Angst, action, and a modicum of perspective

So I must confess this market has me a bit nervous.  My main outlet for financial nerves is my “play money”  (aka mad money) IRA account.  Here are my recent plays:

  • Buying an SPY call to close my covered call.  (realizing ~$300 gain on the call)
  • Selling 100 shares of SPY (about $1100 loss realized over about 1 year, offset by about $700 in call gains and dividends)
  • Buying 2 OCT 123 SPY puts yesterday (~$490 profit on paper in a day and a half).

So far I am happy with these moves.  It frees up cash for future buys and gives me the feeling of security of cash (in a money market).  More importantly it makes feel active rather than feeling passive.  This is helpful as part of me wants to sell sell sell! shares in my broader portfolio.

For me getting out of shares (selling) is emotionally easier than getting back in.  Thus, staying in is important.  I must admit it is feeling harder to resist a bit of selling.  I am certainly discouraged by the lack of gains in the last 10 years in the stock market.

Which gets me to real estate.  My home has been a pretty solid investment.  It has appreciated about 4-5% annually inclusive of the recent slight housing downturn.  This is not bad considering :1) it is a leveraged investment, 2) tax-deductible interest payments, and 3) I enjoy my house and my neighborhood.  So I take some solace in the fact that while stocks have been mediocre, my other investments (house, bonds, money market, options) have provided decent (if not exactly spectacular) returns.

WTF — A Week to Remember

MTWTF — Monday, Tuesday, Wednesday, Thursday, Friday.   But somehow WTF feels appropriate.  That’s where crazy became really crazy.

Monday caught my attention.  A big decline.  Then Tuesday.  Opened low, but finished up.

Wednesday. Down.

Thursday.  Opens up slightly, then down massively.  Then up massively.

Friday. Egads!  Up!!

I the midst of the maelstrom I was tossed by the winds.  My emotions were tossed as I saw $10K+ daily movements in my portfolio.  Fear was palpable.  One moment I wanted to place big bets on the upside by buying SPY calls, the next I wanted to buy puts.  Logic and emotion duked it out.  It seemed like logic was illogical in the face of the forces of financial nature. If logic doesn’t work… then emotion is seductive.  But emotion is fickle pitting fear against greed in the classic tale of investing.

In the end, I kept my powder dry and didn’t make any large moves. I made two modest moves.  1) I sold half of my BCS shares at a very low $21 and change (roughly break even with my $22 and change purchase plus the dividend I will get Oct 1).  2) I bought to close my covered SPY 130 Dec 31 call.

In retrospect selling BCS looks wrong, and closing the call looks right.   These actions were with relative chump change… comprising perhaps a couple percent of my portfolio.  And these moves — in my “play money” account — allowed me to leave my other larger investments untouched.  And so far that seems to have been a wise move (or non-move!).

This is a big week in investing.  The consequences of massive government intervention will likely be debated and studied for years to come.  My gut feels uneasy about the whole thing.  Yes it saved me some money in the short run, but what will the long-term consequences be?   It is, IMO, too early to tell.

If nothing else, this week, and next will be very interesting.  Living and participating in history in the making!

All I can say is that at this moment life is good for me.  It’s not all about money 🙂  Ideally, I like boring, safe, investments that go up in a smooth and steady manner.  But, hey, a little excitement now and again is interesting too.  I do love the drama — in moderation.

After a week like this I think it’s about time for a beer.  Cheers, Mates!!