HOW ONE iTuliper IS INVESTED?

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Thanks, Jim. (My name is Andrew, by the way -- ASH are my initials.) I value your comments.

My allocation would make any sane person blanche. I said in the text that "I had been in precious metals ever since" and I almost meant it!

Here's my allocation as a fraction of assets, but not including debt:

cash (US) = 10%
cash (Swiss Francs) = 11%
precious metals = 79%

The only debt I have is a student loan at 3.125% fixed, which is under 5% of the value of my assets.

Well, you did all right today, ASH. I know it is Andrew, because you are probably the most open person on iTulip in having provided information in your bio. I like that.

I wish I could direct you to the exact exchange between tombat$$$ and me a few days back about allocation and into what exactly. I've forgotten exactly now what he put up, but it was largely DGP which is +200% gold and URPIX (I think that is the profunds symbol for -200% against the SPX). He otherwise has some silver buried on his ranch somewhere. I wrote him tonight congratulating him on his genius. He made a killing of some sort today, which is good, and he had just opened a sizeable portion of the DGP about the time it bottomed.

One thing about being young with regard to financial mistakes (unless of inordinate magnitude) is that one has a longer time-frame in which they can be remedied.

Generally, I don't recall too many posters making harsh comments to those who have posted allocations. Screw'em unless they are willing to show their cards too. As a marine said while getting shrapnel taken out of his leg during the Vietnam War when asked what he thought of the Viet Cong, "Fuck the ******* fuckers." I don't think he had a Ph.D. (it is amazing that the program here will allow the first and last usages of the f-word, but strikes the one "f*cking.") I guess the Marine Corps taught economy of speech among other things.

Good luck.

Edit: one other thing occurs to me. You guys I don't think begin to realize how your lives are made potentially easier by virtue of the internet and all the resources that may be on it. I think you, ASH, are 30-ish, shit, when I was 30, we didn't even have the little hand calculators that cost a $ these days. I still don't know that over life times people with internet access will necessarily do better in investing than those who lived without it or lived with it for brief periods, but it should help, along with a strong sense of self-preservation.

[cakins]

Re: HOW ONE iTuliper IS INVESTED?

I am too small-time to care what people think about how I invest...

Silver (in my HANDS) bullion
Gold (Krurgerrands, Libs, St. Gaudens, maples)
Quick, short-term scalp in SKF
1 HK45 pistol
2% in T-bonds

[Chris]

Re: HOW ONE iTuliper IS INVESTED?

5% Cash
80% Gold
15% (Energy juniors equities) - currently worthless...

[Shakespear]

Re: HOW ONE iTuliper IS INVESTED?

Yes Jim, today young investers have a trove of valuable info at the tip of their fingers plus access to years and years of investing experience of others.

I am invested as follows ( not a recommendation)

BZP (mid cap oil/gas) 50 %
Vestas ( wind ) 40 %
Gold 5 %
DBA (Power Shares) 5 %

I am sleeping sound. :-)

I', a petroleum engineer and thus understand the play in BZP hence the large stake in it. Otherwise ( I did at one point) I would hold SLB, RIG and like oil/gas services or producing companies.

[ddn3f]

Re: HOW ONE iTuliper IS INVESTED?

Please be advised that this is my first post.I am quite young (mid 20s) and I have very little knowledge of investing and/or the economy except for the information I gather from itulip.

All of the investments are in IRAs so that I do not have to pay the high taxrates on owning gold and silver.

GLD 37%
SLV 27%
SRS 25%
Cash 11%

The cash is sitting in a bank account in case I might need it for something. Also I do have student loan debts.

[ASH]

Re: HOW ONE iTuliper IS INVESTED?

As a marine said while getting shrapnel taken out of his leg during the Vietnam War when asked what he thought of the Viet Cong, "Fuck the ******* fuckers." I don't think he had a Ph.D. (it is amazing that the program here will allow the first and last usages of the f-word, but strikes the one "f*cking.") I guess the Marine Corps taught economy of speech among other things.

I miss being around Marines. No one who has read my posts here would accuse me of brevity, but when in a military environment, I was quite capable of short, direct communication. Of course, back at the office between drills, I had to cut down on the profanity. There was a lot of context-switching.

Edit: one other thing occurs to me. You guys I don't think begin to realize how your lives are made potentially easier by virtue of the internet and all the resources that may be on it. I think you, ASH, are 30-ish, shit, when I was 30, we didn't even have the little hand calculators that cost a $ these days. I still don't know that over life times people with internet access will necessarily do better in investing than those who lived without it or lived with it for brief periods, but it should help, along with a strong sense of self-preservation.

I agree. Because of the internet, I understand exactly how screwed my generation is, but at the same time the internet gives me some of the tools I need to better prepare.

[LargoWinch]

Re: HOW ONE iTuliper IS INVESTED?

Here's my allocation as a fraction of assets, but not including debt:

cash (US) = 10%
cash (Swiss Francs) = 11%
precious metals = 79%

The only debt I have is a student loan at 3.125% fixed, which is under 5% of the value of my assets.

Andrew; of course one thing missing is the value of the portfolio vs your net disposable monthly income (among other things such as health - but lets keep it simple).

For younger investors - people with a low portfolio value to annual disposable income - a very high position in a particular investment may make sense, but is not advisable. I would certainly not recommend more than 15% in anything (besides cash) for a retiree with limited income and no more than 50% in anything for gonzos like me.

So, having said that, please remember that your 79% position in gold, is in aggregate very risky.

I believe gold is an incredible investment for the long-term (I own a lot myself) and EJ as well as a lot of other very smart people think it is going much higher but, you need to realize that ultimately it is a bet against CBs and these guys can be quite sneaky. You also never know.

To keep things short; despite your young age (like me - I am 31), my advice is for you is:

1) Pay all your debts as you get a guaranteed risk-free return

2) Use no leverage whatsoever in times like this

3) Reduce you Gold position to no more than 50% - because we never know
This way if gold drop back to $500, you lost 25% of your wealth; a substantial amount but not something you cannot recover due to your young age. Anyway, be mindful that it is still a risky bet

4) Don't keep too much cash (3-6 month worth of expenses)

5) Use the remainder to buy stocks (China, Taiwan and US are my favorite now) or get some energy exposure or fixed income or else. Spread it around. I think that stock are bottoming in nominal terms.

6) Constantly readjust your assets (weekly or at least monthly)

7) Keep funds for trading (in and out in a single day); on top of your core position (like cash + gold)
Remember: Goldman has not made is $$$ by using that "buy and hold" bullcrap. They go in; it goes up; then they are out and ponder their next move.

The goal is not to be a gazilionaire sometime in 40 years, but to do you best to preserve and hopefully grow safely what you saved.

Finally, remember that as Jim would say: your best asset is your ability to earn more. I would add to that; your discipline to save.

- L.

[LargoWinch]

Re: HOW ONE iTuliper IS INVESTED?

Please be advised that this is my first post.I am quite young (mid 20s) and I have very little knowledge of investing and/or the economy except for the information I gather from itulip.

All of the investments are in IRAs so that I do not have to pay the high taxrates on owning gold and silver.

GLD 37%
SLV 27%
SRS 25%
Cash 11%

The cash is sitting in a bank account in case I might need it for something. Also I do have student loan debts.

ddn3f; look at my reply to ASH. Somewhat applies to you as well.

Remember: that is only my 2 cents.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

I'm mostly out of the market because the volatility is wearing or has worn me out.

I think the equity markets are either going to turn up here in the next few weeks, or they may continue on down for a bit more from where we are and then turn up--that is my opinion. That about covers it except for there being possibly being some period of sideways movement.

There are a helluva lot of things all over the world that are cheaper than they have been for several years, and the dilemma is whether they will get cheaper.

That was correct. I'll just comment on the DJI as a proxy for the major equity indices. It was down 150 and the up 466 for an intraday point range of 617 points, which was gigantic.

By virtue of being in the process of changing a spreadsheet in which I try to track things, I captured the swings today in the seven -200% ETF's that I closed out yesterday; closed out because I was content to settle with the profits I had, and I was whipped by the volatility they had been experiencing.

Today, based on prices at which I sold the seven funds yesterday, from the open they "appreciated" $30.2 K and then ending up "losing" $41.5 for the day, that is a $71.7K swing in one day on a base of $379K!! I am glad I was out of them.

What's next with the equity markets?

I can assure anyone, I don't know, but the breadth indicators were very oversold yesterday, much as they were in July and March and at those lows the indices bounced. Generally, when significant new lows in prices are reached, the number of NYSE new lows will decrease in those cases where those new price lows are retested. The new price lows since January are considered retests that failed, by virtue of going on to new lows.

At the bear market lows in July, Oct 2002 and March 2003, the NYSE new lows were 917, 604, and 318 respectively; while the price of the SPX was lower in Oct. than July, and then higher in March 2003 than it had been in Oct. 2002.

So far in 2008, at the SPX troughs, in Jan. the NYSE lows numbered 1114, in March 759, in July 1304, and on 9/16 they were 1292. So even though new price lows have continued to occur, there has been no real pattern in significant contraction of new lows. To me this strongly suggests that the SPX, for example, will revisit or possibly exceed the last lows again, and until there appears to be some positive divergence in the number of new lows.

The three-day sum of the new daily lows for the NYSE is higher today than in any other three day period all the way back to 1/1/2000. I don't know of any significance to that fact with regard to further course of the market, but to me it does confirm just how oversold the NYSE has become so far.

[LargoWinch]

Re: HOW ONE iTuliper IS INVESTED?

Jim, a "back" of the envelope calculation indicates that your invested capital is 5+ times my portfolio.

This got me thinking: this investing exercise can only get more difficult and stressful as one increase its nest egg. This is counter-intuitive no? Since you should feel more secure as you get closer to retirement. What a bizarre system.

Currently I have easily a monthly net income daily swing in my portfolio...I can't imagine the day when in a week I can lose (or win) one year worth of savings...brrr

Not a good feeling right now...

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Jim, a "back" of the envelope calculation indicates that your invested capital is 5+ times my portfolio.

This got me thinking: this investing exercise can only get more difficult and stressful as one increase its nest egg. This is counter-intuitive no? Since you should feel more secure as you get closer to retirement. What a bizarre system.

Currently I have easily a monthly net income daily swing in my portfolio...I can't imagine the day when in a week I can lose (or win) one year worth of savings...brrr

Not a good feeling right now...

Winch, I've got a bit over a $1000K of investable assets. I had about that much when I quit working, and at 10 years after quitting I had about 500K--that was stressful. I think as time goes on, assuming you learn from your experiences, it should not be more stressful to look after your wealth, if you do not object to the time it takes to manage your own wealth. To me what would be stressful is to be nearly totally ignorant about your own money and depending upon someone whom you are paying to look after your own money and considering he/she may not know that much, if you are smart enough to figure that out.

Where I live, there are Edward Jones guys walking up and down my street looking to meet customers and to engage them in having their monies managed. The EJ guys are all late 20-ish looking to me, and I cannot imagine that they offer much in the way of serious concern about OP'sM's.

Another imponderable today is what sort of skill and knowledge will be necessary to look after one's wealth in 25-35 more years. No telling what the greedy bastards who make money off your and my money will come up with in the way of new scams. Life doesn't get easier for most people until their brains stop functioning.

[ASH]

Re: HOW ONE iTuliper IS INVESTED?

The three-day sum of the new daily lows for the NYSE is higher today than in any other three day period all the way back to 1/1/2000. I don't know of any significance to that fact with regard to further course of the market, but to me it does confirm just how oversold the NYSE has become so far.

Hi Jim. Please forgive me as I pretend to know what I'm talking about...

Most of your observations in this post fall into the category of "technical analysis", right? Is technical analysis supposed to work during periods of extreme volatility, such as a financial panic or other systemic shock? I noticed that your post did not make reference to events, but rather price levels and past data. I know zilch about technical analysis, but I presume that if it works, it must work because humans -- and trading programs written by humans -- are trained to look for patterns and respond to trends. I wonder if at times like this, the short-term motion of the market is driven primarily by news, and the hope or fear inspired by same. During a period like this, when earth-shattering news seems to be generated daily, wouldn't you expect traders to respond more to immediate events rather than prior patterns? Are there postulates that underly technical analysis, and do they say anything about when it does and does not apply?

Your final observation sounds a bit like statistics. To my mind, concluding that the market is over-sold based upon comparison of the three-day sum of daily lows over the period of time back to year 2000 implicitly assumes that lows are a randomly distributed variable. The observation that this is an unusual amount of selling can't be argued with -- this is clearly an outlying data point. If selling is a random variable, and the recent degree of selling is many standard deviations away from the average behavior, then one would be justified in concluding that it is not only unusual but "unlikely" behavior. If you postulate some sort of "restoring force" that would push the market back to an equilibrium price level (for instance, sober assessment of earnings and valuations) which did not change during the period of selling, then the conclusion that the market is over-sold follows. If, however, the market is driven by substantive news, then the selling isn't actually randomly distributed, and the news may be about events which affect the equilibrium price level. That would reduce the value of a statistical argument based upon immediate precedent.

[GRG55]

Re: HOW ONE iTuliper IS INVESTED?

Yes Jim, today young investers have a trove of valuable info at the tip of their fingers plus access to years and years of investing experience of others.

I am invested as follows ( not a recommendation)

BZP (mid cap oil/gas) 50 %
Vestas ( wind ) 40 %
Gold 5 %
DBA (Power Shares) 5 %

I am sleeping sound. :-)

I', a petroleum engineer and thus understand the play in BZP hence the large stake in it. Otherwise ( I did at one point) I would hold SLB, RIG and like oil/gas services or producing companies.

And I thought I had a concentrated portfolio.:eek: Interesting. :cool:

[ASH]

Re: HOW ONE iTuliper IS INVESTED?

To keep things short; despite your young age (like me - I am 31), my advice is for you is:

1) Pay all your debts as you get a guaranteed risk-free return

2) Use no leverage whatsoever in times like this

3) Reduce you Gold position to no more than 50% - because we never know
This way if gold drop back to $500, you lost 25% of your wealth; a substantial amount but not something you cannot recover due to your young age. Anyway, be mindful that it is still a risky bet

4) Don't keep too much cash (3-6 month worth of expenses)

5) Use the remainder to buy stocks (China, Taiwan and US are my favorite now) or get some energy exposure or fixed income or else. Spread it around. I think that stock are bottoming in nominal terms.

6) Constantly readjust your assets (weekly or at least monthly)

7) Keep funds for trading (in and out in a single day); on top of your core position (like cash + gold)
Remember: Goldman has not made is $$$ by using that "buy and hold" bullcrap. They go in; it goes up; then they are out and ponder their next move.

The goal is not to be a gazilionaire sometime in 40 years, but to do you best to preserve and hopefully grow safely what you saved.

Finally, remember that as Jim would say: your best asset is your ability to earn more. I would add to that; your discipline to save.

- L.

Hi Largo. Yes -- that would be the doctrinal approach. It is what I would advise someone else to do, with one or two exceptions. I thank you for your recommendations. Here are my thoughts:

1. My only debt is at 3.125% fixed interest, which is below the rate of CPI inflation in the US (presently 5.4%) and roughly equal to the yield of an FDIC-insured money market account. The way I see it, as long as I have enough cash on hand in the money market account to pay off the debt should the need arise, I may as well keep the debt on the books. (I admit, the interest income on the money market account WILL be taxed, so it doesn't actually cancel out the interest on the loan... but the inefficiency here is so slight as to not warrant action.)

2. I agree entirely. I'm sufficiently confident in the long-term macro picture that I'm comfortable not being diversified. However, leverage puts one at the mercy of short-term volatility. That is not something I care to mess with.

3. Well, most of my PM holdings are in CEF, which means 50% silver and 50% gold. However, from the standpoint of risk management, that hardly helps. It just so happens that I'm willing to accept the risk that my macro picture is wrong, because I presently assess an unacceptable level of risk in all alternatives. I will diversify when my assessment of risk changes.

4. I have three reasons to keep a lot of cash. Firstly, I'm keeping cash in a brokerage account in case a target of opportunity arises. Second, when my wife stopped working to have our daughter (born in July), that cut my household income precisely in half, and I want a big cushion of cash in case there are surprise expenses or my wife has difficulty finding a new job next year. Thirdly, we are looking to buy some land to build on, so I'm keeping some funds at hand in case a bargain shows up. I am trying to manage currency risk by keeping half the cash in Swiss Francs.

5. We'll see about the stocks. Even if this is the bottom, there is absolutely no reason to expect corporate profits to suddenly skyrocket. The way I see it, there's no rush to buy. I'm not buying into stocks again until I see a foundation for growing profits -- in most cases that means functioning credit markets, lower levels of consumer debt, rising employment, and a housing recovery. That appraisal will be made on a sector-by-sector basis, so I expect to get back into energy first.

6. Negative on that. The only time I will trade on even a monthly basis is with my speculative "play money." The bulk of my assets are commited to longer-term macro plays, and I will only reallocate when the macro picture changes. It's not that I think your suggestion is bad for everyone -- it just doesn't fit my style.

7. Yep -- cash to invest in targets of opportunity is included in my plan.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Hi Jim. Please forgive me as I pretend to know what I'm talking about...

Most of your observations in this post fall into the category of "technical analysis", right? Is technical analysis supposed to work during periods of extreme volatility, such as a financial panic or other systemic shock? I noticed that your post did not make reference to events, but rather price levels and past data. I know zilch about technical analysis, but I presume that if it works, it must work because humans -- and trading programs written by humans -- are trained to look for patterns and respond to trends. I wonder if at times like this, the short-term motion of the market is driven primarily by news, and the hope or fear inspired by same. During a period like this, when earth-shattering news seems to be generated daily, wouldn't you expect traders to respond more to immediate events rather than prior patterns? Are there postulates that underly technical analysis, and do they say anything about when it does and does not apply?

Your final observation sounds a bit like statistics. To my mind, concluding that the market is over-sold based upon comparison of the three-day sum of daily lows over the period of time back to year 2000 implicitly assumes that lows are a randomly distributed variable. The observation that this is an unusual amount of selling can't be argued with -- this is clearly an outlying data point. If selling is a random variable, and the recent degree of selling is many standard deviations away from the average behavior, then one would be justified in concluding that it is not only unusual but "unlikely" behavior. If you postulate some sort of "restoring force" that would push the market back to an equilibrium price level (for instance, sober assessment of earnings and valuations) which did not change during the period of selling, then the conclusion that the market is over-sold follows. If, however, the market is driven by substantive news, then the selling isn't actually randomly distributed, and the news may be about events which affect the equilibrium price level. That would reduce the value of a statistical argument based upon immediate precedent.

ASH, I don't think following breadth extremes (advance/decline data, new highs/lows) is much in the way of technical analysis. One can see extremes in these parameters that often coincide with price action of indices. Panic, Fear, Greed and Jubilation I believe have as much to do with market movements in the extremes (peaks and troughs) or more than do serious considerations of fundamentals.

Everyday that something happens in the market, someone has an explanation for why it happened. Last night, I didn't have any idea that the FED and treasury would come up today with some "gizmo" to save the financial world from collapsing further, I just observed the mother markets were at extremes using breadth and other measures of deviation from moving averages. Shit, they could have gone down further today and stayed, but either the rubber band grew too taut--that is to someone things looked cheap enough to buy, or the PPT guys convinced everyone again things are going to be all right so a lot of people itching to buy, bought. Nothing much probably changed in fundamentals of the market. I think I said it will return to yesterday's levels in my opinion before it might ever seriously go up as a serious bear market rally or the beginning of a bull market. Of course, I as will all others must wait and see how it unfolds. Still I do not think some sort of rally right now is improbable. The futures are up nicely now for NDX, SPX and DJI, UD$ is up and Gold is down.