Monday, February 27, 2012

Don't Know What To Do

Hey everyone,

So I'm sitting here mid day with 30 minutes until the stock market closes, and I'm trying to figure out what to do. I'm trying to figure out what to do with my virtual portfolio and my real portfolio. The market has rallied an incredible amount since October, and it feels like we're running out of steam here. My thoughts are that any excuse to sell off will spark a pretty severe sell off. This could include a Euro zone debt deal fall through/inability to implement austerity measures, poor economic data from here in the U.S., an Iran issue, a natural disaster, etc. It is in these times that the most intelligent investor will feel stupid, and undoubtedly is, but must stay the course in his/her investment strategies. This is the crossroads I am at. I've had a great run, but want more. However, my gut is telling me to get out. But with only 30 minutes left in the trading day I feel that I will be unable to sell this afternoon. Any decision will have to be made tonight and implemented in the morning. Dow 13,000 is great but can it hold? I at least think we need a correction in the coming days/weeks. So should I just take the pain of the correction, or should I get out, laugh at those who stayed in, and then get back in when times are more favorable? I favor the latter and will probably do something of that sort in the coming days. I will be sure to keep you all in the loop. Off to class.

Cheers,
EZ

Tuesday, February 21, 2012

Europe Reaches a Greek Deal

Greece has finally secured a new bailout plan and debt restructuring agreement, although it is uncertain whether they will be able to meet the terms of the deal.

Details of the deal:
*130 B Euro bailout
-The Greeks wish to receive a 130B Euro bailout to keep themselves afloat until they can implement austerity measures to begin reducing their debt burden.

*120.5% Greek debt target as % of GDP (by 2020)
-The "target" for 2020. Currently, the debt as % of GDP is north of 140. The deal seeks to cut debt as % of GDP to the 120 level.

*53.5% write down on private creditors' bonds
-Private creditors to Greece will have to accept a 53.5% write down on the money they lent to Greece. This may seem harsh, but in a real "laissez faire" free market, the losses would be 100%. Wouldn't it be nice if you went to Vegas, put $1000 on black, it turned up red, and you got $465 back? I like my odds.

That's it for the details of the deal, for now. Look for Greece to meet the demands of the deal. If they can, it should provide for a good market environment going forward. If they can't, expect the European and U.S. markets to correct.

Cheers,
EZ

Tuesday, February 7, 2012

Update on My Life

Hello everyone. If you're wondering where the heck I've been lately, I will tell you. I've recently secured an internship that has kept me extremely busy lately. On the plus side, it's an internship in a very relative field in finance. Unfortunately, due to the nature of the job, I can't divulge what it is I work on, but I will do my best to pass on any non-confidential knowledge that I learn as an intern.

I will also do my best to blog at least once a week, but with school, an internship (20 hrs/wk), and a life, it may be difficult to put together thorough posts.

On another note, the Virtual Portfolio is now up 19%. In light of this fact, I am considering lightening up bits of the portfolio by selling positions. This will allow me to lock in these pretty incredible gains. (Currently beating the S&P by 8.3%).

Helping me make this decision in the next day(s) will certainly be index and stock charts. Have a look at the S&P 500:

The chart looks bullish with the 50/200 cross, but also looks bearish in the short term when you look at the RSI indicator. As you will notice, it is above 70 (73.94), which indicates that it is over-bought. We should expect a near term correction to bring the RSI back below 70. With the European situation gaining more attention lately, any negative news could certainly make the market correct pretty heavily. Although this is the case, given the good economic data, I would expect the market to continue its upward trajectory for a while. (We can never be sure though, and this is why I am considering selling positions to lock in my gains on the VP.)

Just something to think about for those of you trying to understand investing and portfolio management. I'd like to post in the near future about something I learned last summer at my internship at Merrill Lynch Wealth Management. One of the financial advisors told me a tool that I could use to predict market movements. This tool is charting the treasury vs the S&P. Because they move contrarily to each other, if you plot them against each other using a regression, you can predict short term movements in the treasury or the index. I'll explain later in the post.

That's it for now. I hope this post finds you all well.

Cheers,
EZ