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Those folks invested in the US had a Good Day today!

 

1.75% days don't come too often. That's more than 1/3rd of an annual 5% Tbond earned in 8 hrs. :D

 

As everyone really knows when they look at reality, planning to be in Pattaya or actually being there is all about money. This stuff matters a whole helluva lot more than people try to persuade themselves. :unsure:

 

To all US investors, celeberate. And you UK guys, you'll likely follow suit at least partially tomorrow, so thumbs up to you guys too.

 

(Don't expect an equivalent post when the Dow is next down 1.75%) :thumbup

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It's been a good year. My portfolio is up 50% since January 1. Hence, I will be splurging when I hit Pattaya next week. However, it should be noted that the Dow and Nasdaq indexes are extremely poor indicators of the health of the U.S. economy. I mean, who is stupid enough to be holding stock in GM, Microsoft and Coke? These are dinosaurs. A better indicator is the Russell 2000 which was up 2.73% today.

http://finance.yahoo.com/q/bc?s=%5ERUT&t=1y&l=on&z=m&q=l&c=

(small caps are where the growth is at, don't own your daddy's stocks).

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And tomorrow could see a fall of 1.75% +

Doubtful you would see that kind of sell-off tomorrow. The U.S. economy is strong and first quarter earnings have been great. The only downside has been high energy/commodity prices which suggest inflation and the federal reserve's interest rate tightening cycle. Well, oil now is over $72 a barrel, inflation is tame (today's PPI was steady) and, most importantly, the minutes from the federal reserve indicate there may only be 1 more raise of the interest rates. In fact, the San Francisco board member stated that the federal reserve has already tightened too much. And BTW, I don't mind high energy prices as 20% of my portfolio is in energy. Shrub can threaten to nuke Iran all he wants . . . it just makes me more $$$.

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Yes, the Australia, Japan, South Korea and India exchange traded funds (ETF's)have all had great returns. However, you can hit some of these stocks in the NYSE/Nasdaq/AMEX. Why buy the Australia ETF when you can own Rinker and BHP? In Japan, you can own Toyota, Sony and Matsushita. In India, you can own INFY, SAY and TTM (love that Tata Motors!). The South Korea ETF only makes sense, because its damn near impossible to buy SamSung stock in the U.S. ETF's can carry a lot of mediocre stocks in addition to these giants.

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The last 6 months half my account has been in Conoco-Phillips so I was up 2 and a half percent today. If only the other half was not in a shipping line.

 

If only I had serious money in the account.

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I started the thread in a fit of celebration, but now I have to go into my dreaded lecture mode.

 

I bought my first stock at age 21. I never stopped since, even for a single month. I'm 51 now. Does this mean I have rules of thumb? Sure. Here they are.

 

1) There are no rules of thumb. No one has any idea what is going to happen. Ever. No exceptions. This includes me.

 

2) If the market fluctuates in a way best modeled by some percentage rational and some percentage random, is the mix more random then rational? Or the reverse? If it is more rational then everyone would make money and no one would ever sell what they bought because if they bought it rationally, it must always go up. If it is more random than rational, then my preface comment about buying stocks for 30 years means nothing -- since 30 years observing a random process has no educational value.

 

3) Never ever ever buy anything from anyone who contacts you first. You will miss out on 1 billionaire making deal per 1000 yrs by adopting this procedure. You will also miss out on 5 scams per year by adopting this procedure. Why does this matter from a stock market perspective? Because losses matter more than gains. If you have $1 and you lose 50% of it, what do you have? Right. 50 cents. If you now achieve a 50% gain on that, do you again have your dollar? No. A 50% gain on 50 cents leaves you with only 75 cents.

 

Sigh, end of lecture.

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But for a few special situations, I'm out of the market entirely. There's too many reasons why the market shouldn't be going up, including a housing bubble that's beginning to deflate. Let's see, we have an out of control money supply, rising oil prices, and a bunch of homeowners about to be bankrupt. And whoever thinks inflation is tame hasn't made many purchases lately.

 

Rex

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But for a few special situations, I'm out of the market entirely. There's too many reasons why the market shouldn't be going up, including a housing bubble that's beginning to deflate. Let's see, we have an out of control money supply, rising oil prices, and a bunch of homeowners about to be bankrupt. And whoever thinks inflation is tame hasn't made many purchases lately.

 

Rex

A supply side upturn is always built as an inverted pyramid. No solid foundation.

This one had the unexpected "advantage" of a unusually weak dollar, an illogical 10 year and the generousity of the Chinese in subsidizing our national debt.

 

Cash in while you can!

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...losses matter more than gains. If you have $1 and you lose 50% of it, what do you have? Right. 50 cents. If you now achieve a 50% gain on that, do you again have your dollar? No. A 50% gain on 50 cents leaves you with only 75 cents.

 

Sigh, end of lecture.

Huh? - swinging that around gives you an identical result - a 50% gain on your $1 leaves you with $1.50...if you then lose 50% you still have the 75c in your example.

 

 

leemo

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leemo, you're still down 25 cents on identical % rises and losses. The loss was more powerful mathematically. A rise identical to a loss did not return you to the same place. It left you lower.

 

As for selling at the top, I approve of this concept and encourage everyone to do so, provided they don't sell when it's not the top. :clueless

 

As for those folks pointing to all the reasons why this is a false rally and like the Crash of 2000, see Rule of Thumb #1.

 

There has never been a time in my memory, and probably ever, when you could not sit down and examine all the data and generate an excellent array of very rational arguments to explain why the market should go in any direction -- which, btw, includes sideways. See Rule #1.

 

You want compelling reasons for a downside? No problem. Oil prices are very high, draining US consumer resources. The housing bubble is collapsing. Mortgage rates are going higher and will hurt new housing construction from which many industries derive their revenue. The dollar is weakening because the trade deficit is increasing with China. Other countries hold a lot of US dollars and can sell them and collapse the dollar further, forcing the price of oil higher and draining even more consumer resources.

 

You want compelling reasons for an upside? No problem. Corporate earnings are doing very well on average. JP Morgan's 1st quarter was up 36% just this morning. Pfizer drug company (makers of Viagra) earnings soared this morning from sales of Zoloft and Lipitor. The Federal Reserve has apparently ceased raising short term interest rates and there is therefore evidence that this is one of those market cycles in history that did not fall from rising interest rates. The baby boomers are retiring and though they will move money out of the market, they will use that money to buy things and add to the corporate earnings of the companies that make those things. Japan's economy is finally showing signs of growth. With their wealth and China's wealth, there are now a lot of people who can buy US goods, which should be cheap because of the weakened US dollar. This will further strengthen US corporate earnings and make their stocks rise.

 

See? You can make a rationale case in either direction. This is pretty much always true.

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The last 6 or 7 years when I've had some free cash to invest I've usually gone with an index fund and have done well. Why? Because the market has always historically risen over the long haul and will continue to do so.

 

http://finance.yahoo.com/q/bc?s=%5EDJI&t=my

 

I've done it with 10K twice and made a around 1-1,500 each time.

 

The worst thing I did a few years ago was sell 2K of American Aitlines stock I had recently bought at $3.85 for extra cash for a LOS trip. When I came home 25 days later it was almost at 12

 

Hub

_dji.png

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Owen: I concur in your rules of investing, but investing (i.e. long term holding) should only be used for non-discretionary funds (your retirement account) and should be conservatively invested in value stocks that pay dividends or bonds.

 

I am more interested in stock trading, because investing is fairly boring. Discretionary funds (money you can replace through earnings, if you lose it all) needs to be constantly monitored to allow for maximum returns. My two rules are as follows:

1) you should always be diversified, never have more than 20% of your holdings in one sector. (i.e., never have more than 20% oil, or 20% tech).

2) 50% of successful trading is identifying bullish sectors. For instance, right now the best sectors are energy, basic and precious metals, telecom-related tech, and brokerages. The worst sectors are hospitals, biotech, and shipping. Some retail right now is suspect, because of rising gasoline prices. As an analogy: a bad house in a great neighborhood will bring you more money, than a great house in a bad neighborhood.

 

You have an interesting analysis of the general US economy as a predictor of moves in the stock market. Right now, the scale is slightly tipped in favor of bullishness. You probably overestimated the collapse of the housing market. With the fed probably set to leave the federal reserve's rate at 5% following the raise at the May 2006 meeting, mortgage rates are probably topped out. Yes, the housing market has softened, but, other than price drops in over-inflated condo markets (Florida and Las Vegas) prices appear to be stable, there is just less volume of sales. There will be no dramatic loss of house values for the vast majority of American homeowners. In fact, in some markets, like California, housing prices will probably rise 5% this year. That's a far cry short of the 20% annual growth we have been seeing, but certainly there is no bursting of the housing bubble.

 

I agree with your analysis of the impending fall in value of the U.S. dollar. However, the major impetus for its decline will be the federal reserve's halt of the incremental increases in the lending rate. As you point out, there are economic benefits to the devaluation of the U.S. dollar.

 

Finally, there is a major technical reason for U.S. stocks to be in bull-mode at this time. The stock market staged a nice recovery from the 2000 stock market crash. For the past two years, the market has been consolidating (i.e., moving sideways). The primary mover of the market is earnings. While earnings have been good, the fear caused by the bearish economic forces you mention, has kept the market from moving up the past two years. Two of those factors appear to be mitigated at this time. First, the housing market is not crashing (see above). Second, the U.S. economy seems to be handling the increased cost of commodities and oil fairly well. The market did not get spooked by $70+ per barrel oil. As a result, the Dow has now broken resistence at 11,000, and probably will be at more than 12,000 by the end of the year. Even today, the market is acting well following one of its best days in quite some time.

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You probably overestimated the collapse of the housing market.  With the fed probably set to leave the federal reserve's rate at 5% following the raise at the May 2006 meeting, mortgage rates are probably topped out.  Yes, the housing market has softened, but, other than price drops in over-inflated condo markets (Florida and Las Vegas) prices appear to be stable, there is just less volume of sales.  There will be no dramatic loss of house values for the vast majority of American homeowners.  In fact, in some markets, like California, housing prices will probably rise 5% this year.  That's a far cry short of the 20% annual growth we have been seeing, but certainly there is no bursting of the housing bubble.

I agree with your assessment of the housing sector - I don't think so much as a bubble burst but an ease off of the records we have been seeing. Everything I have read indicates that there will be a reduction but that real estate prices will still climb over the next year.

 

I hope you are incorrect on your Florida condo prediction though, as I am having an investment condo being built there now to be finished early next year. However, I agree there has been a small correction in the market based on what I am seeing. I am hoping it is protected from any further corrections due to its good location and the high end construction materials being used.

 

Due to my relatively young age, I am mainly in small to mid cap growth funds, although the best performer I have had in the last 6 years is a China-based fund which has risen > 40%. I bought it as a lark for awhile when I was dating a chinese girl and reading/talking a lot about china.

 

If I was a retired expat, I'd probably be looking at things like tax-free bonds, although I admittedly know little about them at this point. There was an excellent article on offshore investing also in the PattayaToday website a few years ago,but it is my understanding some of these doors may be closing now?

 

Pissed me off that this year I missed my Roth IRA opportunity due to other upcoming expenses (wedding, new car, new house), although hope to make up for it next year, as will be able to purchase for both myself and wife. Is the Roth up to 5K next year?

 

Hub

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A distinct ratchet upward in the post sophistication as folks understand rightly that this is Very Serious Stuff.

 

Might I offer a website of interest. www.fireseeker.com

 

This website has nothing to do with investing decisions or stock picking. It embraces a recent array of academic studies indicating that asset allocation is the most powerful predictor of portfolio performance intermediate and long term, and withdrawl magnitude is the most decisive parameter in the question Will I Run Out Of Money?

 

It's an excellent implementation of historical norms and tells you what Your Number should be. Hope you enjoy it.

 

Count your pennies and enjoy the gains. The BGs will too. They just don't realize it.

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Hi, for an old fart like me cash is still king, although if I was younger and had a sizeable gain in my portfolio at this time I would be looking to protect that my buying some "put" options, that would cost you some % of your gain but in a market turndown you sure won't get wiped out. Have a good one and enjoy.

Old Bud

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"Is the Roth up to 5K next year?"

 

Yes it is.

I better qualify that.

For you young bucks, it's still 4k annually. For us senior citizens, it 5k for 2006! :finger

 

----------------------------

 

I never follow anyone's recommendation.

 

It's either old news by then, or feathering someone else's bed.

 

I stick with what I know.

I buy companies which produce superior products or deliver the best services.

Taught to me by an older gentleman now passed on who worked on a loading dock, but made more money with his portfolio than he ever did working for a living.

 

Works to a fashion.

 

~Sa-teef

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The last 6 or 7 years when I've had some free cash to invest I've usually gone with an index fund and have done well. Why? Because the market has always historically risen over the long haul and will continue to do so.

 

http://finance.yahoo.com/q/bc?s=%5EDJI&t=my

 

I've done it with 10K twice and made a around 1-1,500 each time.

 

The worst thing I did a few years ago was sell 2K of American Aitlines stock I had recently bought at $3.85 for extra cash for a LOS trip. When I came home 25 days later it was almost at 12 :finger

 

Hub

I wish the QQQQ and Spiders were available 20 years ago.

 

The beauty of these is that an index throws out weak companys (this is why index's go up. They are not a reflection of reality. If your 401K funds are in those weakining companys.....).

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FYI concerning Roths.

 

If you ever had a 401K that you rolled into a traditional IRA, or that you will have in 401K form on day of retirement, there is a strategy not widely understood that is advantageous.

 

When you retire, your income should drop sharply. Your tax rate does the same thing.

 

This might not always be so. Tax rates can be changed and the likely direction doesn't look favorable.

 

So given that you have low income and low tax rate, that would be the time to start re-characterizing your 401K/traditional IRA into a Roth. Roth withdrawls are tax free forever, as you no doubt know. But 401K/traditional IRA withdrawls are taxed.

 

So the strategy is to do incremental recharacterizations each year, moving some money from 401K/traditional to your Roth with the quantity determined by the point at which your marginal tax rate on those dollars would go up. In other words, if you can move 5000 dollars over and pay only 15% tax on them, this is better than withdrawing that 5000 in 5-10 years and paying the potentially higher tax rate of 35% or whatever on them. By moving that money into a Roth and taking the small hit now, you avoid the bigger hit later.

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FYI concerning Roths.

 

If you ever had a 401K that you rolled into a traditional IRA, or that you will have in 401K form on day of retirement, there is a strategy not widely understood that is advantageous.

 

When you retire, your income should drop sharply.  Your tax rate does the same thing.

 

This might not always be so.  Tax rates can be changed and the likely direction doesn't look favorable. 

 

So given that you have low income and low tax rate, that would be the time to start re-characterizing your 401K/traditional IRA into a Roth.  Roth withdrawls are tax free forever, as you no doubt know.  But 401K/traditional IRA withdrawls are taxed.

 

So the strategy is to do incremental recharacterizations each year, moving some money from 401K/traditional to your Roth with the quantity determined by the point at which your marginal tax rate on those dollars would go up.  In other words, if you can move 5000 dollars over and pay only 15% tax on them, this is better than withdrawing that 5000 in 5-10 years and paying the potentially higher tax rate of 35% or whatever on them.  By moving that money into a Roth and taking the small hit now, you avoid the bigger hit later.

Don't you have to pay regular income tax on the conversion? Where did "15%" come from? I don't know much about IRAs but, it's my understanding that the conversion has a cap if the income over $100,000.

 

If you are self-employed and looking for maximum tax deduction, I think SEP will be better option than IRAs in my opinion (you can deduct up to $44,000 in 2006 vs . 4k - 5k for IRA). Of coure, I advise you to see a financial planner and a tax advisor befor setting up SEPs.

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