Hi all. Thanks for your participation.
For some time, I've felt that what economic recovery we've seen in the US is a combination of a few things:
1. rebound from a terrible shutdown after the internet bubble burst and 9/11;
2. retail spending (70% of gdp) spurred by tax cuts and increased government spending trickling down to the public;
3. retail spending spurred by the sense of affluence that people have because low interest rates have jacked up the housing values to absurd levels.
I view all of this as temporary and built on air. Consequently, when I started looking around for places to put funds, I didn't want to use mutual funds or individual stocks because I thought the risk was too high.
Instead, I decided to look for places where returns were based upon skills not the whole market rising. Ironically, I concluded that the high-risk area of hedge funds met my objectives so I put some funds into hedge funds diversified by their strategies and vehicles they deal with.
First of all, I only considered funds I could see had excellent monthly performance for at least 3 years with no excessive drawdowns. I allow them to trade only with my direct capital although some allow multipliers (such as trading with $4 for every $1 you put up). Secondly, some of the funds deal with futures, some with commodities, some with currencies, and some in particular sectors such as banking. None of the funds correlate with each other regarding market movements; they all act essentially independently. Lastly, they all allow relatively immediate withdrawal of capital (under 1 month) and all provide very current reporting as to their progress, some real-time. I expect moderate to good returns from this: 8% - 20%, since their track records show they can produce this. (Some have done more.)
Hedge funds are not for the feint of heart. They all operate with fully automated programs except one that permits some intervention. I'm basing my investment on their ability to produce consistent returns over time as illustrated by their actual histories.
Another place I put some funds is with two funds that buy tax liens for the purpose of either collecting interest if they are redeemed, or for the opportunity to forclose on the property when the liens aren't paid. Since tax liens have the same rights as the counties that assess the taxes, they are somewhat secure provided the right liens are acquired in the first place. I think there are many sleazy outfits out there that deal in these things, but I found two that seem reputable that I invested some small amounts in relative to my capital.
Deriving returns from tax liens is a drawn out process that takes some expertise, so I'm expecting this to be a multi-year effort before evaluating it's success. I'll know by the end of this year if real progress is being made, but do know that several properties that were acquired for back taxes are now in foreclosure and will soon be ready for rehab and sale. The returns should be pretty good once the pump is primed.
The rest of my assets (about 50%) are still in cash.
So there you have it for me... still looking for more conservative places to put the cash. I have enough risk in the stuff above.
EDIT: Oh yeah, I have about $200k that I use for a trading account where I focus mostly on oversold opportunities for small scalps ranging from $200-$1000 each. If I can do 2 or 3 a day, I'm set. I try to choose opportunities that allow me to limit losses to about 1/4 of my target for gains and stop out if my loss target is exceeded, even if by a large amount unexpectedly. (I found that letting losses get away from me is the single biggest reason for trading failures.) I use multiple charts, but focus on 2min and 34min (with daily/weekly as a perspective) and look for cci -200 or more with rsi 20 or less as entry opportunities when volume is diminishing. |
