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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: George T. March who wrote (13406)	1/25/1998 3:23:00 PM
From: tekgk	Respond to of 18056

George, I don't think that there is a one size fits all investment strategy. Without knowing someone's age, income, health, wealth and personality I wouldn't want to give you or anyone investment advice other than use common sense and think about what you are doing. I will say what I have done in the recent past and what I plan for the near term future. I will also say that it probably isn't that good a strategy for most people out there. I was a long term bull until June of 97 when I sold almost all of the long positions except for a few companies that I didn't want to part with. For example, Exxon's natural gas to diesel process looks like a good prospect and I didn't want to sell it. I put the proceeds of my long sales into munis and muni funds. Not that I think these were the best possible investments, it's just that I seem to end up making more money that I think I will and end up in the 39.6% fed and 7.7% state brackets more often than I plan. I keep trying to work less but things never seem to work out the way I plan. Another factor is that I wanted liquid assets that I could use as opportunities manifest themselves. I have shorted various indexes and purchased put options mostly on indexes 5 times since August with a record of 3-1-1. The average length of time on the short side was 3-5 days. My best trade was 300+ percent and my worst trade lost was around 20%. I would have done even better if I had been able to get through to my broker during the mini crash. Overall it's been quite profitable. This was all done with money that I can afford to lose. I am currently holding a small number of spx puts that I bought last week. I was going to sell on Friday but I ended up losing track of the time and missed the closing (senility? -g-). I expect a small rally early in next week followed by another decline. I will try to ride out the rally, but will exit if it is strong enough to take my position into losing territory. In any case, I plan to be out by the end of the week at the latest or earlier if I am wrong. I also picked up some ABX call leaps a few weeks ago. I am not a big time gold bug, but the buy back announcement and the charts were just too enticing. Again this is a relatively small position that I can afford to lose. It's been a nice trade so far - I have yet to decide if I will take my profits or stay in for a while longer. As far as gold goes, I maintain a small insurance position that I hope to lose money on - kind of like fire insurance - I don't get upset if my house does not burn down. As you can see I have mostly given up on a stock bull market and have carefully taken small bear positions while putting the bulk of my investments in cash or bond positions. What am I looking at for the future? Back in August I figured that the US dollar had about 6-9 months left in it before it resumed it's long term slide. One of my most profitable trades this decade was German bonds. Not only did I get a nice 8.75% (as near as I can recall) return but interest rates fell in Germany at the time (a couple of points - bond went up) and the Mark appreciated 20-30% against the dollar all in about a year and a half. The EU currency situation should be much clearer after May once the EU participants are chosen. There might be some good opportunities there once again if the situation looks stable. I don't like countries with large current account and trade deficits - look what happened to Asia. We are not all that much better here in the US in this respect. Although I am not a gold bug the closure of mines, large short positions and excessive money supply growth probably means that we might be near a low. I am not smart enough in this area to pick a bottom, so I'll wait for some sort of a trend to establish itself first. I often revisit the following charts (and history books) and review the 66-82 and the 29-49 time periods looking for clues: If you look at the following chart: cpcug.org then look at this one: cpcug.org The US has lost more than half of the financial muscle it had in the mid 60's. At that time we had the power to force the use of our currency in all transactions. Today, I think that although we are still very powerful, we will not get away with the 75% devaluation that we did then without a big rise in interest rates and severe damage to our economy. BWDIK. The bull market has weak legs. One leg - 600 billion of foreign money per year is just about cut off. Another leg - rising earnings because of trade in Asia is all but gone. The remaining two legs political and economic stability look shaky. Indonesia is sinking into chaos, Russia is sinking under the influence of feuding Mafia war lords, China has a bankrupt banking system and massive over capacity lead by an ideologically bankrupt corrupt government, Japan has a financially unsound system, the middle east is seeing the emergence of dangerous alliances (Israel, Turkey, US VS Syria, Russia, Egypt shortly, plus others), lots of unstable nuclear powers like Pakistan and now India with it nice new long range ICBM program nearing completion. I don't know which of these will boil over first but the new era is just an illusion. Trading the up and down nominal dollar zig zags in the stock markets can be profitable if you are agile and don't get greedy. I have also invested in several private high technology companies that I can control with people I trust - if continues to go well as it has in the past, these should leave me very wealthy even with a total loss in my bear positions. Another piece of advice is - enjoy your life! A second person that I have worked with closely has died from a hear attack in the recent past - both of these people were vegetarians that exercised, didn't smoke and drink and led generally clean lives. You just never know when your ticket is going to be punched! Time to play - hope this helps.