2008 11
My life as a non trader
Published by MartinVarsavsky.net in General with No Comments
Most investors who trade stocks and other securities trade frequently. I don´t. I am your average broker´s nightmare. I probably do around 1 trade per month. This year I decided to share my portfolio in my blog. And it has not been a bad year.
In a post I wrote on May 4th I told my readers what I thought was going to happen with the dollar. I said that Europe was in worse conditions then what it looked like at the time, and that the US were in better conditions then what it looked like at the time. That while the dollar was in a seeming freefall that it was going to turn around. For my own portfolio I reversed a 7 year trend and started moving away from the euro into the dollar. And while I haven’t done any oil related transaction, last July I wrote in my Spanish blog that oil prices were absurdly high and they had to fall.
I started sharing what I was doing with my portfolio in early 08 with a post in which I recommended buying Apple stock (on January 23rd). Apple stock had fallen from $202 to $134 per share in less then 60 days and I loved the company, I bought shares and I told my readers I had done so.
So my two trades of the year until now were shifting my liquidity into dollars and buying Apple shares. Other than that my money was mostly in hedge funds that are down around 8% on the average this year. Bad but not as bad as the markets. And here´s another 3 trades I did. I bought TEO (Telecom of Argentina) mainly because I am Argentine and don´t think Argentina is going to hell again. I bought Citigroup and Bank of America because I lived in the States for 18 years and I can´t imagine the two leading US banks going to hell. But if you look at the stock performance of C and BAC you would think that everyone else seems to think they are going to hell. So I bought those shares. I also have bought shares of Cresud (CRESY) a very large landowner in Argentina for the same reasons. They trade as if fertileland will be worthless something that in this world of still very high food prices I don´t think will be the case.
I should also note that my investments are very long term. In 2001 when I switched to the euro I kept with it until 2008. The Apple, Citigroup, Bank of America, Cresud and Telecom of Argentina stock I’ve bought I also plan to keep for quite some time. And overall I don´t own in all these equities combined more than 5% of my net worth so until this year I had no stock exposure and now I have very little.
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Martin Varsavsky on September 11, 2008 ·
@ Azeem:
Azeem just to clarify, the combine value of this stock portfolio is not more than 5% of my net worth. Most of my net worth is in real estate, cash, hedge funds, Fon shares, other privately held shares, solar farms, wind farms….
That´s why I call myself a non trader.
Elliott on November 15, 2008 ·
Great call on the dollar! Hope u didn’t put those profits into Citigroup.
numericalexample.com on May 18, 2009 ·
Like you I focus on long term value. Therefore I wrote a free online portfolio allocation tool to get an overview of my portfolio.
The URL is:
http://www.numericalexample.com/content/view/85/27/
You can also find the tool by searching on the following:
“Trading Simulator” numericalexample
Users can enter almost any number of transactions, dividends, an initial cash balance, interest rates, costs and dividends.
The Trading Simulator computes the value of your portfolio, the costs, the interest received or paid and the ROI.
In addition the Trading Simulator produces two time graphs. The top graph shows the value of the portfolio, the cash part and the investments. The second graph shows the value of each (risk) category of your investments.
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Azeem on September 11, 2008 ·
Martin
Wise point. But and hold is better that most strategies However buy and hold of individual stocks is really too much a lottery. Far better is buy and hold of whole sectors/trades via ETFs. Then you are not stock picking but asset allocating. You only need to plan to actually execute trades be rotating your allocation every six months. Provided you execute in and out of positions gradually, you can smooth the volatility of bad days (like day before yesterday). And if you sector allocate sensibly you can do pretty well.
The danger is when you start to take directional bets or let your emotions get into play. Take China: the point with China was to make the 30-40% return in 18 months that qualifies as an excellent return for an EM, then get out. Sure he FT-Xinhua doubled after that but it is now 80% down. Anyone who held on probably got tanked. Like wise oil. For a prudent investor, you could probably justify buying oil up to $120 but certainly not after that. And I wouldn’t consider getting back in till $80. The same was gold. In the uptrend, buying gold made sense up to about $900 there after you were always too close to the bubble popping. With gold on the way down you would want to wait until it hits $750 or less.
In fact, if you think of a diversified sectoral allocation, say 25 to 30 ETFs to cover over major us sectors, international plays, commodities, currencies and indices, you only have to assess your position on the world through reading the papers every day. Once a week you could review your positions and decide on sectoral rotation.
Actually the academia tells you something much different. Do less, less often, and get your thrills in the casino.
As for hedge funds, 8% down isn’t that bad. But I would say that at times like these you want non-directional hedge funds rather than directional ones. The overall market is in a bear slump (see my post: http://azeemazhar.wordpress.com/2008/09/10/knife-falls-dont-catch/ ) and directional players are fundamentally pissing into a hurricane. There are some directional players who have probaby had an atrocious time in 2006/7 who are short-oriented, we would expect them to do better and some of them have been.
Quick-holdQuick sell, technical traders should be doing very well in this liquidity. July and August were particularly bad for them because volumes dried up and everyone was scared, when liquidity is down and spreads are wide if your bastions of last resort the systematic quants get whacked.
My tip: cash until after the market is really at the bottom (6-9 months). When credit spreads on corporate bonds start to narrow, buy into good but discounted corporate bonds. Enjoy these; then flip out to equities.
If you want to juice it then short the broad market for the next six months but don’t get in until we get to a bit further in the upleg bounce after this weeks hammering.
BTW i have taken none of my own advice.