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ikkyu2 (99.51)

All in

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January 10, 2011 – Comments (18)

Some of you like to know what I'm up to.

As of last week, I'm all in; I put the 10% that was still sitting sidelined into BAC and C, half and half.  I made a resolution to myself - documented here - that these banks are long-term positions and that I will not sell them before 2013 based on negative price movement alone.  Thus, no stop-limit.

My last investment, about 4 weeks before that, was MGM.  I like the company, am a satisfied repeat customer of theirs, and am excited about its Macau / Cotai Strip operations and options.  When LVS reported their staggering Macau numbers - 85% of LVS revenue comes from Macau now - MGM started moving up in tandem, and I have caught a nice little 40% pop.  No intention or reason to sell this any time soon.

If you picked up some GHM on my advice in August, you are most of the way to a one-bagger.  No intention or reason to sell this any time soon.

My best position is AAPL, which since I bought it at 193 has been The Stock That Could Only Go Up.  No intention or reason to sell this any time soon.  I do not know that I would accumulate more at this price point, but largely because its appreciation has skewed my asset allocation - I am an Apple portfolio with some other stuff in it at this point.

The last 6 months have absolutely been the best I have ever seen since I started actively managing my own accounts in 2005.  However, I am not eager to sell, lock in gains, or play with house money.  I am trying to remind myself what I keep reminding myself in downturns: don't fight the tape.

I have no particular conviction about the short or medium term movements of the market, interest rates, or the broad economy.  Long-term, 2-5 years, I believe that the market will go up, interest rates will go up, the economy will recover to a sustainable 3% growth rate, taxes will go up, and that energy and commodity demand will continue to rise.  I feel my portfolio is going to be nicely levered to those trends and so I am trying to resist any urge to do short-term monkeying with it.

18 Comments – Post Your Own

#1) On January 10, 2011 at 3:14 PM, Valyooo (99.81) wrote:

BAC is my biggest holding, so I am with you there.

The only thing that worries me about C, is that they're worse than they were a few years ago (they shed some of their best assetts) and they still have a market cap of 150 billion.  dont you think thats kinda high?  how much more can they grow? there is way too many shares.  It is the most actively traded stock every single day.

BTW, if you want to trade around the positions, buy C calls 16 days before earnings.  So much forced selling but their share price does not plunge...obviously people want to buy.  There is no forced selling during that 16 week period.  It has worked for 5 quarters in a row....last time I made 20% overnight with it

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#2) On January 10, 2011 at 3:16 PM, Momentum21 (98.34) wrote:

I won't argue with you. 

If I was going to push real aggressive (with a big, long term all-in style bet) I might just look at the XLF since you get above avg weighting to C, JPM and BAC and avoid the impact of any surprises the 2 bigs guys encounter short-term.

I own USB since I thought it was taken down with the sector and offers more downside protection. Obviously it is not as "cheap" on the surface but I like it short-term at least.  

GL 

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#3) On January 10, 2011 at 3:28 PM, jlmjlm77 (99.55) wrote:

If you are all in with no margin and have emergency cash, then you are probably okay as long as you are adequetely diversivied.  Best of luck, seems like you are making some good long term calls, however I would not be surprised to see a 5% run up followed by a 15% correction sometime in the spring and summer.  Hard to guess big moves in the short term.

 

 

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#4) On January 10, 2011 at 3:46 PM, Pennyperson (< 20) wrote:

Rec+

Waiting on the 15% correction to re-buy BAC (if it happens). Already in deep w/C and riding it long term and not worried.

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#5) On January 10, 2011 at 3:49 PM, IBDvalueinvestin (99.59) wrote:

Sorry but I believe if you place a stubborn position in the market it usually is a bad move. You gotta be flexible and willing to listen to what the market is telling you.

 

You said:

" I made a resolution to myself - documented here - that these banks are long-term positions and that I will not sell them before 2013 based on negative price movement alone.  Thus, no stop-limit."

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#6) On January 10, 2011 at 4:08 PM, hcve (< 20) wrote:

As #5 said...you may want to sell 50% when it's free-falling and re-invest when it hits rockbottom, that would heal some wounds maybe...?

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#7) On January 10, 2011 at 4:18 PM, Pennyperson (< 20) wrote:

I've pushed nearly 50% of my PF in on 2 stocks several times in the past = I can't say anything.

But, I watched close and did set a stop each time

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#8) On January 10, 2011 at 4:29 PM, ikkyu2 (99.51) wrote:

To IBD and hcve:  Losers average losers, all the way down!  I don't want to get into the habit of meddling with a long term position because of short term price moves.

 I resolved not to sell based on negative price movement alone.  That's not the same as being stubborn or refusing to listen to the market.  If the underlying thesis - that the banks will recover as the economy recovers - falters, I'll exit out of that position immediately.  If one of the companies runs into a giant structural problem, I'll be out immediately.

I like the idea of buying the XLF as well.  I did buy the homebuilder ETF, ITB, with a similar premise in mind.  You pay 0.5-0.75% a year for the diversification, and I figured that since the XLF is heavily weighted to the big names, I might as well not bother. 

As far as the comments about margin and asset allocation, when I say I'm "all in," I'm referring to that portion of my Roth IRA that I have allocated to equities.  I often keep some cash on the sideline inside that portion, in order to be able to buy an opportunity or miss a long bear trend, but right now I am fully invested in equities.  Although you can get short the market with ETFs inside an IRA, I believe this skirts the intent of regulations and may be penalized in future; and I do not want to be short; and these ETFs are a bad bargain all told; so I don't do it.  Margins and options are not permitted in an IRA. 

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#9) On January 10, 2011 at 4:31 PM, ikkyu2 (99.51) wrote:

More to the point: the reason I've put this resolution down in writing is based on a review I undertook recently (see the Dec entry) of my own investment journal.  Fact is, I'm a good buyer and a very, very bad seller.  I sell at the wrong times, for the wrong reasons, for no reason.  That's what I've observed about myself and it's one of the strongest trends that I observed in that review!

So I'm trying to impose some constraints on my own behavior in order to improve the results.  Your personal mileage almost certainly may vary.

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#10) On January 10, 2011 at 4:49 PM, Option1307 (30.43) wrote:

Best of luck!

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#11) On January 10, 2011 at 5:03 PM, Momentum21 (98.34) wrote:

 ikkyu2 (97.50) - I recently investigated the XHB and didn't like the composition of the top holdings. 7 of the top 10 aren't even builders! 

This is the case where I would find 3 or 4 decent plays (i recently bought MDC) and run with it. 

 

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#12) On January 10, 2011 at 5:58 PM, nuf2bdangrus (< 20) wrote:

First of all, you need to change if the facts change.  Secondly, why not sell some ATM calls every 60 days to lower your basis?  Or, if you're a believer, sell some OTM calls 12 months out to collect some premium...if the stock sells off, you can at least pocket the premium.  THe BAC Aug 14 calls sell for 1.88, so if you went long at 14.40 today you could lower your cost basis by 1.40.  Yes, you cap your upside, but given how extended the market is, I'd have some protection.  Good luck in your trades

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#13) On January 10, 2011 at 9:19 PM, rd80 (99.12) wrote:

 Margins and options are not permitted in an IRA.

Margin isn't permitted in an IRA, but options are, although not all brokerages allow it.  When I asked WellsTrade about it some time ago, buying options and selling covered calls in an IRA was ok.  They didn't allow selling puts from an IRA even if there was cash covering the position - I think that was their policy, not a regulatory thing.  I never applied for option permission because selling cash covered puts was what I was most interested in doing.  I did consider shifting to Interactive Brokers, they did allow selling cash covered puts in an IRA.

FWIW, I think Citi is the better of your two new banks.  It's turned the corner and still has room to improve.  BAC seems to just be hacking along, occaisionally finding new reasons why it shouldn't have overpaid for Countrywide.

Russ

(another happy GHM shareholder)

 

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#14) On January 11, 2011 at 3:33 AM, hcve (< 20) wrote:

Sidenote; be careful in banking, there's still a wikileaks thunderstorm hanging over - someone's- head....

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#15) On January 11, 2011 at 3:54 AM, ikkyu2 (99.51) wrote:

Good food for thought here.  I did not realize that options could be traded in my IRA.  Not sure they can be at Fidelity, which is where mine is.

I find Black-Scholes confusing and I am certain that I would misprice options and fail to understand their risks even with computer assist to delineate various scenarios (which I don't have.)  I'm happy with my all-long portfolio because I understand it and because time is on my side, not my counterparty's. 

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#16) On January 12, 2011 at 7:51 PM, fewl10 (34.03) wrote:

Gosh.  You guys are going to get killed.  Sorry, the banks are still committing fraud.  When it finally is realized, we will have a scenario play out that is worse than 2008.  Good luck with BAC and C, buddy.  I think you're going to regret this move.

Can't believe I'm not seeing more austerity coming from TMF'ers.  I thought you guys weren't such a bunch of Cramer-loving CNN types.

 

 

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#17) On January 12, 2011 at 7:54 PM, fewl10 (34.03) wrote:

One more thing:

AAPL, NFLX, AMZN - these are all screaming sells right now.  You'd be an idiot not to sell Apple, assuming you were a big enough gambler to hold it till now (which, obviously, you are).

 

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#18) On January 13, 2011 at 12:52 AM, ikkyu2 (99.51) wrote:

Oh no fewl10, you didn't!  Weren't you the guy who recommended I get out of AAPL here:

http://caps.fool.com/Blogs/apples-corporate-culture/353222

You're as wrong now as you were then! 

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