Happy All-Hallows-Even

Fiat Fantasy's October return was 3.12% as precious metals continue to lead the way.  Among others, Ron Paul and the writers listed under "Good Ideas Here" nailed this trend.  In October, BPT, DBA, and KOL joined the fray before this journal began.  No investments were sold.

At church today there was a special collection because the local clergy's retirement plan is underfunded by more than three million dollars.  These folks are eligible to retire at age 70 and there are no "golden parachutes".  So they asked for charity, the need for which is clearly on the rise.

3.5% Revisited

Several weeks ago I was about to toss the daily delivery of junk mail into the trash when I noticed a piece from my local credit union. It said "refinance your mortgage at 3.5%". It was a special rate applicable in certain circumstances. This loan program seemed to fit my needs, but my first thought was this seems too good to be true. I decided to pay them a visit just to find the loophole. Happily, there were no loopholes. The entire refinancing process was completed in three weeks.  No lawyers.  No realtors.

Lower than expected closing costs of $1200 made the deal work. The more typical higher closing costs greatly hinder economic activity. New York leads the pack as it so often does when it comes to fees. You can see where your state ranks here.

My parents bought a house for about $7000 in 1952. Their mortgage rate was 3% or so, likely through the VA. The government was encouraging the great numbers of WWII vets to buy homes. Houses were springing up on Long Island like wildfire as waves of people abandoned the city. Anyway, the refinancing brought home the fact that we haven't had interest rates this low in a very long time.  I was also reminded that despite the current debate about whether inflation or deflation is the greater economic threat, the real trend becomes clear once you look back more than a couple of years.

Some Recent History

In the Fall of 2007 I was quite confident my investments were adequately diversified and in some cases "professionally managed" . Fifteen months later I was down about 25%. It was little comfort that the S&P was off about 56%. I'd seen major drops before in the crash of 1987 and the dotcom bubble burst. What went wrong this time? First, a willingness to accept big losses. Second, pseudo diversification. There was a greater correlation between the returns of different asset classes such as equities and bonds as well as different regions and countries. I didn't want to go through this again-- changes had to be made. Almost sublimely I adopted the goal of getting a return greater than a bank CD or Treasuries with less volatility than the S&P 500. Years ago my brother-in-law built a business around this basic concept. I believed in the concept then; the failure was one of implementation.

Whatever vestiges of the "buy and hold" mentality that were still floating around the old noggin were eradicated. I briefly pin balled to the other extreme and did some day trading. It wasn't for me but at least it didn't cost me anything to find out. We'll get back to time frame another day, but let's just say I'm now more than willing to panic if need be.

I've been on a hunt for different investments. The term du jour is alternative investments. I took larger or new stakes in precious metals, commodities, and non US currencies. My appreciation for dividends increased and I learned a bit about Master Limited Partnerships, Royalty Trusts, and oil tanker companies. If a farmland ETF came out I'd take a look.

Results of this new framework have been satisfactory. I'm mindful it's been a period of rising prices for nearly all assets. The test will come when the turn comes. All I can say is the antennae are on full alert.

An Introduction

As I write this first entry, people throughout the country wait anxiously for next week's big event.  Not the national election, the Federal Reserve's announcement on "quantitative easing", a euphemism for creating dollars to spur economic demand.  Some experts say it's a good idea, others the opposite. 

What if the Fed makes a poor decision?  Could this have a profound affect on me?  I think so.  Similarly, next year my taxes may go up or my taxes may go down.  My home may go up in price or it may go down.  My state may go bankrupt or it may not.  What will a dollar buy next year?  To me, this appears to be a time of unprecedented financial uncertainty.  I feel like I'm in a tree 50 feet up at the end of long limb and a tornado warning siren goes off.  This journal records how I perceived and dealt with that financial uncertainty.  I'm hoping it makes me more objective and less of a procrastinator.

Mostly I'm going to discuss my investment approach and results.  It's what I'm doing, not what you should be doing.  As I said, this journal is primarily intended to help me.  Presently, I'm not enabling comments, but you're welcome to read about the shenanigans.  I do welcome comments and suggestions via email.