HOW ONE iTuliper IS INVESTED?

[Orforded]

Re: HOW ONE iTuliper IS INVESTED?

Eric's take on the economy, supported by others like Nouriel Roubini are what convinced me to go against my financial advisors advise and get out of the equity market. So you guys are golden to me. I remember in '07 I read a piece by Eric Jansen about how the whole thing was going to blow up with the subprime troubles being the fuse. Although I knew little about the economy it made complete sense to me because for the last few years I had been scratching my head wondering how all these people could suddenly afford to pay 300k and up to buy houses. Then I read how it was due to the credit fiasco and it all made perfect sense to me. So I emailed my investment guy and asked what are we going to do about this and his response was patronizing to say the least so that's when I started to try and learn something about investing. I'm still a novice but the money I saved by getting out of equities in the spring thanks to you guys sure looks good now.

The problem is I'm still too green to figure out a viable thesis.

I do believe that this country will never be the same economically, since there are not enough good jobs to sustain a viable middle/working class any longer. And since its my understanding that the working/middle/consumer class has always been the heart of our economy I don't see how we recover. Why should manufacturing jobs stay in the US when overseas workers will do the same jobs for a lot less money; couple this with jobs lost through mechanization and where do uneducated people go to work? They can't all be cops and firemen and computer operators. Without the vast working/middle class working at jobs that pay good union type wages we no longer have the consumer base that is the engine of our economy. I think this is the beginning of the end of the US being the world's great economic power. China is already the world's 4th largest economy and will get stronger as the consumer class in its billion plus population conitinues to grow. Right now the rest of the world props us up because for the time being we are still the biggest marketplace but that's going to change and inevitably we will lose that status and the rest of the world will cut us loose in a heartbeat. I think the US will come out of this with a smaller tighter economy which may in the end make for a better nation less fixated on $$$$ as the be all and end all, but it will be painful to get there.

So that is my strongly held economic thesis but I don't know how to create an investment thesis compatible with it.

[Orforded]

Re: HOW ONE iTuliper IS INVESTED?

Why Orforded? Why not "Orchevied" or Orjeeped?" I've always wanted to ask that.


Things turned out well for you in that when you first posted you were near lows in a lot of things wondering whether or not to sell. The summation of "advice" that showed up in that thread was to hold out for a rally and sell into it. I think that happened and you did, so good for you.


I expect someone suggested getting rid of your advisor(s) if you didn't trust them. Why haven't you done that?

I made some suggestions to a guy ER59 about some newsletters I thought could help him. If you care to search out ER59's posts, then you should come upon them. I would still make that recommendation to anyone who asked, and perhaps you can PM ER59 and see what he thinks of the newsletters.


Orforded, I think it was you who put up that you had paid some $7-8K for a course in investing. Was that you? Did you complete the course? Was it of no benefit?

Advice: Screw colleagues' investments tips.

If you care to disclose, how much has your 401 lost this year under the guidance of your advisors?

I'll check that out and get back to you.

Be patient.

Re Orforded: A couple of years ago I needed to come up quick with a screen name for an internet chess league I joined. I was at work and my office is in Orford NH, thus Orforded

I got out of equities based on the consensus of advise on this list and other sources that made sense to me.

I do not have sole control of the pofit sharing plan at work. I've convinced my partner and the employees that we need to change horses I just havn't found a new suitable horse and I don't trust my knowledge enough to run the fund for everybody.

I'll check out ER59. Right now I subscribe to Sy Harding and Curt Hesler. I also get the Hulbert digest. I will check out ER59's posts. Thanks.

I took the course and it sucked. It was this obtuse course in options trading. The teacher was just some self taught guy they hired who was self taught and couldn't teach worth a damn. He had no ability to explain and clarify ideas and methods that had become seond nature to him.

I'll get back to you on the profit sharing plan losses. The plan is a multiple of the SEP/IRA.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Re Orforded: A couple of years ago I needed to come up quick with a screen name for an internet chess league I joined. I was at work and my office is in Orford NH, thus Orforded

I got out of equities based on the consensus of advise on this list and other sources that made sense to me.

I do not have sole control of the pofit sharing plan at work. I've convinced my partner and the employees that we need to change horses I just havn't found a new suitable horse and I don't trust my knowledge enough to run the fund for everybody.

I'll check out ER59. Right now I subscribe to Sy Harding and Curt Hesler. I also get the Hulbert digest. I will check out ER59's posts. Thanks.

I took the course and it sucked. It was this obtuse course in options trading. The teacher was just some self taught guy they hired who was self taught and couldn't teach worth a damn. He had no ability to explain and clarify ideas and methods that had become seond nature to him.

I'll get back to you on the profit sharing plan losses. The plan is a multiple of the SEP/IRA.

Thanks, Orforded, for the followup to all my questions. Sy Harding is one that I recommended, and as I noted to ER59 I have not subscribed to his newsletter; however, I have read his public comments on decisionpoint.com for several years and I find I agree with most of what he puts up there. Additionally, he moves in and out of trends. For some reason his Friday note is not on decisionpoint.com this week, but is at http://www.financialsense.com/fsu/ed...2008/1219.html

The other guy The Chartist, Dan Sullivan, I look upon as the best person whom I know to issue a "long only" buy signal when he perceives the current bear market has come out of its bottom--though whenever that call comes it may or may not be correct. Below is from his latest hotline 12/18/08:

Stocks retreated in today's session with the Dow losing 219.35 -2.49%. Declining stocks led on the NYSE by a ratio of 3 to 2 and 7 to 4 on the NASDAQ. The Dow had previously traced out an inverted head and shoulders pattern and with today's sell off has been turned back at the neckline.
The weakest industry groups included gold, oil and gas and real estate investment trusts. On the positive side were hospitals, healthcare and airlines. Oil dropped 9% today to close at $36.22 a barrel which is surprising considering the fact OPEC announced a 2.2 million barrel a day cut in production yesterday. The drop in the price of oil is great for consumers but it also shows how weak the worldwide economies really are.
Our advice remains as it has been since the beginning of the year stay on the sidelines in money market funds.
Our other publication the Chartist Mutual Fund letter has moved into the number 1 spot in the Hulbert Financial Digest ratings for performance over the past 5 years. It was also among the top 5 newsletters in Hulbert's Honor Roll. If you would like a complimentary copy of our most recent issue please either email us at contactus@thechartist.com or call us at 562-596-2385. If you reach us after hours please leave your last name and your zip code.

The Chartist will manage accounts, whether yours is one it would manage I don't know. I don't know about what Harding offers. John Serrapere, who is one of EJ's acquaintances and who contributes here from time to time, manages money as I understand, and again I don't know anything specific about what he offers, but to my reading of his contributions he is sophistocated by my standards. Search Serrapere or perhaps PM Eric for directions if you have a desire to find out more about Serrapere.

It's amazing to me that more people here do not put up suggestions on dilemmas like yours. Surely some small business people must have similar retirement plans and face similar problems with finding competent managers.

I guess with the Madoff story occupying the news these days, it should be evident that one should be particularly careful about the leeway that one allows any money manager. I used The Chartist for a brief period and the only access it had to my funds was a trading authority in a Schwab account, which I could and did monitor daily. There was no way The Chartist could get at my money, or had it been inclined to try, no way it could happen without my seeing it.

[leegs]

Re: HOW ONE iTuliper IS INVESTED?

I'm very new to iTulip and here's my situation:

Cash - 52% (did some selling out of mutual funds in late Sept and late Oct 2008 (refer to thread http://www.itulip.com/forums/showthread.php?t=6197))
Equities - 42% (failed to commit totally to selling out of stocks. Been waiting for Lukester's big rally to develop)
Gold (BV) - 3%
SH - (S&P short) - 3%

80% of my money is in IRAs.

I am settling on the following parameters for a personal thesis:
- serious inflation will take place
- gold will go up
- oil will go back up a lot
- stocks have a lot further down to go

My sense of timing for the above to happen is 1-2 years, not necessarily next several months, but you can see by my minimal commitment so far to gold, oil, and short stocks that I definitely am taking a wait and see attitude.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

I'm very new to iTulip and here's my situation:

Cash - 52% (did some selling out of mutual funds in late Sept and late Oct 2008 (refer to thread http://www.itulip.com/forums/showthread.php?t=6197))
Equities - 42% (failed to commit totally to selling out of stocks. Been waiting for Lukester's big rally to develop)
Gold (BV) - 3%
SH - (S&P short) - 3%

80% of my money is in IRAs.

I am settling on the following parameters for a personal thesis:
- serious inflation will take place
- gold will go up
- oil will go back up a lot
- stocks have a lot further down to go

My sense of timing for the above to happen is 1-2 years, not necessarily next several months, but you can see by my minimal commitment so far to gold, oil, and short stocks that I definitely am taking a wait and see attitude.

Looks like a little "cognitive dissonance" here with SH and the maintenance of your emotional attachment to your 42% equities positions, or a 3% hedge against your long equities positions.

I closed out a bunch of longs last week (at losses), so perhaps that will insure a rally in equities.

You should start a thread "Ask Lukester" and inquire of him as to what's gonna happen.

It is a tough situation with your longs, assuming you have some losses in them, as to what to do now. I have the same problem with some stuff, losses I should never have allowed to buildup, but failed to have cut my losses when I should reasonably have done so had I exercised serious discipline. The issue of your time horizon, 20-years, may over that period bail you out, but no one knows. Look at Nikkei 225 today, 19 years after its peak.

If your reasoning leads you to believe that stocks have a "lot further to go down" then it seems to me wise to decide just what further losses you are willing to accept with regard to the 42% equities position in the case that the "Lukester" rally does not go much beyond where it may be currently, thus removing for you the opportunity to sell into strength.

I wish I knew and could publish the correct and easy answer, but it does not exist, I don't think.

[leegs]

Re: HOW ONE iTuliper IS INVESTED?

Jim,

'Cognitive dissonance' . . . 'emotional attachment' - yeah I think both of those terms pretty well sum things up.:confused:

I agree completely that I really need to establish some parameters regarding getting out of stocks (mostly index funds actually) if the rally is dead. As you say its tough. The sales I made in late October were really just gut-based, and I was lucky to catch that bounce.

The SH position is just dabbling for now,won't get further into it until doing something about the long positions.

BTW - the reference to 'Lukester's big rally' was not meant at all to be sarcastic or critical - I hope no one, especially him, takes it that way.

[Basil]

Re: HOW ONE iTuliper IS INVESTED?

Jim,

'Cognitive dissonance' . . . 'emotional attachment' - yeah I think both of those terms pretty well sum things up.:confused:

I agree completely that I really need to establish some parameters regarding getting out of stocks (mostly index funds actually) if the rally is dead. As you say its tough. The sales I made in late October were really just gut-based, and I was lucky to catch that bounce.

The SH position is just dabbling for now,won't get further into it until doing something about the long positions.

BTW - the reference to 'Lukester's big rally' was not meant at all to be sarcastic or critical - I hope no one, especially him, takes it that way.

First of all let me say, I have great respect for Lukester and read his shorter posts carefully. After discussions with him, I checked out Sy Harding, as this is one of the people Lukester cited to support the notion of a large rally in December. Harding is of the position that we should rally, not only because his technical indicators say so, but also because this recession will not be any worse than what transpired in the 70s (red flag if you accept the Itulip thesis). It turns out that most of the people calling for a big rally often cite the 70s as the worst this could get. For example Leeb bought the idea that the US government would actually make money from the TARP program. I am starting to think that many of these people are very good, but do not know how to read the tea leaves when somebody has been pissing in the tea. EJ, however, asked the question, "Well how did they make the tea?" rather than assuming it was the same old tea. And that makes all the difference

All of which is to say that (thus far) the rally has not panned out as they thought/hoped it would. I think that Jim is correct in that we have hit the 50 DMA and just cannot get past it. We now have a triple top, or a mini head and shoulders top; make of it what you will. It says to this amateur that we are going down again sooner rather than later.

If one accepts the overall Itulip hypothesis and EJ's read on the markets, two years from now, or maybe even six months from now, one will be very happy to have cashed out anywhere above 8K.

[Supercilious]

Re: HOW ONE iTuliper IS INVESTED?

I have great respect for Lukester and read his shorter posts carefully.

Priceless !!! .....

[LargoWinch]

Re: HOW ONE iTuliper IS INVESTED?

Priceless !!! .....

Indeed. Lmao on that one!

BTW: time to short crude... I went long this week on 2x leverage.

Last time I went long crude it plunged 15% or so in less than one week! (leverage excluded).

I can understand Jim's decision to sit on the sidelines. The markets volatility is crazier than a drunk beaver dancing on a log headed for Niagara Falls.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Indeed. Lmao on that one!

BTW: time to short crude... I went long this week on 2x leverage.

Last time I went long crude it plunged 15% or so in less than one week! (leverage excluded).

I can understand Jim's decision to sit on the sidelines. The markets volatility is crazier than a drunk beaver dancing on a log headed for Niagara Falls.

Well actually, Winch, the volatility as I have witnessed it in my portfolio and in the $VIX has lessened considerably, though the $VIX (chart above) is still just a hair below its peak in 2002, and nearing 50% off its recent high. My portfolio is more than just a hair beneath its peak of this year.

I have felt for a while that if I closed my longs, the market would go up, and if I held them, the market would go down. I guess everyone feels that way about their trades. I am out mostly, so we'll see what happens.

Mike Burk, who is the only person I cross that makes weekly market calls (record this year 39% correct, 35% wrong, and the rest mixed, i.e. for some weeks some indices were up, some were down and these were rated as a "tie"), today wrote

"Short Term
Seasonal considerations overwhelm everything else.

The second and third days prior to Christmas are often a little weak, but the day prior to Christmas is usually strong. This year, Friday, the day after Christmas, is likely to be a very low volume day that drifts upward, similar to the day after Thanksgiving.

Intermediate term
There is nothing technically to put the Santa Clause Rally in doubt."

My current allocation is:

LONG	0.00%
INTL LONG	0.00%
COMM	3.89%	DBA, UNG, USO
PM	1.57%	PHYS GOLD AND SILVER
EGY	1.95%	TSO, FTO, VLO
CURR	2.97%	FXF, TBT
HEDGED EQUITY	19.63%	HSGFX
12/20/08	30.02%
CASH	69.98%	NOT EARNING JACK SHIT.

The above positions are down 13.3%.

Currently my drawdown is 15.33%, YTD -3.57%, 1 year -2.21%, 2 years cmpd 2.92%, 3 years cmpd 4.38%, 5 years cmpd 8.20%, from 10/2002 lows cmpd 14.54%, from 2000 high -1.64% cmpd.

The upmove off 11/21/08 intraday lows to recent intraday highs has been 21% for DJI, 24% for the SPX, and 32+% for the RUT. I've been of the opinion that a "lot" of people have been expecting something like the ~50% rally for the DJI after the post-1929 crash (I think I am recalling that correctly). A 50% rally or more could happen in here, but my bet is against it. If it were to happen--50% rally--I will feel like shit.

[LargoWinch]

Re: HOW ONE iTuliper IS INVESTED?

Ok little update here.

My current allocation entering 2009 is as follow:

Cash	50.5%
Gold	32.2%
Platinum	6.1%
Silver	5.3%
Crude Oil (HOU)	4.1%
Natural Gas (HNU)	1.1%
Palladium	0.7%
Total:	100.0%

I recently added some HOU, but lost 15% on this position in a few weeks. Despite this I will not sell, but add to my cash position until I buy some more Crude (HOU.TO) or some DJ-Aig grains (HAU.TO). In other words: I feel I have enough PMs for now.

Note that the ETFs (HOU, HNU and HAU) are $CAD hedged and 2x leveraged. The allocation % above accounts for this leverage.

Starting this year, my spreadsheet will allow me to calculate my investments return (duh!) at any time during the year i.e. will differenciate between new capital (savings) and returns.

- W.

[Debt-freeTICer]

Re: HOW ONE iTuliper IS INVESTED?

My first post. My first investment was $1.4 Million cash. I found iTulip after I had made my investment. I welcome your critical analysis of how I did.

I am a 35% TIC owner of 4 NN commercial leased, new construction, single tenant, corporate sponsored, properties. My mining partner, Dick, owns the other 65% ($2.6 million). We chose to pay cash because Dick is 77 years old and did not want debt, and I am 55 and was using this investment to replace my working income. These leases are all at 7.5% CAP rate on 10 yr. initial term with 3 five year renewals. There are 2% per year rent increases on all. 2 are Family Dollar Stores, 1 Dollar General and a dialysis center.

My $101K annual income, paid monthly has been great.

My question for fellow iTulipers, "Do you think I am safe to hold these through Ka-poom?"

I have been reading here for about 9 months and have great respect for your opinions.

Let me give you some additional information which I hope has given me some comfort as I understand Ka-poom.
If we have hyperinflation, the Dollar store leases have a clause, "If store sales exceed $2.5 million annually, we receive a payment of 3% of gross sales over the 2.5."
The value of the Medical center for calculation of the Lease Payment is adjusted to current replacement costs at the time of the renewal periods.

When we purchased these properties, the rent per sq. ft. we are receiving was 20-25% below comp values in the local areas. We felt this was a nice cushion, if we had to replace our tenants.

Last of all, "Where did I get the $1.4 million to invest?" Dick and I sold 65 Square miles worth of mining claims on Iron and Rare Earths in Utah. Mining claims are recognized by the IRS as Real Property and qualified for 1031 Like Kind Exchange. Hence the purchase of other RE.

We both would have been in 50% tax brackets. My Basis (after claiming expenses in previous years) in the claims was only $1600.00. We paid no income tax and no commissions to purchase the properties. The whole $4million of our proceeds went into the purchase. If we hold these, or continue to exchange for like kind until we die, our children will get the properties tax free, due to the step-up in basis. Nice way to have Uncle Sam take on half of the risk and get none of the benefits.

If there is some better investment, I can sell as much of my property as I want and only pay Capital Gains now. The Realtor I purchased through, is still selling about a million dollars of this type of property per month. He said if I sold this in pieces of $50,000 minimum investments and up, I could sell at 6.5% CAP rate (a 13.3% Profit). He will charge me seller's commissions if I cash out, but nothing if I reinvest in some of his other inventory.

I realize this is waaay out of the norm for this forum, so please be kind. Today is My birthday.

[Sharky]

Re: HOW ONE iTuliper IS INVESTED?

My first post.

Welcome to itulip. And Happy Birthday!

I am a 35% TIC owner of 4 NN commercial leased, new construction, single tenant, corporate sponsored, properties. My mining partner, Dick, owns the other 65% ($2.6 million). We chose to pay cash because Dick is 77 years old and did not want debt, and I am 55 and was using this investment to replace my working income. These leases are all at 7.5% CAP rate on 10 yr. initial term with 3 five year renewals. There are 2% per year rent increases on all. 2 are Family Dollar Stores, 1 Dollar General and a dialysis center.

My $101K annual income, paid monthly has been great.

I can certainly understand what attracted you to the deal. That kind of investment would have been almost perfect about 10 yrs ago.

My question for fellow iTulipers, "Do you think I am safe to hold these through Ka-poom?"

Before Ka turns to Poom, we're likely to see:
-- Lots of bankruptcies in the retail sector
-- A big downturn in commercial real estate
-- Further credit tightening

I don't know anything about your tenant's businesses, but if I were you I would definitely investigate that in detail, if you haven't already. How well-positioned are they to survive the market downturn?

If the earnings from this investment are intended to be your only source of income, I would be concerned about the above issues. Are you in a position to be able to get by if your income drops by 50% or more? What if it goes away entirely for 6 to 18 months?

Mining claims are recognized by the IRS as Real Property and qualified for 1031 Like Kind Exchange. Hence the purchase of other RE.

We both would have been in 50% tax brackets. My Basis (after claiming expenses in previous years) in the claims was only $1600.00. We paid no income tax and no commissions to purchase the properties. The whole $4million of our proceeds went into the purchase. If we hold these, or continue to exchange for like kind until we die, our children will get the properties tax free, due to the step-up in basis. Nice way to have Uncle Sam take on half of the risk and get none of the benefits.

Nice on the surface. The flip side is that the real estate market is terrible at the moment, and is likely to get much worse before it gets better. The tax savings won't help you if the property drops in value by 50% or more over the next 4 to 6 years.

If there is some better investment, I can sell as much of my property as I want and only pay Capital Gains now. The Realtor I purchased through, is still selling about a million dollars of this type of property per month. He said if I sold this in pieces of $50,000 minimum investments and up, I could sell at 6.5% CAP rate (a 13.3% Profit). He will charge me seller's commissions if I cash out, but nothing if I reinvest in some of his other inventory.

The key to investing in the Ka phase is to retain as much purchasing power as you can. It's less about profit and more about safety. And safety means diversification. After Poom hits, taking on a lot of debt can allow low-risk leveraged investments, with the debt being paid back with inflated dollars.

Personally, I sold my commercial RE holdings a few years ago. I own my home free and clear. I cashed out my 401(k) and paid the tax penalty. My liquid holdings are divided between gold, a little silver, and cash (including foreign currencies). I've been out of the markets entirely since July.

You might want to consider selling at least some of your current investment and diversifying a little (if it was me, I would sell it all and take the tax hit, but I'm probably a bit more paranoid than most). If you decide to hang onto the property, you might look into ways to hedge your investment somewhat. Maybe by shorting RE ETFs, for example, or shorting companies similar to the ones your tenants are in, etc (there are many options in that area).

[LargoWinch]

Re: HOW ONE iTuliper IS INVESTED?

I realize this is waaay out of the norm for this forum, so please be kind. Today is My birthday.

1st: Happy Birthday!

2nd: Thanks for your post and welcome to iTulip.

3rd: I find your post very valuable and perfectly fitted for this thread. So don't be afraid to test your strategies, better be warned on the internet in a forum than losing your precious life savings.

Besides, the only members to be really afraid of are The metalman and Lukester and maybe Jim Nickerson on a bad day (he remains a AAA gentlemen though), but I prefer someone punching me on the head here than doing stupid things with my hard-earned money.


Having said all that, iTulip does not provide investment advice (Ed. I hope you approve of my disclaimer), but its members on a voluntary basis will if they feel like it.

Myself, being in Canada and with limited knowledge of the IRS tax code cannot help much.

However I would venture and say this:

a) Given the size of your capital, I think you should "invest" in an iTulip membership! (Ed. do I get brownie points for this?).

This paper from EJ regarding 2009 could prove very useful:
http://www.itulip.com/forums/showthread.php?t=6504

b) One of the main issue I see with your investment is that it is not liquid.

c) What if we have a severe recession lasting multiple years? How many tenants can you lose to break even?

d) Lastly, the last bubble occurred in RE and I doubt it will re-inflate to previous level. Inflation will of course support nominal prices somewhat of a deflated bubble, but I think inflation will show up somewhere else. My humble guess is that Gold and Crude Oil are likely to benefit the most. Hence, your nominal returns maybe ok, but your real returns may turn out to be negative.

e) I don't know about the costs of ownership, but if the increase in rent are capped a 2%, your are likely to suffer during POOM.

f) Last but no least: EJ/Ed. do recommend a mix of gold and cash (nothing else at this point).

[swgprop]

Re: HOW ONE iTuliper IS INVESTED?

I am a 35% TIC owner of 4 NN commercial leased, new construction, single tenant, corporate sponsored, properties. My mining partner, Dick, owns the other 65% ($2.6 million) ... These leases are all at 7.5% CAP rate on 10 yr. initial term with 3 five year renewals. There are 2% per year rent increases on all. 2 are Family Dollar Stores, 1 Dollar General and a dialysis center.

It strikes me that if you have to own retail based commercial real estate your tenant makeup is pretty good. Family Dollar and Dollar General are in a retail segment that should perform well during poor economic times (now).

http://www.lohud.com/article/2008812230362

That said, there are no guarantees of continued success...

http://online.barrons.com/article/SB...lenews_barrons

Your fourth tenant, a dialysis center, is in a potential growth industry given the aging boomer population.

You didn't say what percentage of your total holdings these properties represent. Assuming they represent the lion's share of your net worth, I would agree with Largo and Sharky; you may want to pursue a course of diversification and liquidity. You state you have the opportunity to sell some of your interest in the properties. While I am envious of your 100K in passive income, personally I'd sleep better at night having a healthy percentage of my holdings in cash and gold.

Best of luck and welcome.