at $34.90 for her hunch and their forward PEG at .8 and already pushing $40 in 10 days.

The thing about these hunches is that they all come with amazing volatility so not for the feint of heart...

[greg]

Quote:

Originally Posted by kcowan The thing about these hunches is that they all come with amazing volatility so not for the feint of heart...

I don't think it's the hunch that looked for the volatility or the volatility that found the hunch. I just think smaller cap growth stocks, which is what you were looking at, are oftentimes wild rides. Peter Lynch used to say 'buy what you know.' I think this is where hunches couple up with stocks--the head works with the heart. Personally, I have a lot of trouble figuring out retail and consumer stuff.

[kcowan]

Yes I must admoit that we knew a lot about the business models for each of the holdings. We also have some cell phone carrier holdings in Mexico and China. They are continuing to be excellent perfomers.

OTOH we held Vodafone for 18 months and it went nowhere.

[unclemick]

Rats - I seem to do better on dogs I forgot I had, didn't seem the time tax wise, or just plain couldn't make a decision on.

Management change, time passes, change in Market cycles or - and they sort of come to life - Aetna, Union Pacific the last few years.

My hunches generally suck.

heh heh heh - 7 to 10 years is a short term holding for me.

[REWahoo]

Quote:

Originally Posted by unclemick Rats - I seem to do better on dogs I forgot I had...

Careful UncleMick. Remember, Michael Vick not only tried to forget his dogs, he buried 'em - and got in some serious trouble...

[unclemick]

Quote:

Originally Posted by REWahoo Careful UncleMick. Remember, Michael Vick not only tried to forget his dogs, he buried 'em - and got in some serious trouble...

Unlike Mr V I had sleeping dogs - always wondered what the second line to 'let sleeping dogs lay' - sometimes they wake upe up and .

heh heh heh heh heh heh heh - of course one good hunch per lifetime and you are good to go - I made that one up!

[greg]

Quote:

Originally Posted by unclemick Rats - I seem to do better on dogs I forgot I had, didn't seem the time tax wise, or just plain couldn't make a decision on. Management change, time passes, change in Market cycles or - and they sort of come to life - Aetna, Union Pacific the last few years. My hunches generally suck. heh heh heh - 7 to 10 years is a short term holding for me.

unclemick:

What happen to your hormones? I remember you used to use the term "hormone money," for your speculative investments? That's what kind of got me started about separating the thinking part of the portfolio from the emotionally charged, wild part.

[unclemick]

Quote:

Originally Posted by greg unclemick: What happen to your hormones? I remember you used to use the term "hormone money," for your speculative investments? That's what kind of got me started about separating the thinking part of the portfolio from the emotionally charged, wild part.

Greg - I wish you luck! My ability to separate - came under question in my mind the more I read on the internet and lurking at the Diehards forum. Luckily I didn't I read read any stinking books! (inside joke). I came to the sad/enlightened/ephinany/DUH! - for me it's maybe more hormones than I thought.

Soooo - my rational thinking Lifestrategy moderate(60/40ish) with 10% side bet on Vanguard REIT(Bernsteins 1998 Falling REIT Correlations article), 3% Sm Cap Value Index(Fama French 3 factor- a small dose). Maybe 10% Norwegian widow dividend stocks.

As of Jan 2006: Rocked up, tossed in the towel, admitted that hormones creep in everywhere.

85% Target Retirement 2015(even here note that I'm 64 and should be in TR 2005).

15% individual stocks - they bounced up in value as they will fluctuate.

heh heh heh - theoretical purity is not one of my strongpoints. That's as close as I can get to my unified theory of chickenheartedness(lifecycle full auto). Now finding a good Doc with a good anti-hormone serum so I could get 'totally pure' theory wise

P.S. 10% or lower for individual stocks is what I seem to remember(without Googling) from the Index Purists and they never mention hormones!

[greg]

unclemick: I still have about 20% in very low dividend stocks or, ahem, growth stocks. That's my outside limit and I'm stickin to it . . . although I've made some minor adjustments in how I regard ETFs. But I still try to steer clear of non-dividend focued ETFs as much as possible unless there is no alternative. I tend toward old fashioned CEFs that are more focued on regular divis.

So as a future curmudgeon (and B. Graham reader) can I use your "heh heh heh" once in a while?

--unclegreg

[unclemick]

Quote:

Originally Posted by greg unclemick: I still have about 20% in very low dividend stocks or, ahem, growth stocks. That's my outside limit and I'm stickin to it . . . although I've made some minor adjustments in how I regard ETFs. But I still try to steer clear of non-dividend focued ETFs as much as possible unless there is no alternative. I tend toward old fashioned CEFs that are more focued on regular divis. So as a future curmudgeon (and B. Graham reader) can I use your "heh heh heh" once in a while? --unclegreg

Sure - but remember I don't give out autographs, can't sing , and have absolutely no plans to write a book!

heh heh heh - and you don't have to give the Norwegian widow a cut under the table - but we need to acknowledge her once in a while.

Of course we both know she is a mythical figure - Right?

[greg]

Quote:

Originally Posted by unclemick heh heh heh - and you don't have to give the Norwegian widow a cut under the table - but we need to acknowledge her once in a while. Of course we both know she is a mythical figure - Right?

Right! As is the young lady from Missoula. The real good stuff will always be in the compounding. heh heh eh.

The new and modern Norwegian-American widow spouse working on her third fourth well off husband: The dividend is dandy, but compounding is quicker.

[Dawg52]

A few high yielding investment ideas in this article. Many stocks already discussed here.

Put Cash in Your Pocket - Kiplinger.com

[twaddle]

My Aug 29 picks for "black swans" were FXI, DRYS, and FXY. The yen did nothing, but FXI is up 36%, and DRYS is up 83%.

So, I sold half my DRYS position and bought Dec 47 puts on QQQQ. Sorry, but I can't help but place a bearish bet over the next couple months.

Those run-ups make this speculative stuff kind of fun. I can see how guys like Victor Niederhoffer get sucked into this stuff.

Annals of Finance: The Blow-Up Artist: Reporting & Essays: The New Yorker

[unclemick]

Duh - Do people actually look at the price of their shares - instead of DCA and /or reinvesting for 7 to 10 years and then checking to see in they still like what the company does for a living?

Hmmm - I do get an end of yr slip that says what I owe in taxes on the div.'s.

Check the prices - eh. Interesting concept.

heh heh heh heh heh heh heh heh heh heh heh - you know on many 'keeper' stocks - you can auto deposit div.'s so there's no waiting by the mailbox.

[twaddle]

Quote:

Originally Posted by twaddle So, I sold half my DRYS position and bought Dec 47 puts on QQQQ. Sorry, but I can't help but place a bearish bet over the next couple months.

Closed out my puts just now for a quick 60% gain. I've been pretty lucky with these bets so far, but there's just no way I could do this as a real investment strategy.

I think I'll take a break from speculation for a while and wait for attractive long-term investments. But I might keep this up as a hobby if I get bored.