Don’t Wait to Begin Investing

Thomas Bruni @BruniCharting  had a excellent tweet on the difference between investing and trading:

“As a trader/analyst I don't like equities.

As an investor, I'm buying stocks next week, month, year, decade, etc. Know your timeframe/goals”

I started thinking about some of the reasons why people delay investing.  I ran the numbers on what happens if you delay investing because you don’t like the market.

Let’s take a 30 year time frame.   A $4,000 annual investment at a modest 6% return awards you with $339,206 at the end of 30 years. 

If you don’t like this market and spend the money this year money instead of investing it, your payout drops to $316,232.  Postpone investing by five years?  Now your nest egg is down to $236,625.  Spending $20,000 now costs you $100,000 down the road. 

But you don’t the market?  You think maybe a bear market is coming next year?  It doesn’t matter.  If you put your $4,000 in the market and the market drops 20% this year, your fund is worth $333,572 after 30 years.  The 6% annual increase over 29 years more than makes up for one bad year now.

Hey, it’s your money, use it however makes you happy.  But I think you’ll be a lot happier if you have more of it to throw around later when you need it.

Time to go bullish

I don't know about capitulation, overaold conditions or moving averages, but i know when stocks stop going down..  That was today.

I turned bullish this afternoon when the market started to recover.  Shorted some $UVXY and bought a put on $SQQQ which is the Bear ETF for the 3X SPY.

People are way too bearish after the bad start to the year.

I'm Bearish Here

If you've got some money you are going to need in the next few months, or are a short term trader, you probably want to consider pulling it out of the market.

If, on the other hand, you've have money in a 401K with a 20 year horizon, you'd be better served to just wait it out and add more if the market goes down.  20 years is a very long time as far as investments go.  Think back to 1996. Could you have come close to predicting what was going to happen over the next 20 years then?

Big Comeback in Stocks Today - Is it a Good Sign?

The stock market come back big from being down even bigger.  A lot of talk that this is a positive sign for the market, so I wanted to test it.

The $SPY finished just under 2.% off the lows today, so I ran a sample of days where the index finished 1.8% or better above the low for the day.  You could dice it a lot of ways, but this is the one I chose.

It's happened a lot of the last 15 years,  I looked at what happened the following day or days and didn't really see a major trend.  Some days were up, some down and some barely moved.  In looking at the list, I saw it happening a lot in 2008, a very bad year for stocks.  So, I added up the numbers per year.

2015	3
2014	3
2013	2
2012	6
2011	21
2010	13
2009	40
2008	61
2007	7
2006	2
2005	1
2004	2
2003	23
2002	49
2001	40
2000	37
1999	20
1998	27
1997	24
1996	10
1995	2
1994	3

As you can see, the worst years are bear market years, 2008-9 and 2000-2002.  Having a lot of these is a sign of volatility and a bad thing. I can't say what one day will bring, but a lot of them are not good. 

Best of luck trading. 

Why I am short gold today

I sold off all of my money in equities today. Not that I am particularly bearish going into tomorrow’s Fed meeting, just that I don’t have a good feel for what may come out of the meeting.  I expect I will be buying back in after a few days, once things settle down.

The one thing I did keep is a short position in the Miners, Junior Miners and in Silver, via the 3x ETFs.  The reasoning, such as it is, is that the general consensus is that the Fed will be dovish when it announces tomorrow.  I judge this on the fact that gold and silver have exploded to the upside this week.

The strategy is no matter what the Fed announces, good things happen.

·         If they are dovish as expected, then nothing much will happen.  I should get the benefit of those ETFs going down through the daily rebalancing, or through a small selloff.

·         If they are a bit more hawkish, I expect Gold will sell off big time, dragging the miners down with it.

I see it as a win/win, or at least a win/not lose.  It’s the concept of going against a crowded trade. 

I’ll know tomorrow if it works.  If I don’t get shaken out before that.

Where are the Customers on the Forbes’ Billionaires List?

The Forbes list of billionaires is out for 2015 and Michelle Celarier @mcelarier tweeted that there were 38 hedge fund managers on the list, led by Ray Dalio at $15.2 million. 

I posed a question to Michelle, “Where are the Customers on the list?” and she responded that, indeed they were on there, as many billionaires would be clients of the hedge funds.

And I suppose that’s true.

But, the hedge fund managers had achieved the list because they ran hedge funds.  The customers made it because they earned or inherited the money from other endeavors, not because they invested their money in hedge funds.  

I just wonder how many customers made the list in spite of investing with the hedgies rather than because of them.

  

Does the $UVXY decay over the weekend?

Someone on Stocktwits made a comment that you should never hold the $UVXY over the weekend because you loose (sic) 2% due to decay.  I ran the numbers going back to when the UVXY was established to check that statement.

The UVXY is the Proshares Ultra Short term VIX futures ETF, which is a measure of volatility in the SPY futures times two.  This ETF was created in 2011.  Since its inception, it has declined in price by close to 98%, due to its design.   The question is whether this occurs over a weekend. 

The results?  The UVXY moves a lot over the weekend, but there is no clear trend.  Actually, the net change from Friday close to open Monday averages out to almost nothing.  Some weeks it moves up, some down, but overall, it is almost exactly zero (0.12%). 

Most of the move in $UVXY happens intraday, not over night.  Personally, I don’t ever recommend holding this ETF because of the decay mentioned.  But it’s not about the weekend.

This post is not a recommendation to buy or sell any investment.  Disclosure: as of posting date I have no position in $UVXY, but I often buy and sell and may at any time.