Back Into The Fray

Earlier this week, I concluded the self-evaluation begun during my wilderness getaway. After taking everything into account, I decided to pursue returning to full-time work as a software engineer. I love the work and it pays well. There is still surprisingly strong demand in the market for my skills and it never hurts to make hay while the sun shines. (as my farmer relations used to say)

My other major option, raising capital and starting a small business, is still an important goal for me. A good portion of my getaway was invested in creating a specific business plan, including estimating startup costs, on-going cashflow, expansion plans, etc for the venture I had in mind. This was a valuable exercise and the plan I created may, one day, be the plan I pursue.

During my previous years of employment, I did a good job saving money in retirement plans and I feel like that part of my financial picture is in good shape. So beginning with my next job, I intend to divert my savings into a taxable investment account that will be dedicated toward helping to fund future business ventures and investment real estate purchases. I hear it works best to have a good chunk of your own money on the line when you present an opportunity to invest to others.

This decision (returning to employment) will likely mean another geographic relocation for me. If that turns out to be true, it will also likely mark the end of a short but incredible romance. Yet I feel the magnetic pull of my capacity for greatness in this world, and it is not a force that my spirit is inclined to resist. When you're in on the secret that love is not scarce, it is abundant - well, it doesn't make things easy, but it does make them possible.

A Different Lesson in Stock Market Humility

From an emotional point of view, I shouldn't have looked, I really shouldn't have.

But I did.

In the three day period since I sold DUG, it rocketed from the 42% gain I locked in, to a 95% gain from my original buy point. And it's still not showing signs of weakness.

Dad's voice in my mind is asking, "What did you learn?" and I've come up with an answer. If I had held on to the stock into the last half hour of the trading day (instead of selling it mid-afternoon) I would have been able to see a clearer picture of its behavior for the day. In DUG's case, this would have shown me that there was no clear sell signal and it is likely I wouldn't have sold.

Jesse Livermore, a famous (or infamous, to some) stock investor at the beginning of the 1900s used to say, "People fear when they should hope, and hope when they should fear." I used to think this was a kind of indictment on those other traders who are somehow weak. But now I see that he was just making an honest observation about how we all act sometimes.

T. Harv Eker writes about each person having a financial thermostat that is defined by his or her upper and lower financial comfort zones. If the person's financial situation goes below or above that range, he or she tends to subconsciously "correct" it so that the comfort zone is maintained. Evidently, my upper comfort zone for stock trading profits is somewhere around 42%. Well worth noticing.

The McCain Nausea Reflex - Guilt By Association?

With the 2008 election coming up, I'm asking myself, "Who will best lead the USA as president in the next four years?"  From where I sit, it's not as cut-and-dried a decision as one might think.

I am a believer in limited central government - as you might have guessed from this previous post.  One of the reasons why I am so disappointed with the current US administration is that "W" won me over during his campaign in 2000 with his talk of "learning the lessons of Vietnam" and "reaching across the aisle".  I had no idea the neo-conservative branch of the Republican party would render him into little more than a goofy-talking sock puppet mascot for their agenda of global economic and military supremacy.  Yeah, this from a guy who bought the Iraq WMD argument and voted for "W" again in 2004.

Of the two major candidates, John McCain embodies my political and philosophic views more accurately. (of all cadidates, that would be Ron Paul)  Yet, I am just as susceptible to a reaction of disgust for what we have all been through in the past eight years (let alone the shocking meltdown of the US financial system in recent weeks) as anyone else.  In 1993, the Democratic leadership of the House of Representatives was implicated in a sordid fraud scheme that involved the House post office.  That straw was enough to break the camel's back and give the House of Representatives a Republican majority for the first time in 40 years.  1980 gave us Reagan Democrats and I suspect 2008 will have its share of Obama Republicans.

And yet, I wonder, is all this reactionary decision-making serving us well?   Taking a step back from the whole scene, it is highly unlikely that a John McCain presidency would look anything like "W"'s regime.  He's not one of the Washington good ol' boys with a hundred butts to kiss, he wouldn't have a rabid war hawk with ties to the defense industry as a VP, and there isn't a snowball's chance in hell he (or any other Republican president for the next decade) will get a rubber-stamping legislature.  Put simply, just because he voted the party line 90% of the time doesn't make him a "W" clone.  It makes him a Republican.  George H. Bush's presidency didn't look anything like Reagan's did before him.

A Democrat president with a Democrat-majority congress could lead to the kind of "We've got a mandate" mentality that leads to cures far worse than the diseases they intend to cure.

Well, I'll tip my hand.  All I want for Christmas is some old-fashioned gridlock in Washington for the next four to eight years.  Like the kind we had under Clinton, where congress would squash the president's agenda and then the president would veto congress's bills.  As far as I'm concerned, that was a key contributor to the prosperity we experienced from 1995 to 2000.  And if this somehow manages to suffocate the global military hegemony we've got going on (long after its purpose, winning the Cold War, died out) as well as atrophy the federal bureaucracy by oh, say one third to one half, that would be nice too.  OK, now I'm really dreaming, but hey - why not?

See, my problem is, I'm just old enough to remember the reactions to oil, war, and power which swept Jimmy Carter into the presidency.  Such a great smile.  Such a thoughtful, gracious person.  Such a disaster for the country, policy-wise.  Whoops, that looks like guilt by association as well.  Maybe I'll just stick to my guns and write in "Ron Paul" on my ballot.

Not Too Shabby

Recently, I blogged about holding on to a security during the US economic bailout crisis. I can now reveal that I was holding shares of DUG, the ultrashort ETF for US oil industry stocks. I sold my shares yesterday and locked in a 42% gain.

I was confident enough in the weakening demand for oil (due to turbulence in the general economy) that I did not check up on my position while I was out of town last week on my retreat. Yet I knew the market might rally once the wall street bailout went through. It turns out that the turmoil in the European credit markets bought my ETF a little more upside Monday and Tuesday.

Stocks headed lower yesterday as well. But when the Fed announced a rate cut coordinated with rate cuts in Europe, the S&P 500 seemed to rally and at 2:30 PM, DUG was trading near the bottom of its intraday range on higher trading volume. In other words, it looked like more people who held DUG were starting to doubt its value than the ones who felt it would go higher. With all the uncertainty in the economy, I decided to pull the trigger and lock in my gain.

Maddeningly, the general markets turned bearish from 3:30 to 4:00 PM and DUG ended up right in the middle of its trading range today - not a clear "sell" signal after all. Nevertheless, I feel good about following the instincts I've developed as a result of studying the market over the past 10 years. That goes for holding it last week as well as selling it yesterday.