Wednesday, January 25, 2006

2005 In Review

I predicted that Desperate Housewives would lose viewership this year. I couldn't find out whether or not I was correct on this. And who really cares anyway?

CaptiousNut has been right about a sliding housing market. Click here, here, here, and here for refreshers.

Right about shares of Google. $451 per share as I type this, it was around $300 at my last post and $228 at my first post on the subject.

Right about George Allen. In a prior post I predicted he would be the Republican 2008 nominee for president. Okay, I am not technically right yet, but Rush Limbaugh, subsequent to my post, threw Allen’s name out as the lead candidate. Perhaps Rush is a Marginalizing Morons blog reader?

CaptiousNut was wrong about Google being added to the S&P 500 by January. Wall Street remains befuddled as to why Standard and Poor’s keeps passing them over. By not adding Google, they have cost many investors billions because index-tracking fund managers’ Google entry point seemingly goes up every week.

(weekly sugar chart: click to enlarge)

Jim Rogers hit the homerun on my blog with his call to buy oil, lead, sugar, and coffee.

Obviously oil is roaring, sugar is at 24 year highs, and coffee has been percolating as has lead.

I said that I was waiting for an Asian economic blip to give me a good entry point into the commodities market and unfortunately I haven't gotten one.

Gold is also at multi-year highs. I didn’t predict it was going up officially, but I did mention a purchase of options in the sector that have appreciated nicely.

I predicted the January effect would not come and was wrong. The stock market did rally in November, but also spiked during the first two weeks of January. Incidentally, I was shorting into that rally and was short the market last Friday when the market got obliterated. Unfortunately for me, I covered it a little too early. I also doubled up my Google position at $397, yet I also wimped out and dumped it for a very small profit as it bounced considerably. As much as I love Google, I have been burned enough over the years to learn the wisdom of keeping my eggs in separate baskets. I would rather try to find the next Google then get overly invested in the present one.

I was wrong shorting Apple (but did a good job covering around $70. It went up to $86).

On the subject of Apple, a lot of iPod geeks were high-fiving recently when the stock hit $85 and its market capitalization momentarily passed that of Dell Computer’s.

Jeff Jarvis was delighted as was Apple CEO Steve Jobs. Before the geek celebration even got started however, Apple shares got smacked down to $74. They have still had quite the remarkable run, but the episode reminds me of some of my own gloating stories.

In the summer of 1999, I was on fire with my trading. My account had climbed to a few hundred thousand dollars and I decided to “brag” or at least tell a couple of friends. Well, that was it. From there my account plunged to negative a couple of hundred thousand bucks. And I will never forget the high correlation between my gloating and that particular peak in my profits.

Once I got into a heated altercation on the trading floor with another trader. We were arguing over a trade, of course I was right and he was dead wrong. Four lettered words were flying and we had to be separated. My opponent had that lethal jerk/Moron combo going on and amidst about 50 people standing around he screamed at me,

“...F*ck you….I paid more in taxes last month than you make in an entire year...”

Though he was dead wrong in the original argument, he apparently thought his tax bracket gave him special dispensation. Needless to say, nobody on the trading floor really knows exactly how much others are earning.

How did this Moron end up?

Well two days later, he lost all of his money and got fired. He tried but couldn’t get another job with any other firm. Mind you, this was during the bull market and firms were throwing stupid 22 year old college grads into trading pits.

"I pay more in taxes...." became an oft repeated punchline for the guys down there, even years after the Moron was gone.

I could probably make a list of 50 or so similar traders I knew who suffered similar demises from my six years on the Philadelphia Stock Exchange.

“Pride cometh before a fall…” was also the theme of Johnny Tremain, an American literary classic I had to read in middle school and definitely didn’t learn from. I am not sure but "Pride cometh..." that may actually be from the Bible. Anyway life in the real world is unlike school because the tests come first and the lessons later on.

Definitely click on this Jeff Jarvis link and read the comments under his post. CapitousNut makes a few good pointed comments in the thread.

The difference between me and most opinion-heads is that I tend to put my money where my mouth is. I don't just THINK that the iPod is a fad, I have been shorting the stock and putting my money where my mouth is. Don't think for a second that Steve Jobs was buying Apple stock at $85 per share when he gloated (Apple insiders are actually ONLY SELLING). Nor were many of these college geeks, struggling artists, or cheerleading bloggers buying shares of Apple at any point.

But all in all, I try to stay focused more on analysis and sound financial planning rather than forecasting punditry.

Whether it is buying Google, renting instead of buying a house, or shorting Apple or stem cell research companies, etc., taking money from Morons may be the optimal way to Marginalize them.

Heck, you can even make money off "global warming" Morons by shorting stocks like ENER as I did today.

Maybe I will short the whole basket: Whole Foods, Starbucks, Apple Computer, Alternative Energy companies....

But that would be categorically foolish because,

...selling stuff to Morons is no small industry.

No comments: