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Saturday, March 28th, 2009 02:45 pm
randomly, updates
This week in adventures in gambling!
First:
This is purely a question of opinion, for those on my flist that are financial professionals. What is the tipping point where I should consider getting a professional financial manager for my stock account? Is there a particular amount I have invested at which time I need to stop treating this like a particularly expensive hobby and at least start seeking professional advice?
First, Opinion
At my current rate of investment, not including the stuff in my 401K since that's all mutual funds, I should tip over ten thousand even with my current five percent loss by the end of this year or the first quarter of next. While yes, I do enjoy this on a purely visceral level--and will probably if I do go that way start another account for my own personal amusement to play with--at that point I have to admit that I'm going to lose my nerve and start doing really stupid things and I can handle doing that with the equivalent of my lunch and DVD money every month, but not so much with the cost of a new Kia Rio staring me in the face. Also, I went to look at Lenovo laptops and what do you know, if I keep this up, I can buy one with a solid state hard drive and 8G of RAM. My projections--yes, me and my spreadsheets--are encouraging ten years down the line if I am careful, but I'm not careful. I'm treating this like a game of Risk. You see this is dangerous.
Naked Short Selling!
Not actually naked, and possibly the most insane thing I've ever heard of in my life. Thanks to Stewart and company, I went on a hunt to work out the difference between short selling and naked short selling.
Here's what I got. Correct me if I'm wrong.
Short selling is borrowing X number of shares from someone--broker, bank, etc--and selling the shares immediately, pocketing the cash, betting that the shares will fall in price. When they do, buying back the shares at the lower price and returning them to the person borrowed from, and keeping the difference.
So say, 100 shares were borrowed. Each share is worth 100 dollars, equaling 10,000 when sold, minus transaction fees. Then the borroweer waits until the price drops to say, let's make this crazy, eighty dollars a share. So then the person buys 100 shares at 80 each, costing 8,000 plus transaction fees. They give back the shares and keep the roughly 2000 difference as profit (minus transaction fees). Which sounds like a very, very stressful way to make money. You know, unless you already know the stock is going to drop enough to offset the inevitable heartburn.
So naked short selling is not borrowing the shares, or even owning the shares. Instead, you sell shares you do not have, wait for the price to drop, then buy back the imaginary shares at the lower price. Not borrowing or having the shares could mean several different things, including having calls on shares that are not yet in your possession, so you are selling shares you may have. Eventually.
(The entire call/put thing is still just--okay, I'm not going there today. I understand it on a theoretical level, not practical.)
This is bad. Bad because apparently--and God, did this take some math--a company has, say, 100,000 shares they've offered. If you are selling shares you don't have, you are creating shares (imaginary ones, but for the purposes of this conversation, they are financially real), which then give the impression there are 100,000 shares + however many you say you are selling, which lowers the value of the shares.
See, I can't get past this. Like, at all.
What I'm getting from this is as follows: Joe has calls on 10,000 shares of say, BAC, which is a promise to buy those shares at a certain price at a certain time. But he does not have htem. They still belong to John. He tells Maggie he will sell these 10,000 shares, which he still does not have, to her at the current going price. Even though they are still John's. Then the price goes down, and Maggie's stupid, so she sells them back. The imaginary shares, that is. And then Joe gets the money for shares he did not have in the first place. Though apparently, Maggie is actually about five thousand people dumping shares. Or something.
And this is legal. I mean, if I squint, I can see it, but then again, if I squint, I can also imagine I see porn in Rorschach blobs, so really.
I continue to boggle at the wonders of the financial world. It's insane. It also makes me wonder how we even have a viable economic model going on.
Portfolio!
I mailed home my spreadsheet since my home version isn't current and updating it would take too much time. Also, I have new formulas imbedded that I don't remember how I created, so it was just easier that way.
My current total loss is roughly 9.11%, since I still don't know how to divide up my invested principle from dividends and sale profits, or for that matter, how to count the principle stored in the money market account--does that go under Total Invested or Current Value? Without that added in, and without monthly fees, it's about 8.06% loss or so. In other words, I'm still doing this with no real idea of what I'm doing.
I added two new columns for Previous Close and Change, which brings me to fourteen columns per stock to track, mostly for my own amusement.
Finally got rid of Bank of America. It was just too irritating. I am carefully not calculating what I could have made if I'd just waited to sell this week, because it's just too depressing. However, after watching gas prices thoughtfully, I added Exxon, as their shares seem not a terrible price and OPEC finally started cutting production. They are, in fact, the only profitable thing on my spreadsheet right now. Like, fifty-three cents. But I am okay with that. This is exciting.
Alcoa had some kind of personality switch and followed the rally up, so I am losing less with them. I don't know what that means.
Though I did figure out why CRNT was doing so oddly. Apparently, buying shares in foreign companies with American dollars not only has to worry about share price itself, but the value of the dollar at the time of buying. So--I mean, I have no idea, but at least I have a vague idea that my American dollars are not doing well in the Israeli exchange or something. It's--confusing. That's like, an entire chapter in my S7P Guide to Money and Investing and I started glazing over during the first paragraph. Give me time.
And that ends the lesson. For me, more or less.
Child
The locally owned and operated reptile and rabbit store has showed interest in Child volunteering there, which is--I mean, great, but also, um. They have five of the hugest snakes I have ever seen. And a ton of tiny rabbits. I did not buy a rabbit. I think everyone who has been here two years or more just breathed a sigh of relief. Mostly because it still hurts and I own my issues on that score, so you know. There were also ferrets, and this thing that was furry and expensive and hid in its bed, so we coulnd't figure out what it was (not a chinchilla). Adorable.
So today I saw a ball python (flashbacks to that woman who was strangled recently by one), blood python, something else that scared me, something else that scared me, something else...well, a lot. A lot of snakes. And bearded dragons, chameleons, anoles, and for display purposes only, a caiman lizard that looked a bit like a crocodile's runt baby that never grew up.
So I am calling the manager tomorrow of all the stores to find out what I need to do to get him into reptile heaven. Frankly, dragging him out today was hard, but they had a jacuzzi set up with turtles and fish and a huge iguana and it was literally the coolest thing ever. If you live on Austin, it's on Burnet just past Black Eyed Pea, and seriously, this place is cool. It's bigger than their original location, and with better lighting and more space. I mean--there's a freaking jacuzzi of turtles. That cannot be anything but awesome. And that iguana!
Right. Back to your lives. I'm working on editing a fic, so maybe up tonight or tomorrow? I'm going to ask you to keep your expectations very low right off the bat. It'll just be easier on us all if you do not do anything crazy like expect a plot or something. The working title is "The Slutty One" that will be renamed about five seconds before I post. So you know, that should tell you what you are getting here.
First:
This is purely a question of opinion, for those on my flist that are financial professionals. What is the tipping point where I should consider getting a professional financial manager for my stock account? Is there a particular amount I have invested at which time I need to stop treating this like a particularly expensive hobby and at least start seeking professional advice?
First, Opinion
At my current rate of investment, not including the stuff in my 401K since that's all mutual funds, I should tip over ten thousand even with my current five percent loss by the end of this year or the first quarter of next. While yes, I do enjoy this on a purely visceral level--and will probably if I do go that way start another account for my own personal amusement to play with--at that point I have to admit that I'm going to lose my nerve and start doing really stupid things and I can handle doing that with the equivalent of my lunch and DVD money every month, but not so much with the cost of a new Kia Rio staring me in the face. Also, I went to look at Lenovo laptops and what do you know, if I keep this up, I can buy one with a solid state hard drive and 8G of RAM. My projections--yes, me and my spreadsheets--are encouraging ten years down the line if I am careful, but I'm not careful. I'm treating this like a game of Risk. You see this is dangerous.
Naked Short Selling!
Not actually naked, and possibly the most insane thing I've ever heard of in my life. Thanks to Stewart and company, I went on a hunt to work out the difference between short selling and naked short selling.
Here's what I got. Correct me if I'm wrong.
Short selling is borrowing X number of shares from someone--broker, bank, etc--and selling the shares immediately, pocketing the cash, betting that the shares will fall in price. When they do, buying back the shares at the lower price and returning them to the person borrowed from, and keeping the difference.
So say, 100 shares were borrowed. Each share is worth 100 dollars, equaling 10,000 when sold, minus transaction fees. Then the borroweer waits until the price drops to say, let's make this crazy, eighty dollars a share. So then the person buys 100 shares at 80 each, costing 8,000 plus transaction fees. They give back the shares and keep the roughly 2000 difference as profit (minus transaction fees). Which sounds like a very, very stressful way to make money. You know, unless you already know the stock is going to drop enough to offset the inevitable heartburn.
So naked short selling is not borrowing the shares, or even owning the shares. Instead, you sell shares you do not have, wait for the price to drop, then buy back the imaginary shares at the lower price. Not borrowing or having the shares could mean several different things, including having calls on shares that are not yet in your possession, so you are selling shares you may have. Eventually.
(The entire call/put thing is still just--okay, I'm not going there today. I understand it on a theoretical level, not practical.)
This is bad. Bad because apparently--and God, did this take some math--a company has, say, 100,000 shares they've offered. If you are selling shares you don't have, you are creating shares (imaginary ones, but for the purposes of this conversation, they are financially real), which then give the impression there are 100,000 shares + however many you say you are selling, which lowers the value of the shares.
See, I can't get past this. Like, at all.
What I'm getting from this is as follows: Joe has calls on 10,000 shares of say, BAC, which is a promise to buy those shares at a certain price at a certain time. But he does not have htem. They still belong to John. He tells Maggie he will sell these 10,000 shares, which he still does not have, to her at the current going price. Even though they are still John's. Then the price goes down, and Maggie's stupid, so she sells them back. The imaginary shares, that is. And then Joe gets the money for shares he did not have in the first place. Though apparently, Maggie is actually about five thousand people dumping shares. Or something.
And this is legal. I mean, if I squint, I can see it, but then again, if I squint, I can also imagine I see porn in Rorschach blobs, so really.
I continue to boggle at the wonders of the financial world. It's insane. It also makes me wonder how we even have a viable economic model going on.
Portfolio!
I mailed home my spreadsheet since my home version isn't current and updating it would take too much time. Also, I have new formulas imbedded that I don't remember how I created, so it was just easier that way.
My current total loss is roughly 9.11%, since I still don't know how to divide up my invested principle from dividends and sale profits, or for that matter, how to count the principle stored in the money market account--does that go under Total Invested or Current Value? Without that added in, and without monthly fees, it's about 8.06% loss or so. In other words, I'm still doing this with no real idea of what I'm doing.
I added two new columns for Previous Close and Change, which brings me to fourteen columns per stock to track, mostly for my own amusement.
Finally got rid of Bank of America. It was just too irritating. I am carefully not calculating what I could have made if I'd just waited to sell this week, because it's just too depressing. However, after watching gas prices thoughtfully, I added Exxon, as their shares seem not a terrible price and OPEC finally started cutting production. They are, in fact, the only profitable thing on my spreadsheet right now. Like, fifty-three cents. But I am okay with that. This is exciting.
Alcoa had some kind of personality switch and followed the rally up, so I am losing less with them. I don't know what that means.
Though I did figure out why CRNT was doing so oddly. Apparently, buying shares in foreign companies with American dollars not only has to worry about share price itself, but the value of the dollar at the time of buying. So--I mean, I have no idea, but at least I have a vague idea that my American dollars are not doing well in the Israeli exchange or something. It's--confusing. That's like, an entire chapter in my S7P Guide to Money and Investing and I started glazing over during the first paragraph. Give me time.
And that ends the lesson. For me, more or less.
Child
The locally owned and operated reptile and rabbit store has showed interest in Child volunteering there, which is--I mean, great, but also, um. They have five of the hugest snakes I have ever seen. And a ton of tiny rabbits. I did not buy a rabbit. I think everyone who has been here two years or more just breathed a sigh of relief. Mostly because it still hurts and I own my issues on that score, so you know. There were also ferrets, and this thing that was furry and expensive and hid in its bed, so we coulnd't figure out what it was (not a chinchilla). Adorable.
So today I saw a ball python (flashbacks to that woman who was strangled recently by one), blood python, something else that scared me, something else that scared me, something else...well, a lot. A lot of snakes. And bearded dragons, chameleons, anoles, and for display purposes only, a caiman lizard that looked a bit like a crocodile's runt baby that never grew up.
So I am calling the manager tomorrow of all the stores to find out what I need to do to get him into reptile heaven. Frankly, dragging him out today was hard, but they had a jacuzzi set up with turtles and fish and a huge iguana and it was literally the coolest thing ever. If you live on Austin, it's on Burnet just past Black Eyed Pea, and seriously, this place is cool. It's bigger than their original location, and with better lighting and more space. I mean--there's a freaking jacuzzi of turtles. That cannot be anything but awesome. And that iguana!
Right. Back to your lives. I'm working on editing a fic, so maybe up tonight or tomorrow? I'm going to ask you to keep your expectations very low right off the bat. It'll just be easier on us all if you do not do anything crazy like expect a plot or something. The working title is "The Slutty One" that will be renamed about five seconds before I post. So you know, that should tell you what you are getting here.
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From:I've had this thought for a while, but it didn't seem to be my place to volunteer it--so remember you asked.
You shouldn't be hiring a professional financial manager. You shouldn't be doing what you're doing at all.
Stock-picking as a hobby is all very well if you can afford to lose all the money you have in play. I may be wrong, but my understanding of your financial situation (government job = not excessively compensated, sole supporter of a teenager) is that you can't.
The fact is, even professional stock pickers, who spend their lives working on doing it well, are not particularly good at it. The vast, vast majority of managed stock funds do not consistently over time (that's the key) outperform the market when you take their fees and transaction costs into account. And as an individual investor, you may not be paying their fees, but you're incurring higher transaction costs (you pay more for each individual trade, etc., because they get volume deals). Adding in someone to whom you pay fees will only make matters worse.
The idea that individuals can win their way to wealth through the stock market in the ordinary course of things is one of the most dangerous delusions of the 90s. You can't rely on your spreadsheet projections. The fact that some people got lucky and have had some success at this is not an indication that it is safe to rely on luck yourself with money you can't afford to lose.
To the extent that you're in the market at all, you need to be in low-cost index funds. Of course, the big examples of those funds are down this past year. Just about everyone is except for a handful of people with remarkable computers out in Long Island who are playing the game in a way that an individual who isn't Lex Luthor can't. But your individual investments aren't going to consistently beat the market unless you are insanely lucky, and "let me be insanely lucky" is no way to get ready for retirement.
P.S. Most forms of naked short-selling are no longer legal (http://www.sec.gov/news/press/2008/2008-204.htm).
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From:I need to check my credit union on that and see who they affiliiate with in retirement or education planning.
And to add to that, sorry! Thank you for the advice. I do appreciate this. I just apparently forget to add that to comments.
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From:Don't forget: (a) to account for the taxes you will have to pay for any gains you may have made this year if you have to sell stocks and (b) the maximum contribution for a Roth in any year is $5000, although you can contribute for last year until (I believe) April 15 of this year.
You should be looking into a 529 for the kid if you're not already.
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From:Yeah, the 529: I keep forgetting what it's called. There was talk they'd start offering the option through the state as they do the 457, but waiting for that isn't happening. Luckily, that loss of hope coincides with my latest job, so it's now practical to go ahead and start.
I'm probably going to wait until the end of this year. If I pull it now, i will find a reason to use it, and I want to get to the ten thousand. I will say this, even with a loss, it's still the best savings I've ever managed to pull off in my life, mostly because of the sheer inaccessibility. With a three day wait to move from one account to another, it makes it hard to do any decent impulse buying.
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From:(Seriously, you should always take the time you need to contemplate these things, but it's a pity to forfeit a year's allowance of tax-advantaged funds. Money invested in a Roth grows tax-free. So, for the most part, the identical stock holding will be worth less to you in an individual investment account than in a Roth.)
(But it occurs to me that you should double-check to see how a Roth and a 457 interact, only because I have no experience with the latter.)
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From:Whether it's better to go with a Roth IRA or a traditional IRA depends on what you anticipate your tax situation to be when you start withdrawing funds at retirement. Also, there are decisions to be made regarding whether it might be better for you to increase your pretax deferrals to your 457 plan (assuming you're not maxed out)--or, if you qualify, a traditional IRA--than to save on an after-tax basis. Your 457 plan provider may offer some online tools and/or personal assistance to help you evaluate your options and work through the tax implications. If what they offer seems inadequate or biased, it is definitely worth the cost to hire a fee-only or fee-based financial planner to look over your situation and make some recommendations regarding both your retirement savings and college saving for Child.
Whatever you do, don't rely on the advice of a commission-based representative. They don't earn anything unless they sell you something--and their advice tends to be biased in favor of the products they sell and/or get the biggest commissions on, whether those are the best products for you or not. Do try to find someone who regularly counsels people with a similar net worth to yours. The strategies and appropriate products for someone with a $100,000 net worth (for instance) are simply not the same as those for someone worth $5 million. If your net worth is modest, you WILL have a harder time finding a fee-only or fee-based advisor who will take you on as a client, though you may be more successful if you indicate you're only looking for a "checkup" as opposed to ongoing investment management.
Good luck!
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I only have basic advice - which you may be beyond
From:but remember investing is part of your overall life plan - other things to consider - credit card debt, student debt, car debt, emergency savings of 3-6 months etc. Both Dave Ramsey and Suze Orman have basic 'take stock of your life plan' books.
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From:a: awesome
b: something that some how has thus far failed to happen in SGA fic.
Despite the fact that my brain is going: hot tub of turtles = mckay/sheppard sex.
I'm not sure what this says about my brain, but it worries me a little.
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From:Short selling a stock really isn't any more stressful than buying a stock and waiting for it to go up. There's a credit component to the transaction which needs managing. The short seller uses the cash from the sale (or some other security) as collateral for the borrow of the stock and receives some rate on that amount. The lender of the stock can use the collateral for its own purposes. The two counterparties price the position every day and exchange collateral depending on whether the market is up or down. A potential problem is if one or the other counterparties gets in financial trouble and can't fulfill the contract. You really have to manage how much credit you want to give to somebody or else you might not get your stock or collateral back.
BTW, money market goes in both "Total Invested" and "Current Value" - the first is for how much you paid for the investment, the second is for what it's worth today (or the date on which you value it). There are a lot of on-line portfolio trackers you could use - most browsers have them, also Bloomberg, Business Week and Forbes - they also flag any news relating to your particular stocks.
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