Today I did a couple more GOOG trades. Buying 80 GOOG, selling 100, shorting 80 and then buying back 50. So I ended the day short 30 GOOG. The first trade made about $180 and the second lost about $20. This is pretty typical of daytrading I think. Trading tens of thousands of dollars of stock for a couple of hundred dollars gain. Nothing glamorous. But if you worked at it every day and made $200 a day, that is $50,000 a year... I trade purely on technical analysis. A mixture of my own proprietary indicator, the basic indicators any charting program gives you - stochastics, MACD etc. - and Elliott Wave and traditional pattern based TA. You have to synthesize all that data together.
On mutual funds, yesterday I downloaded the last few months of prices for several funds in the Australian funds family I am invested in (Colonial First State). I analyse the funds I actually own plus some others I might think of buying. The analysis includes looking at how they perform in up and down markets, a correlation analysis, and a crude estimate of "alpha".
The correlation analysis is just the correlations computed using Excel of their daily rates of return over a five year period. To compute alpha, I regress the daily returns of each fund on the returns of their Diversified Fund.
Most of the funds I tested with the exception of their "High Growth Fund" have positive alpha relative to the Diversified Fund - i.e. adjusted for risk they outperform it. I don't even bother analysing their international stock funds. Those are so lousy it isn't even worth it - they are a top manager of Australian and resource stocks but not of general international stocks.
The update pretty much confirmed my previous analysis that the Future Leaders, Developing Companies, and Global Resources Fund have a relatively low correlation to each other and to the Conservative, Diversified, Imputation, and Geared Funds. The Geared Share Fund borrows on margin to buy Australian Shares and otherwise is pretty similar to the Imputation Fund. The Conservative Fund is 30% stock and 70% bonds and cash. These four funds are fairly highly correlated with each other and Conservative, Geared, and Imputation outperform Diversified. Therefore, my market timing strategy includes having the core of my portfolio in either the Geared Share or Conservative Fund and maintaining positions in Future Leaders, Developing Companies, and Global Resources for diversification purposes.
I perform a similar analysis also on my TIAA-CREF funds. Currently I hold CREF Bond Market and TIAA Real Estate in my 403(b). Neither has a high correlation with each other or much correlation with the general stock market or my own performance.
My own performance using monthly data has about a 50% correlation with the MSCI global index and in the last three years strong and increasing alpha. This is good news it shows I am improving in skill. Maybe if I could be bothered I could be a hedge fund manager :)
Tuesday, February 28, 2006
Sunday, February 26, 2006
Tax Day
8:30pm
Decided to do my tax returns today... I do them myself and use Excel to keep records and calculate. This year I added to my spreadsheet, worksheets for each of the six federal tax forms I need (1040, A, B, C, D, and 4952). Took about 4 hours to do the federal form. Most of the work is done by record keeping on those spreadsheets throughout the year, which I improve from year to year. So why learn Quicken or something? My expected federal refund is $3745 - about double last year. I'm including the expected refund in my net worth from today. I don't count my implicit tax assets and liabilities though as it is too much hassle to calculate.... and the value is uncertain depending on future tax rates, AMT etc....
Something interesting was figuring whether I needed to do the form 6251 for the AMT. If I had managed to reduce my tax bill by about another $3000 I would have to fill that form. $10000 of mortgage interest and property taxes would about do the trick I figure... That's not a very expensive property.
Now about to have dinner and then do my state return which should be pretty quick.
11:25pm
OK done my state tax now - no spreadsheet needed just the calculator on my Mac and my federal return....
I ended up owing the state government $5.92 :(
That is the first time in my life that I have had to pay any government rather than get a refund!
Decided to do my tax returns today... I do them myself and use Excel to keep records and calculate. This year I added to my spreadsheet, worksheets for each of the six federal tax forms I need (1040, A, B, C, D, and 4952). Took about 4 hours to do the federal form. Most of the work is done by record keeping on those spreadsheets throughout the year, which I improve from year to year. So why learn Quicken or something? My expected federal refund is $3745 - about double last year. I'm including the expected refund in my net worth from today. I don't count my implicit tax assets and liabilities though as it is too much hassle to calculate.... and the value is uncertain depending on future tax rates, AMT etc....
Something interesting was figuring whether I needed to do the form 6251 for the AMT. If I had managed to reduce my tax bill by about another $3000 I would have to fill that form. $10000 of mortgage interest and property taxes would about do the trick I figure... That's not a very expensive property.
Now about to have dinner and then do my state return which should be pretty quick.
11:25pm
OK done my state tax now - no spreadsheet needed just the calculator on my Mac and my federal return....
I ended up owing the state government $5.92 :(
That is the first time in my life that I have had to pay any government rather than get a refund!
Saturday, February 25, 2006
Daytrading
Some times I do a daytrade for fun. Today I traded Google. Bought 70 shares alongside the 30 I already had and then at the end of the day I sold 80 for a small profit. There were a couple of opportunities during the day to make a few hundreds of profit and I missed them :( Oh well, at least I ended up by a few tens of dollars...
The money for the trade was borrowed on margin using "day-trading buying power". This means you have to close the trade by the end of the day or get a margin call... so it really is pretty much educated gambling on how fast the stock will move in the direction you expect.
The money for the trade was borrowed on margin using "day-trading buying power". This means you have to close the trade by the end of the day or get a margin call... so it really is pretty much educated gambling on how fast the stock will move in the direction you expect.
Friday, February 24, 2006
Americans' Net Worth Trends
This article shows just how unusual most of the posters on NetWorthIQ who have multiple entries are:
http://money.cnn.com/2006/02/23/pf/consumer_fedsurvey/index.htm
Most show strongly rising net worth. However the median of all posters at $79500 is not that far from the national median of $93000. It is pretty obvious that people making an effort to increase their net worth are the types to track their progress on such a website...
http://money.cnn.com/2006/02/23/pf/consumer_fedsurvey/index.htm
Most show strongly rising net worth. However the median of all posters at $79500 is not that far from the national median of $93000. It is pretty obvious that people making an effort to increase their net worth are the types to track their progress on such a website...
Goals
The net worth goals might seem rather high and they do depend on everything going right.
The goal for this year is based on:
Current savings from salary: $20,000
Retirement contributions: $7,000
Investment returns: $30,000
Inheritance: $20,000 ($7,000 of which has materialized the other is a guess of the value of my share of a land sale)
Exchange rate change: $23,000
I'd be happy with a lot less - say a $50,000 gain instead of the $100,000 gain. But with $16,000 added to net worth so far this year I am right on track for the $100,000 goal.
The decade-end goal is dependent on there being a new stock bull market in 2007-8. This is what I expect based on the four year stock cycle. Based on the 2002-5 bull market I could double whatever wealth I have at the beginning of such a bull market. If that happens, the $1 million goal will not be so hard to achieve.
At the moment I am mainly trying to preserve capital against a potential downturn this year. You have to be very daring and right to make money in a down market...
The goal for this year is based on:
Current savings from salary: $20,000
Retirement contributions: $7,000
Investment returns: $30,000
Inheritance: $20,000 ($7,000 of which has materialized the other is a guess of the value of my share of a land sale)
Exchange rate change: $23,000
I'd be happy with a lot less - say a $50,000 gain instead of the $100,000 gain. But with $16,000 added to net worth so far this year I am right on track for the $100,000 goal.
The decade-end goal is dependent on there being a new stock bull market in 2007-8. This is what I expect based on the four year stock cycle. Based on the 2002-5 bull market I could double whatever wealth I have at the beginning of such a bull market. If that happens, the $1 million goal will not be so hard to achieve.
At the moment I am mainly trying to preserve capital against a potential downturn this year. You have to be very daring and right to make money in a down market...
Trading
Difficult trading environment at the moment. My trading positions are pretty much hedged between long and short at this point. Last night took a hit on my News Corp puts... this morning news from Toll Brothers is good as I am long WLS (William Lyon Homes). Nursing a long Blackrock (after trading it both ways last week). Was expecting a bounce on technicals.... Short SBUX very bad.... Long AAPL, HHH, and GOOG doing great. This morning AAPL announced new product announcements coming on Feb 28. Short DCX has been bad up till the last few days when plenty of analysts downgraded the stock...
On the investment side my current positions are pretty conservative with a bias towards bond mutual funds and listed hedge fund type investments. More on all this at month end.
PS 3pm - bought an extra 100 shares of AAPL
On the investment side my current positions are pretty conservative with a bias towards bond mutual funds and listed hedge fund type investments. More on all this at month end.
PS 3pm - bought an extra 100 shares of AAPL
Thursday, February 23, 2006
This and that
A great blog on the world markets, investment strategy, and China, from one of my old friends at Silicon Investor:
http://worldmarket.blogspot.com/
The Australian Dollar has been going down and foreign currency has a big impact on my net worth calculation. This month so far I am down $US 1,000 but up approximately $A 9,000...
http://worldmarket.blogspot.com/
The Australian Dollar has been going down and foreign currency has a big impact on my net worth calculation. This month so far I am down $US 1,000 but up approximately $A 9,000...
Thursday, February 16, 2006
Long Term Net Worth
This chart shows my net worth in the 12 years or so before NetWorthIQ's accounting starts. Starts with a period as a grad student and post doc where I go into and then out of debt and then a gradual increase in the last ten years. Big dip in 2002 due to no employment, a crashing stockmarket and a worldwide job search. Flew more miles that year including two round the world trips in the first three months of the year than I did before or since... Rate of accumulation since moving to the US (in 2002) has been faster than in Australia (1996-2002) where I earned less.
Welcome
This is my blog - I just got it so I can answer other blogs - I will probably occasionally post some personal finance stuff here to complement my profile on NetWorthIQ.
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