October 11th, 2007


Market turkeys

I have been playing in the stock market for almost 10 years. With the advent of discount brokers, any fool can put money into the market with just an Internet connection (emphasis on fool). I haven't had any formal "training" in economics or investing, but I did have a very informative training class in retirement planning and a father who was addicted to programs like "The Nightly Business Report." Currently I am addicted to Bloomberg Radio on XM. It's very informative in learning the ins-and-outs of the world economy and how to make the most of it. One thing that was drilled into our heads during the retirement class was that you had to make your money work for you. If you put your money in the bank and earned 2% interest but inflation was 3%, you lost money even if your balance went up. That's why you need to look for other places to put your retirement dollars since your money has to be worth more when you eventually quit for good. I'm a bit further down that road than most of you friends. It was only 15 years ago, however, when I was just getting out of grad school and really starting life. You'd be amazed what you can accomplish when you force yourself to put money aside and budget carefully. You deny yourself some pleasures, but you gain piece of mind later down the road when you don't have to worry about day-to-day bills.

I started investing just before the dot com bubble burst. That hurt me quite a bit, but I never bought into the whole game. I instead bought around the edges. I knew the Internet was the wave of the future so I bought into hardware and software. The only problem with that was that the market had been reaching saturation and capacity. When the market collapsed, I was left holding onto a lot of overvalued stock. The market has been recovering and I am getting close to breaking even with some of the stocks, but I finally realized that I am not making any money on this. It's better to walk away from the table as opposed to waiting for the cards to get hot again.

I should have just invested in some mutual funds, but instead I decided to make my own little mutual fund by investing in a whole range of stocks on my own. I figured that I could diversify as well as the next guy. In a way I was right. I had some winners as well as losers. Overall I am ahead of the game, but I could do better. Last week I finally jettisoned some of the underperformers. Hopefully the move will pay off.

One of the rules is to only buy what you know. There are a lot of stocks out there where you can make a lot of money. But if you don't exactly know what Bangladesh Wireless does, you probably shouldn't buy it. I mostly bought shares in companies that I knew.

Motorola: The company was beat down so I thought I was buying a bargain. Cell phones were spreading all over the place! Every time you saw a headset during football games you saw "Motorola" on the side. Well, the stock was no bargain. There were lots of problems and companies like Nokia were doing the job better. Bye-bye. You're gone.

Anheuser Busch: The stock was doing great. I knew they had a huge market share and were expanding around the world. You would think it would grow faster! Sorry. I am impatient with you. You're not growing fast enough. Thanks for the little profit.

UPS: I knew folks selling stuff on the Internet would need a way to ship it. UPS was my choice over FedEx. I was right! Made a nice little sum, but I keep hearing more and more horror stories about "Brown." Sounds like service is suffering! SELL!

Home Depot: Every time I went into HD it was packed! When living in Yuma I would drive 3 hours to Phoenix just to shop at HD. It was going to revolutionize the hardware store. Unfortunately service started to suffer big time. Hello! Can anyone help me me me me? Then Lowes started taking market share with nicer stores. Stock price fell and stagnated. Sorry. I don't believe in you any more. Gone!

Time Warner: With the rise of the Internet there were n00bs signing up every day. What was the choice of newbies? AOL! However, soon nobody gave a damn about AOL as cable and DSL started kicking dial-up's ass. WB had a few good movie franchise's like Harry Potter, but the stock has been flat. Buh bye!

Brinker: Who the hell are these guys? It's the company that owns Chili's, Macaroni Grill, Maggiano's, Corner Bakery, and On the Border. Now you know why we always go to Maggi's at MFF! Bwaa haa haa! No, seriously, their restaurants are always packed and the food is tasty. I could have held on to this one, but the price has been pretty flat as of late. Time to take some chips off the table.

Lightpath: This is one of my biggest disappointments. The company makes fiber optic products and were one of the biggest high-tech companies in ABQ. They closed the plant here and moved to New Jersey. The country's fiber optic network had been over-built and there was little demand for their products. I have been holding out in hopes that some larger company would buy them out, but so far no dice. I'm tired of holding onto this turkey. I'll lick my wounds and move on.

So where has the bear moved his money? Resources. China and India are growing like crazy. They need commodities to fuel their growth. Metal prices are going through the roof. I have doubled my money in South American copper in less than a year. Ethanol seems to be the wave of the future. Time to buy stocks related to agri-business. Oil and gas? The demand certainly won't be going down as we keep adding cars to our highways. Coal? Remember the brown-outs in CA a few years ago? I don't think we have built that many power plants so the need is still there.

So that's where things stand. I've simplified and consolidated my portfolio. I'll be looking more into mutual funds so that I don't have to screw around like I have been doing. It is fun, however, like gambling, but unlike Vegas you can make informed decisions instead of relying on luck. I'm also gaining insight into how the monetary world functions. It almost makes me want to get really serious and take some course in economics.
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