Firefox Search Goodie

I just learned of a feature in Firefox that is very handy. When doing a Web search, holding down the option key (alt on a PC) when pressing return causes the search result to show up in a new tab. Sweet!

Investing & Market Corrections

Some people think that the market is due for a correction. It’s interesting to understand the reasons, but not essential. The essential things to know is that markets do correct and it’s impossible to know exactly when. It’s also true that what starts as a correction can become a serious long term decline: just look at 2000-2002.

When you are investing inside of tax sheltered vehicles, there is an obvious strategy for corrections. Once you’ve decided that a correction has started, you exit your investments. When it’s over, you get back in. People quibble over details of identification and timing, but all competent strategies follow the same basic logic. Moreover, there is little penalty for getting the timing wrong.

Taxable investments are a different story. Exiting the market creates a taxable event. Even worse, exiting too soon can create a “high tax” event (short term capital gains) while waiting could someday result in a “low tax” event (long term capital gains). What’s an investor to do?

It seems to me that the most important thing to remember is that it is not necessary to be “all in” or “all out”. It’s possible to reduce positions instead of eliminating positions. That’s my strategy for dealing with possible corrections. When I think a correction might be beginning, I reduce, but not eliminate, exposure. In fact, I use several triggers to signal that it’s time to reduce exposure. That way, if a major market decline occurs, I mostly avoid it. If the market corrects but then resumes it’s upward direction, I haven’t entirely lost the tax benefit of long term gains in the future.

It is impossible to predict what a market is going to do in the future (other than have it’s ups and downs), so the prudent approach is to hedge your bets by reducing and increasing exposure based on the best signals you can find.

Energy Independence

It doesn’t take a lot of thought to realize that energy independence is an illusion. Naturally, the need for energy independence is one of the few things Democrats and Republicans agree upon. Sigh. And I also think most attempts at creating an energy policy are mistaken. Policy makers have an appalling track record of diverting resources away from good ideas to bad ideas which have political appeal. As always, given the level and influence of political nonsense, I am amazed that things are as good as they are!

Investing

I’m pretty much standing by my Thursday analysis. My initial strategy for the week is to eliminate exposure to microcaps, reduce exposure to Mexico, and increase exposure to Taiwan, financials, financial services, and real estate. I’ll also be increasing negative exposure (shorting) precious metals.

As you might have guessed, I’m doing this through funds of various kinds. I’ve become a big fan of index funds for all the normal reasons, but mostly because it’s a lot less work than managing a portfolio of individual stocks.

After we see what the market looks like on Monday, I expect I’ll increase exposure to a few other corners of the market, but that will have to wait until Monday or Tuesday.

Iraq Status

It’s amazing to me that when we are at war, and the commanding general gives a status briefing to the President, Congress, and reporters, almost nothing filters into the news. Fortunately, the information is available. It’s as if people don’t really believe we’re at war or that the war is somehow phony. I blame our President for that. Calling this the “War on Terror” confuses things. I think we should have called it the “War on al Qaeda”, even though it is more properly al Qaeda’s war on us. The Iraq War was finished when we saw an elected Iraqi government in place. But the War on al Qaeda continues - in Iraq as well as Afghanistan. A more clandestine part of the war has continued elsewhere, such as we most recently saw in Saudi Arabia where there were plots to severely disrupt the government and the economy. For the life of me, I fail to see why so many people don’t take this seriously.

Remote Backup

Mozy provides free remote file backup and restore for both Macs and Windows. I’m beta testing the Mac version and have put it through one complete backup and restore cycle. It seems to work. I only backup critical data, so I need a lot less than the 2GB they provide for free, and for my small quantity of data, it’s pretty speedy.

Investing

When I started this blog, I hoped to concentrate on investing. I haven’t done so well, mostly because I’ve been giving some serious thought about exactly how to go about it. My earlier attempts were disappointing and I wanted to do better this time. Let’s see how it goes!

Current investment results are the consequence of previous decisions. Many weeks ago I decided that it was time to move into the major indices in a big way. The results have been rewarding, but now the trade off between risk and reward has changed. It’s too late to move into indices, but it’s too early to sell. This rally could continue for some time, or it could collapse soon. The question, as always, is if you have some cash to put to work, where should you put it?

This week I have been moving into a few specific sectors of the domestic market: technology, financials, and financial services. Investing in sectors is my least favorite thing to do, but it seems to be the best opportunity that the market is offering. It’s still looking good for next week, although today’s action could change my mind. I’ve also been moving into leveraged positions in the Dow, the S&P, the Nasdaq, and Midcaps. This was perhaps the last chance to get broad exposure at a decent price, and now buying will have to cease.

On a more exotic basis, it looks like continuing to invest in Taiwan, real estate, and commodities is prudent, but I think I’ll pull back from my investment in Mexico. I was using the Mexico Fund for that, since it’s pricing is quite confused and discounted due to a warrant offering, but my confidence is flagging. I may replace my Mexican exposure with a little more exposure to Japan.

In the very exotic area, I’m still liking the nanotech index (PXN) and shorting precious metals. I am, however, thinking more cautiously about microcaps.

My Thursday analysis is always preliminary. I’ll construct a real game plan over the weekend and try to post it here.

Coolest Mac Goodie?

If you’re a MacBook user, you must check this out. Who knew this was embedded in OS-X? The ability to zoom and scroll the screen could be very useful.

Pop vs Soda vs Coke

And if you didn’t have enough to worry about, someone is gathering data on the cultural divide that really splits America.

Economic Mysteries

A number of people are fretting about some economic mysteries: how can unemployment be so low when GDP growth is also low? How can the equity market be doing so much better than the national economy? The answer, I think, is globalization. Most big companies are multinational players and have considerable flexibility in how they account for international transactions. How many American jobs show up as American costs while the revenue they produce is recorded overseas? Don’t focus on traditional exports. Instead, remember that about 20% of the American economy is financial - banks, insurance, brokerage, etc. The assignment of national costs and income must be terribly arbitrary. In a global world, how meaningful is a “domestic product” measurement like GDP? I think a better metric would be a “gross global product”. No one cares much about the relative GDPs, trade imbalances, or cross border activities between Minnesota and Wisconsin. The same situation is slowly being recognized globally.