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American Capital Agency Corp. Message Board

  • ray8435893 ray8435893 May 3, 2012 9:06 PM Flag

    Investing thoughts

    Here are a half dozen thoughts from someone who has been learning for three years now ... hope it's interesting:

    [1] I think one can over-diversify. It gets to be too hard to do it right when you have to watch so much. I form a thesis about the economy, and choose stocks that will win in that environment. I am very over-weight MREIT's right now, but this is an unusual economic time. ((The options traders have their own problems, and I can't comment on them as I don't know .... I'm a missionary position investor.))

    [2] You have to get in at the right price if you're long .... no substitute for that. I got in too early a couple of times - too late is just as bad - but the first time was the worst. Wrote off $2.50 a share, although if you deduct the divy's I had gotten, I lost about half that. I got better as time went on, and haven't lost anything of consequence since ... a few small numbers ... always have had good numbers for the year as a whole.

    [3] Loss or not, sometimes you have to move on. It's probably a lot easier to make it back in a better stock.

    [4] I currently have eight stock positions totaling well into seven figures. I watch them everyday, and avoid big losses ... you need several winners to offset a bad loss, and it's hard to do. Eight is just about my limit, but, then, I like to go on vacations.

    [5] Don't trade in and out unless you really know what you are doing, or something serious changes. Moving around too much usually yields poor results. AGNC has been an exception to this for the most part, and even it is challenging sometimes.

    [6] I have almost exclusively high-divy stocks ... only the 1,500 shares of QCOM that I got recently doesn't fit that requirement, but it's a small percentage of my holdings. Not only do high divy's give you cash with which you can compound your investing, it gives you the courage to stay a little longer with a stock that might just be having a bad day.

    These techniques are currently yielding 1% a month in cash flow and 1% a month in cap gains [realized and unrealized] ... roughly. That is my goal.

    I would be happy to hear the thoughts of others. Cheers.

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    • Doc;

      I earned 14% for about 3 yrs. Those bonds are now history. If I would have bought the 10yr I would have still been earning approx. 10% to this day and of course they would be BAC bonds now. Also back in those days I was thinking that world would be a better place in 3 yrs and I could have re-invested in a better quality corp. at a decent yield. Of course the world never got better did it.

      Doc everyone has some knowledge here to share.
      Trust me , I see you talk about Ops and I am the idiot.

      Onion

    • Hi Onion,

      You have found my Achilles heel...;-) I am a dope at this stuff. So, I understand your premise that bad news drives up the yield on short maturity bonds over long maturity bonds, which therefore depresses the price you can buy both of them at, right?

      Then why would your preference be to buy the longer maturity other than its price being depressed with the bad news also.

      >The 3yr bonds were at 14% but the 10yr bonds were at 10% ( thats why I say I should have bought those 10yrs.)>

      In other words, since this is a conversation about the cf between long and short maturity, why chose long(other than duration), if the shorts are cheaper.

      I know, DocReits needs help...so help me...;-)

      Thanks,

      DocReits

    • NONO you guys misunderstood me.

      In the world of bonds, when there is bad news and you are buying bonds at a depressed price,

      depressed prices affect shorter bonds more than they do longer bonds.

      When fund managers were dumping say, Countrywide bonds back when the Mozillo scandal hit the papers , The 3yr bonds were at 14% but the 10yr bonds were at 10% ( thats why I say I should have bought those 10yrs.)
      Price movement affects a shorter bond more than it does a longer bond. Maturity is part of the equation.
      So all things being equal if suddenly, all bonds are selling say 10% lower in price,
      the shorter bond will have the higher yield.

      Even today with a positive yield curve...
      If I were to take 10% off the price of all us Treasuries (steep yield curve)

      The 2yr treasury today price = 100 yield 0.25%
      the 10yr treasury today price 101-7/32 yield 1.86

      ok lets say Obama reveals himself as the Anti-Christ and we take 10% off the price of all UST

      2yr @ 90 = 5.66%
      10yr @ 91-7/32 = 3.046%

      I hope this makes sense, didnt mean to confuse anyone.

    • Wife and I got back from a trip to Corona Del Mar about a month ago. I love that place! Problem is I don't have enough money to even rent a shack there. I need your money Ray. I'm still up for adoption....;-)

      We especially liked the small park at Lookout Point. Enjoy your trip!

      DocReits

    • Yes, its easy to identify them " after " they recover, right? I have to give credit to Onion and others who " knew" BAC would recover. I just about pulled the trigger on WAMU bonds at about 14% or more...can't remember. Did the bond holders finally get their money?

      I also just about got GMAC bonds too. Who would think they would default. Wait, they became the new GM..."Government Motors" .

      I was looking at Ford, at 2.00. It's easy to say that Ford would make it now. Wasn't real easy back then. If I had been actively trading options then, I would like to say I would have had the temerity to place a 100,000 bet on 10Jan4 Leap Calls at 2.00. They cashed in for about 9.00 in Jan 2010 for a nice 3.5 banger or 350,000 profit. Coulda, shoulda, woulda...was Ford too big to fail?

      They took care of themselves....how novel....;-)

      DocReits

    • Sorry, I obviously misinterpreted your question. He did say "should have bought longer" so I'm guessing that that was probably a typo -- but let's hear it from the horse's mouth.

      BTW, Onion's recommendation regarding "good companies on bad news" is very much what I have been trying to do with options over the years. It's easy to identify the bad news, the question is how you can be sure of the "good company" part. Especially in an age when traditional rocks of Gibraltar like autos and banks etc. go belly up. If you can identify a beaten-down good company that is certain to recover, you can make money from that many different ways.

    • Ephort,

      Am I chopped liver?

      >>Doc, I think "shorter" here was meant to apply to maturity>>

      Please re-read my question and link. I am dumb at bonds and yield curves, but the question I asked was the same as the correction you attempted. That is, in a normal( non-inverted) yield curve environment, the shorter the maturity, the lower the yield(please click on link I provided on the previous post). So therefore , I asked if Onion had misspoken, or if he was talking about something I don't understand , as he stated the opposite, in his post.

      What am I missing? Please give me light, but please read my post to understand the light that I need .... ;-)

      Thanks Ephort,

      DocReits

    • Hope you and your son catch a lot of fish! Enjoy your weekend Matt.

    • The SPO was the reason I was looking at it. Short term (in a month or so) it will probably be up nicely. I just didn't like their financials.

    • ----------
      These techniques are currently yielding 1% a month in cash flow and 1% a month in cap gains [realized and unrealized] ... roughly. That is my goal.
      ---------------------

      ok, i read every single comment here to see if someone would catch this, sadly no one seems to of even questioned it?.

      I haven't seen a comment like that since about the 1997 to 1999 period.... just before the great tech crash, (ok a little talk like that in 2006-7).

      expecting 24% gains a year is totally unrealistic... it is so egregiously unrealistic that if he had not said it, i would of guessed he was only in the market for 1 or 2 or 3 years. ONLY people who have been in this short of time, talk like that.

      that is scary talk.... every time i see someone talk like that, i go back to my portfolio and see if i can cut something else out to make it leaner and meaner.
      stop doing that... this market has been in goldilocks mentality for a little too long.. if enough people get that type of attitude, then guess what happens.

      • 3 Replies to jonkai3
      • I invest with the intent to get as close as possible to 10% dividend returns a year, which have been fortunately possible for last few years.
        However, regarding capital gains and LOSSES , they turn out more to be a function of the markets, economy etc more than anything else and which I cannot control much and which fluctuate with the market. But dividends are what smooth the ride. I have a few stocks , I have held for couple of years, which are 10% below what I bought. I think of them as losers but they too have given dividends of about 10%/yr , more than making up for capital losses.

      • Wow Jonkai, with all due respect to Ray(love you buddy), I almost totally agree with you. You say you read my post. When I read about people planning on 15,000/ month in divi's I wonder where I went wrong....;-)

        When I hear about yoy 8% total, I get doubtful. If you are making 6, yoy, total portfolio , you are doing well. Well taking 5% as more realistic you would have to have almost 4 million in your portfolio to make that 15k/month.

        Good for you, if you do. Most folks don't. I often talk to my patients who are living on their 50,000/ year state and fed pensions and I ask them do they know how much money they'd have to have in a 1% CD( if they could find it ) to make that pension money. Most are teachers, so they say no, of course....;-).

        Well, I tell them....5,000,000. Really , they say, yes, really. But I worked 20 years for that and I deserve it...uh, huh. I worked 35, and I am still working to pay with my earned income the tax dollars to pay for your pension. Oh....

        I make about 8% on my total portfolio. That's because I am 70% cash. 20% CD's, paying 3.5% avg(got them in the semi good old days, and 5-10% option money, I make 100-200% /year on. It's the option money that inflates the total.

        I will not place more than 10% of total portfolio at risk, with options.

        DocReits

      • I have been in for only three years ... thought I was upfront about that. My post in actually a search for good ideas, not saying I know it all.

        My goal is 1% and 1%, but it might not be possible all the time. Lately, I am north of those benchmarks. If the market tanks, my income should hold up, but the cap gains won't. My goal will still be the same, though.

        Some people have goals like: 0% of income and 40% of cap gains. See, that's different than me .... difference of philosophy.

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