Wednesday, August 25, 2010

Marriage License. Gosh Darn, It Really Is About The Money

So earlier today Jess and I bought our marriage license for $90. We ordered it online and picked up at the court house in Beverly Hills. The whole time, Jess kept asking me if something was wrong cause she could detect I wasn't able to focus on the present excitement. No there's nothing wrong, and yes I'm very excited about marriage, but gosh darn, I can't get my mind off the market. My current puzzle is trying to figure out why my return this past month was only flat while also trying to dissuade a close family member from selling his large stake in GE stock.

As I've discussed in the past, my responsibilities as an investor has increased significantly over the last few months and its been incredibly challenging and rewarding. One the one hand, I'm wooping the market, on the other, its very, very challenging. My initial fund (less capital) was up ~6.5% through July this year. So from January 2008 through July 2010 (the total period of my initial fund), I was up 134%. During this same period the S&P 500 was down ~20% (an estimate which includes dividends). While this was a great run, it could have been much better had I also invested unallocated resources. As John Wooden would say, it wasn't a success because I didn't strive to reach my full potential.

Starting July I took on a greater role. I've made two moves that have worked favorably. First I quadrupled my short position (mostly to offset new purchases), and I also bought a spinoff (VPG at ~$11) which subsequently rallied 30-40% in a matter of a few weeks. VPG is doubly enjoyable as I also told a few people that I was buying it at $11 when it was still an opportunity for them to tag along (whether they did is I'm sure another story). Yet, despite two good bets, I'm only flat from July through today. So what am I doing wrong?

I know its a lousy ending to the post, but I still don't have a concrete answer. My initial takeaway is that I'm not making big enough bets to really make a difference (I'm only 15% invested including a 4% short stake) despite buying stock in 8 companies. Largely I think I need to get over the fact that I'm concerned the market could retest its March 2009 lows, which would create all the companies I'm currently buying 30% cheaper. Wouldn't you save most of your buying power for the lower prices, or do you just say, I know it's cheap here and I'm willing to buy 30-50% of a full position with the risk that I could have a huge paper loss in the months ahead? Tough choices. Do I potentially miss the upside (my VPG position could have been double its size easily) for an uncertain downturn?

Regarding GE, who the hell creates a marketing campaign suggesting that they're willing to make bad loans? That's just on top of the fact that if they're loan portfolio declines more than 10% the company is insolvent. Poor GE pensioners / employees, they would never know what hit them.

One of GE's recent ads below, and unlike the ad suggests, it is simply about the money.

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