My primary job is to manage my family’s life. A large part of that is managing our finances. However, every hour I spend writing and editing for this site is an hour I could have spent more productively. I’m not sure what my pay-off is for spending time posting here. It’s an issue for me as illustrated by my sons portrait of me.

In my next post I’ll share his portrait of my S.O., his mum, the irony of his perception of our roles is  not lost on me. I spend too much time on this computer and apparently hate mosquitoes more than anything.

So for the time being I’m going to ramble and use this site to collect my thoughts.

Some interesting Jim Rogers videos here at Fund My Mutual Fund.

• Civil unrest in the US?
• Commodities and Ag are the places to be. I’m still trying to make the time to look at Incitec Pivot more.
• Direct commodities instead of stocks. My dad and Jim like silver as it’s usual correlation to gold is out of whack and silver does have an industrial value.

The only thing that surprises me about the uproar over the AIG bonuses is that people are getting upset about 0.1% of the amount given to AIG. It like a magicians slight of hand, look we’re getting $165M back, just don’t look at the other $179,800M we’re not getting back from AIG. [As for the latest Toxic Asset plan, I'll let Options University speak for me. How many ways can US tax payers be mugged by their government? I'm so glad I've started hedging our US assets by selling USD and buying AUD. Deflation is the only salvation as the US runs out of citizens to fork over.] 

Investing in never easy.

Being one of the minority as an early adopter in RaptorD’s pole [on 18 March he asked "Is it time to buy financials?"] made me comfortable.  Today’s rally does not . My guess is the early majority are now jumping into financials and this rally won’t last, but I also think too many people were targeting specific price points, like 600 and 500 on the S&P, and as the markets job is to make the majority wrong, we may never see those points and it really is up and away from here. 

I am a market timer. However, I am not stupid enough to think I can time it with any accuracy. I am not arrogant enough to think I can predict the bottom. So I buy. I buy most comfortably on the way down, I am getting slightly better at not buying too early, but only slightly as my WM and IMB buys attest to. 

What to do? Smile and take profits or hold on for possible 10 baggers over the coming years? Have a short term focus or play the long game? Traditionally I prefer taking singles rather than going for home-runs, as singles are easy and plentiful.

My real problem is I have no idea what these financial companies are worth. I have no real plan. Just talking out loud. I think my solution may be to sell and buy stuff that I do know.

I post this as I feel the majority of investors sit comfortably in the majority, for want of another word. While Buffett says temperament is the most important trait, I reckon that is secondary to knowing yourself. While I don’t articulate my flaws much I spend a lot of time dwelling on them and my mistakes and thinking how to work around them.

I want this rally to have legs, even if I don’t get to deploy my margin at ultra low levels. I want it to have legs so I can see how those who sold get back on board, how those with cash chase prices higher. I’ve endured months of pain and I now want to see them squirm. Of course that bloody clever feathered friend of mine, RatorD, may have adeptly changed his feathers at the right time, oh to be so nimble!  It’s not him I wish to see squirm or anyone in particular it is the market in general.

Just rambling. I find it interesting that so many people are now talking about market timing and the dangers of long term buy and hold. I used to feel lonely and comfortable with my views on market timing, now I’m feeling crowded and that means it probably time I jumped back to the long term buy and hold camp, at least until the market once again becomes over valued.

This site is unlikely to become what I wanted. The main reason for that is our combined failings. I am not a great writer and with plethora of great writers now overflowing the blogosphere my voice is lost. People only seem to want to hear things when it is too late and when it is eloquently articulated. They now want to hear about market timing, when it is too late.

People were interested in margin investing at the height of the bull market as that is when the articulate marketers push them. So once again I’ll say now is the time to be thinking about margin. I don’t mean right now, today, but around about now, this year. My plan remains the same. If we get another large sell-off I’ll start to use my non-callable margin. If not I’ll start to use it when we are clearly out of the woods. We are not yet clearly out of the woods.

Why should anyone listen to me? ‘Cos I’m good at the game of life and good at investing. I’m not trying to get somewhere, I got there too soon. My problem now is I have no goal. I got there too soon and I’m floundering looking for another goal.

1. Know yourself.
2. Manage you short coming.
3. Control your emotions and temperament. Those of you who place significant importance on money are unlikely to succeed at this, so you should use long term market timing via averaging into index funds; buy lots now via averaging in and sell some when the market is next overvalued.
4. Don’t be part of the herd. For most people that means doing exactly the opposite of what they think is right. This comes back to number one. Most people like to think they’re different, but clearly the vast majority of people are not different and do not think differently. In all likelihood you are not different, so spend a lot of time thinking how you’ll manage what is a significant shortcoming to an investor.
5. Know you investing style and circle of competence. Make sure they fit your personality. 
6. Keep excellent records. If you do not outperform the market most years then accept that equaling the market is a fantastic return when combined with regularly saving year in year out.  

I may sound like an arrogant tosser, but hey you spend your life looking down on the masses from a 6′5″ vantage point, you achieve a primary life goal by 36, you outperform the markets eight out of every ten year and then you come and tell me to have some humility. The reality is one of my failing is under-confidence, I am always beating myself up about my failings and looking to improve. I am lucky, I am happy, I am often humbled.

More on Margin

Or should that be moron margin? I posted the following back on March 7 on TMF, after a drink too many! For the record the S&P closed at 683 on March 6 and at 676 on March 9, today it’s 21% higher. My post was in reply to what my addled brain thought was yet another person knocking the use of margin.

I find it incredible that my vodka tastes so good! It must be the fresh lime! What did I want to talk about…oh yeah margin.
What I find most incredible is…I can still type..clearly a motor reflex not controlled by the brain…woops, let’s try that again. 
What I find most incredible is that a guy who invests in real estate is taking issue with with margin. 

Margin is mortgage. Margin is a LOC [Line of Credit]. Margin is debt. Margin is leverage. How can someone who invests in real estate and presumably has a mortgage think that margin is bad? The conventional wisdom is margin is bad, that in itself makes me think that margin must be good.

I was bought up in a money hating family. When I started meeting “rich” people I asked them for tips on wealth. Almost everyone said something to the effect of OPM. OTHER PEOPLE’S MONEY.

So the secret to wealth is OPM, but margin is bad. Huh? Colour me confused.

My house and yours was bought using debt. Companies use debt with gay abandon. Countries, states…Debt debt debt, wherever you look. Yet somehow the conventional wisdom is that margin debt is bad.

There is one problem with margin so let’s isolate that. Margin can force your hand. It can make you sell low. So the problem is not margin, the problem is being forced to sell when you don’t want to. Remove that problem and you may uncover one of the best wealth creation tools of all time. Margin is leverage and the judicious use of leverage is a wonderful thing.

Now is not the time to be playing safe. Now is the time to be getting ready to cream the market using leverage, high betas, small caps, long LEAP calls, you name it. I don’t mean right now, though it’s certainly looking attractive to me, and certainly not all at once, but this is the year to be play with fire. 

Play safe when the markets are high. Use non-callable leverage when the markets are low.

Related posts:

1. Ten Rules of Margin Investing
2. Margin Investing
3. How to Spot Market Turning Points
4. Investing vs Working plus a Simple Path to Wealth
5. Portfolio Update come Investing Philosophy
6. Random Ravings From the Lunatic Fringe