Coby, Agree with all except that I expect the economy to behave rationally and bring oil back, not investors to behave rationally and bring HAL back. Different concept. If the economy and oil perform as I expect, I will be paid enough by Hal, itself, not the market, to make this a good investment. If the market wises up, that means I get paid more, sooner. Which I really hope and think will happen. But my contrarian strategy looks to the company's worth as an ongoing business, as though I was the only owner, not the market's perception of the company's worth.
Options. Yes, long options limit risk. But they do not limit upside potential. The cost of premiums is a cost, but not a limiting cost. I don't understand the 11% number. Is that from my 10% statement about Hal? I expect to make much more than 11% and have done so. By a lot. For example, in both 1995 and 1996, I made more than 100% on the total 90/10 account. That includes the 90% in money markets. In 1997, my returns were much worse in that account, up 27%, which actually underperformed the S&P. Some nice winners but also many total wipeouts. I wasn't unhappy with that, though after 1996 and 1995, it felt kinda puny. This year, I am up about 60% on the total. I have had some huge winners, but I have suffered from having low percentages committed to them. For example, my puts on the XAL and the DRG were major league homeruns, but I only had one third positions committed to each when the fit hit the shan. Citicorp was a huge winner, but I took a number of one third wipeouts on that position before it came true and only had two thirds worth of puts at the top. And then I cut it to one third much too quickly. A bit gun shy. I think my 90/10 portfolio this year, with the market twice hitting new highs, benefitted from my conservatism. But it is also possible I could have been much further ahead had I cranked out full positions in both up and down markets.
I hope that 11% question is not caused by me mixing up the income vs. the 90/10.
MB |
