Books And Other Thoughts

Books And Other Thoughts

I try to be well-read.  I have actually stopped reading paper books and magazines and have gone 100% electronic.  I use a Kindle
 for all my books, coordinated with the Kindle app on my iPhone and iPad.  Then I subscribe electronically to The Wall Street Journal and Barrons. I also use a great app called Zinio for magazines.  I get PC World and Kiplinger's on Zinio.  While I read PC World to learn about the world of technology, I have gotten investing ideas from there as well.

Right now, I have two books in my Kindle queue to read regarding finance/investing.  The first is Flash Boys by Michael Lewis. You'd have to be living under a rock not to have heard of the book, where ML announced the markets are "rigged".  I have read about 1/3 of the book so far.  It is stunning the lengths these HFT traders go to just to gain an advantage of a few microseconds (a millionth of a second).  So just following the money trail suggests that the advantage of speed has been critical. My read is that HFT would essentially have bids on many, many stocks (almost like sentries), and they would be triggered when a potential large trade was being placed at the first exchange.  They would then race in front of this large trade (to other exchanges) and buy shares in advance of it (due to their speed advantage) and then sell to the large trader for a slightly higher amount. So in essence, it has been sort of a tax on the rest of us. In the grand scheme, not costing you or me a lot (individually), but if you ran a $10 billion hedge fund that traded a lot, it could cost you $100 million a year.

The second book is The Manual of Ideas. I am actually very interested to dig into it and see what they have to say. I have appended a youtube video at the end of this blog regarding the book.

My favorite investing books are:

1. The Little Book The Beats The Stock Market
2. Margin of Safety
3. The Intelligent Investor
4. The Richest Man in Babylon and
5. You Can Be A Stock Market Genius

Taxes

Well, I have completed my tax returns, written my checks and mailed everything off.  I am actually getting back a bit on my federal return, but had to write a check to Connecticut. It feels good to be done and the end numbers were not as bad as I had feared in February. I guess I did a decent job on withholdings and managing some of my gains to be long term.

Bear Flags

Even though we are just a few percentage points off our all time high (1.8% for the SPY), it is easy to be like Chicken Little after the sell-off on Friday.  My readers know I am not a "technical" investor", but I do have a couple indicators I use to know when it might be time to go more towards cash.  None of those indicators are even close to being tripped.  My approach is such that I have no hope of ever getting off at the top, as that is virtually impossible. My approach is rather one of capital appreciation, which means to get out before a complete crash - so I will be able to take advantage of bargains post-crash.  

And for me, it is important not to be trigger happy in any direction.  Do not massively sell positions early, in most cases a sell off like Friday is a mere head fake and in a week after a 5% drop, we could be going back up.

But once I decide to massively sell (which in reality means maybe 20% of my portfolio), then I do not want to jump back in too quickly.  When you start to see "cheap" stocks, it can be very tempting to pull the trigger; but my experience is more like "don't shoot until you see the whites of their eyes"; wait until you are pretty darned sure the drop is over.

20% Of My Portfolio

To sell 20% of my portfolio would take some thinking.  I am definitely in the "don't buy zone" right now with my ill-timed buys on Friday (TWOU and GNW).  Dividend stocks and MFI stocks would be largely off limits.  So that would mean 15% of total might come from discretionary holdings.

Stock	Avg Cost	Current Price	Dividends	Gain per Share	Pct Gain	Pct of Portfolio
GTAT	5.41	16.90	-	11.49	212.6%	10.5%
LMNS	12.57	10.72	-	(1.85)	-14.8%	7.9%
GNW	9.16	17.82	-	8.66	94.6%	7.2%
KLIC	11.43	12.24	-	0.81	7.1%	4.8%
AOD	8.02	8.43	0.56	0.97	12.1%	4.3%
BBEP	16.74	20.09	1.03	4.39	26.2%	4.2%
CTCM	8.98	9.47	-	0.49	5.4%	3.5%
RPXC	16.36	16.14	-	(0.22)	-1.4%	3.4%
CS	29.47	32.66	-	3.19	10.8%	3.4%
PM	78.60	82.81	0.94	5.15	6.6%	3.0%
CALL	22.20	20.36	-	(1.84)	-8.3%	3.0%
ATVI	17.39	20.12	0.20	2.93	16.8%	3.0%
NTC	12.01	12.11	0.11	0.22	1.8%	3.0%
TPVG	15.55	15.90	-	0.35	2.3%	2.9%
CSQ	8.63	11.22	1.69	4.28	49.5%	2.8%
TGONF	10.27	10.25	0.34	0.32	3.1%	2.6%
FGL	20.06	23.51	0.07	3.52	17.5%	2.6%
FSC	9.65	9.59	0.08	0.02	0.2%	2.4%
CF	185.70	255.62	2.38	72.30	38.9%	2.1%
RIOM	2.25	2.03	-	(0.22)	-9.9%	1.9%
BAC-WTA	5.35	8.00	-	2.65	49.5%	1.8%
SNDK	70.20	80.95	-	10.75	15.3%	1.7%
KLAC	61.35	69.40	0.45	8.50	13.8%	1.7%
HIG-WT	21.24	26.84	-	5.60	26.4%	1.6%
AGX	15.60	29.02	0.75	14.17	90.8%	1.6%
GA	8.96	11.55	0.23	2.82	31.4%	1.5%
WNR	39.80	39.05	0.26	(0.50)	-1.2%	1.4%
SYNA	48.01	61.16	-	13.15	27.4%	1.4%
RDA	9.74	17.74	0.10	8.11	83.3%	1.3%
TWOU	13.92	13.06	-	(0.86)	-6.2%	1.3%
AVG	17.22	19.90	-	2.68	15.6%	1.3%
FLR	66.06	77.66	0.53	12.13	18.4%	1.0%
NVDA	13.85	18.15	0.32	4.62	33.4%	1.0%
OIBAX	5.00	6.10	1.94	3.04	60.9%	0.9%
O	20.64	40.74	15.28	35.38	171.4%	0.9%
CYOU	29.24	29.06	-	(0.18)	-0.6%	0.7%
IWM	119.28	114.49	-	(4.79)	-4.0%	0.5%

So yo can see if I sold all my LMNS (7.9%), TWOU (1.3%) and CALL (3.0%) - I would be pretty far down the road of 15%.  Then I would have some more difficult decisions to make. But that is for another day.