Good Weekend

I had a great weekend at poker. On friday I took 2nd in a $10 30k guarantee tournament on Pokerstars for 3.6k. The tourney started at 7:00 PM EST and was over at 3:30 AM EST.



Then on saturday afternoon I took 2nd in another tourney on Fulltilt for about 1.2k.



Good start to October.

Car loan paid off

I managed to pay-off the 20k car loan in just under 4 months. So that is one 2009 goal that can be chalked up as done. Unfortunately my savings account is pretty much decimated, but the rebuilding process can now start with vigor.

Emulate

Seabeast : made his bones in cash games before switching to tournament poker, that what I need to do, stick to cash till I have a roll that can make some damage.

TheAshman103 without the tilt and degen behavior and better bankroll management, but please give me his balls and skills. He is a true rags to riches story (740 usd to 970k usd in 1 year 3 months, and then donating back almost half of his net worth trying to compete with deep pocketed best of the best players). Heres his story in his own words of his rise based on pure skill and balls. A related highly negative cover story on this guy here.



Ben Grundy: another mid stakes grinder who successfully made his mark in the big games, of course he runs better than God. Please give me his god-like-running ability.

Last but not the least, my favorite Foucault: Needed his skills in cash game and life.

Foucault's 35th place finish in last years WSOP main event brought hm the check above. His bread and butter though is cash.

Savings allocation

Heres my savings allocation as % of total savings (excluding 401k), Ive been using this for the past couple of months with some degree of flexibility of course :

• Cash savings : 47% (i will probably reduce this substantially by end of the year, probably re-evaluate this one around Aug-Sep)
• House : 23% (saving up for house buying)
  
• Retirement: 30%
• Undecided: poker earnings (right now its kind of an even split between cash savings and retirement)

I got a nice boost this month as the Indian stock market sky rocketed and the Rupee appreciated versus the dollar as well.

Some reshuffling

Ok so I have about 1800 in my trading account and 1900 odd in my poker account, I have been able to generate a +ve cashflow of atleast $400pm from poker, and trying to increase that to atleast 700-800 by the end of the year. So obviously it seems poker>measly trading account.

I thus decided to close down my trading account for now and move the money into my poker accounts. I'll do that in 2 batches of $900 each.

Just finished a hand against an absolute donkey:

Full Tilt Poker Game #12113272302: Table Lord (heads up) - $0.25/$0.50 - No Limit Hold'em - 3:15:10 ET - 2009/05/09
Seat 1: ME ($91.50)
Seat 2: Cryandcatchme ($24.25)
ME posts the small blind of $0.25
Cryandcatchme posts the big blind of $0.50
The button is in seat #1
*** HOLE CARDS ***
Dealt to ME [Qs Ah]
ME calls $0.25
Cryandcatchme raises to $24.25, and is all in --> open shoved thrice in a row and i would hv snap clled with any A
ME calls $23.75
Cryandcatchme shows [Kd 7d]
ME shows [Qs Ah]
*** FLOP *** [8c 9s 4c]
*** TURN *** [8c 9s 4c] [4h]
*** RIVER *** [8c 9s 4c 4h] [2h]
Cryandcatchme shows a pair of Fours
ME shows a pair of Fours
ME wins the pot ($48) with a pair of Fours
Cryandcatchme stands up
*** SUMMARY ***
Total pot $48.50 | Rake $0.50
Board: [8c 9s 4c 4h 2h]
Seat 1: ME (small blind) showed [Qs Ah] and won ($48) with a pair of Fours
Seat 2: Cryandcatchme (big blind) showed [Kd 7d] and lost with a pair of Fours

He immediately quit after this hand, poker will be profitable as long as such donkeys are around !!

Portfolio update

I let go half off DGP (double long gold ETF) at a paltry profit, with the market rallying like it is gold is facing a tough time (almost an exact inverse correlation with the market right now).

On the brighter side Fidelity national finance FNF is up 5.5% today after they reported last night. Though their quarter was rough (0.06c EPS on an expectation range of -0.03 to 12c), they did say that business has picked up strongly towards the latter half of the quarter.

I also started a position in Allegiant Travel ALGT, with Priceline reporting today they might get a nice booster dose tomorrow.

I also dipped into my emergency fund and transferred $2000 to India to take advantage of the high interest fixed deposit scheme I talked about earlier, I'll probabaly do a 50-50 split (1/2 in the 12% FD with Tata Motors and 1/2 in a 9.75% FD with HDFC bank).

11% annual interest !!

Tata Motors, one of India's biggest and most respected corporation is offering a fixed deposit scheme offering upto 11% interest (compounded), thats a huge huge huge deal and right now I am scrambling to put together as big a war chest as possible for this. Unfortunately it doesnt seem I can come up with more than 1.5k, without dipping into my cash savings. So what do you think should I be dipping into my cash savings to try and put as much into this as possible?

Tata Motors FD Interest Rates reduced from April 16th,2009

Effective Yield on 3 years Deposit reduced from 13.5% to 11.83%

Tata Motors has announced reduction in Interest rates on its ongoing and hugely popular Fixed Deposit Scheme with effect from April 16th,2009.

Under the Quarterly Income Plan the Interest Rates on 1 year deposit has been reduced by 0.75%, on 2 Year deposit by 1% and 3 year deposit has been reduced by 1%.

Additional Interest to Senior Citizens, Tata Motors Shareholders and Employees of Tata Motors has also been reduced from 0.5% to 0.25%

Other terms and condition of the Fixed deposit scheme remains same. You can read further details about the scheme in my earlier post here.

If you are a senior Citizen or Tata Motors and its subsidiaries employee or a shareholder of Tata Motors, the Effective Yield on 1 Year Deposit will be 9.84%.

Effective Yield in case of 2 Year deposit will be 10.62%

Effective Yield on 3 year deposit will be 11.83%

The effective yield on 3 year deposit will get reduced by 1.67%. Hence, if you have made up your mind to invest in Tata Motors FD scheme, it would be better if you invest before 16th April,2009.

Following are the Main Brokers / Distributors for the FD’s

•Tata Securities •ICICI Direct

•Kotak Securities •Stock Holding Corporation of India

•JM Financial •HDFC Securities

Reassessment of 09 goals

I had planned to pay off my car (about 18k) by end of 09, but now I am giving it second thoughts. Reasons:

1. My lofty bonus (almost 30% of my normal salary, announed Feb of every year) will get a severe haircut this year, our company already missed Q1 09 revenues by 30% YoY.
2. Our company has freezed salary hikes, due in May, till further notice. I was on course for a 7%+ hike, sigh.
   
3. If I set bonuses to zero, I can only come up with 11k by the end of this year (8 months).

Sigh, well laid plans down the drain it seems. Fuck me.

Beginning Fidelity National Finance

I started a position in Fidelity National Finance, FNF, yesterday at $19. This is a play on the refinancing boom that the government is trying to push through very hard, but this play should also get steam from the fact that there will be a significantly large volume of foreclosure sales in the near and intermediate term.

FNF is essentially a title insurer, so what they are concerned with is not home prices falling or rising, but only how many transactions (title change/tranfers/new titles issuance) occurs. And going forward the volume should rise, it has little room to fall right now.

Good pieces on this here,here and here

Long FNF is trading account

Limit order for Mosaic and thoughts on the crazy mkt rally

I set up a limit order at 43 for Mosaic in my trading account. Right now I only hold Gold (a pretty big chunk actually) via the double long DGP ETF. I am severely cash strapped in my trading account because of which, at this point, I am unable to load up on things that I like. But then again the market is excessively over-priced (30-40x PE is really really bad given the economic data points that we have) at this point and so not being in the market right now may not be such a bad thing.

As the market gets cheaper (once the Fed dollar printing dries up) I would like to start building core positions in names I like and then trade around them. I think this is a style most suitable for my kind of investing and leaps and bounds better than a buy and hold strategy. Remember that whenever we (atleast my generation and those in their 45s) talk about the merits of a buy and hold strategy we are only taking into account the past 2 decade and a half, and that was a bull market period. Alter your start points and the buy and hold merit arguments go pooooof .

Long DGP in trading account

Edit/Update: In regards to the excessively over priced nature of the market right now, here are some stats via Zerohedge which goes to show how overbought the market is right now (quoted in green below):

1. Fully 84% of the stock market is now trading above the 50-day m.a.; financials are running 26% above their 50-day m.a. in a gap we have not seen in 20 years.
2. It’s not just the banks that are hoarding cash – so are portfolio managers (ah yes, the proverbial “dry powder” … or maybe, just maybe, cash has become an integral part of money management): According to Morningstar, almost 30% of diversified US stock funds now have more than 5% of their assets in cash; for the entire fund industry, the cash-stash stands at a 5.9% share compared with 4.2% a year ago.
3. According to Moody’s, the ratio of companies having their credit ratings cut versus the number being upgraded (an indicator of declining credit quality) has reached its highest level since 1983.

But the equity market is somehow up 27% in march on pure sentiment. Sigh

Over budget

For the first two weeks of April I am destined to go over budget... sigh !! There were a couple of factors responsible for this though

1. I live alone, and over the past 2 weeks I discovered a fab take out place, and all my meals have been coming from there :(
2. I bought several gifts for my wife.

Anyway what this means is that for the first two weeks of April, the savings accounts get only 50% of what they are supposed to get. My wife and I are also planning for a beach vacation over the memorial day weekend, and thus I expect my savings for both April and May to be substantially lower than what I planned for.

Last but not the least I decided to pay off my car loan by the end of 09. Amount needed 18k. Godspeed !!

A couple of milestones

My 401k (Roth) crossed 10k today. I started contributions on March of 08 at a 5% rate (+5% employer match). Just another small marker on the road to a large nest egg.

I also withdrew( made) 1k+ from my poker accounts this month. Also a first.

Profit taking

I took some profits today by selling ESI, ITT Educational Services, for a 10% gain in just about 5 days. I am holding onto my double long gold ETF DGP, waiting for the market to realize the implications (read hyper-inflation) of the monthly-trillion-dollar-printing-bonanza by the Feds.

For now it seems the market is super technical in nature, it is following Technical analysis to a T. And it would be really unwise to go against this current prevalent technical trend, atleast for now. But come earnings season (Apr 4th) HMMMM, that is when the cat comes out of the bag.

Disclaimer: Long DGP in trading account

Buy stocks now

We are rallying, based on a hyper flawed plan by our revered Treasury secretary.
Some easily identifiable flaws in the plan are here.

In short it is more of the same old story of piling Wall street-risks-gone-bad onto US tax-payers. On top of that wall street traders who usually suffer from some severely acute form of short term amnesia (recent wall street trading philosophy: forget all long term indicators, data points about the recession/economy but lets focus on that one thing, Geithner today, baltic dry index last week, china hoarding commodities and preparing a surge a week before that and so on, which though bad/meaningless, atleast sounds nice), immediately go bonkers and gung-ho on the bull side and thus shit like bank of america, citigroup, morgan stanley are up 15%+.

The other shitty basket also known as REITS are also surging, again for no real reason in particular, well essentially based on a spin that home sales increased month-over-month by about 5% (in reality they are down 4.6% YOY!!!). These are prime short candidates based on their huge debt, problems with their revolving credit lines, secured debt facilities and the immensely tight credit market. Goldman Sachs has an extremely bearish outlook on the REITs and rightly so. I myself will try and short these in the next couple of days, primarily via shorting the IYR ETF.

Long gold

I am back into the market in my trading account. With the Fed announcing 300 billion buy of treasuries (1 trillion net), hyperinflation combined with the depression of first degree is well on its way. The gold ETF spiked almost immediately. There are two gold ETFs : GLD and DGP, DGP is the double long ETF version of GLD.

I got into DGP at about 20.6 as a pure trade, though long term gold is where all the smart money is getting BIG positions in. Hedge fund czars John Paulson as well as David Einhorn are getting into gold, via bloomberg. as the money printing continues unabated by all major economies. Paulson bought a 11.3% stake in a gold miner Anglogold Ashanti, while Einhorn is buying the ETF GLD.




Zero hedge also has an interesting piece on this money printing.

Disclaimer : Long DGP in trading account

Broad ETF trackers

For the layman/unsophisticated trader one quick way to gauge the market performance on a given day is by using the broad ETF trackers for each sector, kind of gives you a feel about which sectors of the market are performing (or not). Heres the list:

Consumer Staples : XLP
Consumer Discretionary :XLY
Energy : XLE
Financial : XLF
Healthcare:XLV
Industrial: XLI
Materials: XLB
Technology: XLK
Utilities: XLU

Net worth,income streams, cash flows

This will be my first attempt at a net worth post, so bear with me. I havent set up any kind of a standard format for this (most of my spreadsheets are on google docs) but maybe down the line I would. So here goes:

Net Worth breakdown along with explanations wherever needed (I got married in Jan 09, after a 2 year long courtship and havent merged my wife's accounts yet)

Cash (emergency fund, easy short term money access)

• ING 1 : 10,000
• FNBO: 3480 (Target 10k by end of 09)
• Credit union savings: 1025.00
• Discretionary savings (ING 2,penny pinching basically): 480

Roth 401k (5% contribution, 5% employer match) : 9208

Foreign investments (bank fixed deposits, stocks, mutual funds, I am a non-resident on H1-B visa (labour certification done in the green card application stage), so I send a chunk of money back to my native country where the interest rates are high as well as being part of the BRIC nations the stock market has more potential upside.)*

• Fixed deposits: 2900@9% locked in for 3 years (Target 15k by end of 09)
• Mutual funds : 4000 (at current exchange rates)
  

Trading accounts (These are my daytrading accounts for stocks as well as my poker bankroll, poker is my alternate income stream, currently it constitutes about 10% of my take-home 8-6 job income, in the future (5-10 years) I hope to increase this to 100%):

• Tradeking : 1812 (Target 5k end of 09)
  
• Poker (mostly online) : 2935 (Target 6k end of 09)
  

Travel accounts (These are setup for annual visits to my home country or buying tickets for my parents when they want to visit me, usually due to work pressure and lack of vacation time I prefer bringing my parents over):

• HSBC : 698 (target 3k by end of 09)

##################################################
TOTAL : 36538.00 (rounded to nearest $)
LIABILITIES : 0.00
############################################

Income streams, cash flows:

8-6 take home : 6125.00 pm
Poker (10-25 hrs/week) : 600 pm (averaged)
Expenses : 3640 (notable expenses outlined)

• Family maintainance, India : 400
• Family maintainance, wife (student, my wife is pursuing her PhD in finance, expected 2011, and lives 260 miles from me, she is 70% funded by her school): 600
• Rent : 1000
  
• Gas : 300-400
• Starbucks, cigarettes (personal indulgence wont be cut unless I get laid off) : 300
  

I started looking into savings etc only from Sept 08, having joined the workforce in Aug 06 (and going through the usual binge-spending routine). But atleast I've made a start. Bon Voyage Senor

A blow to dividend investors?

Dividend stocks have been the staple for many an investor and huge number of investors have a bulk of money locked up in dividend blue-chips for a stable passive income source post retirement.

But has the carnage that is the S&P 500 now re-written the play book on dividend investing?

Via Zerohedge:

We do see that the equity culture is not dying as much as we would have thought, but insofar as the stock market can generate cash flows, the ability to do so with consistency is in question. Wells Fargo became the latest to cut its dividend – by 85% to a nickel per share in a move that will save the bank roughly $5 billion per year. So far this year, the amount of dividends that has been cut has totaled $40.78 billion (financials now represent 11% of total dividend payouts, down from the 2006 peak of 30%). In less than three months, the dividend cuts have already exceeded the $40.6 bln in all of 2008. According to S&P, dividends are on track to decline 23% this year, the most since 1938. According to the folks at S&P, the sharp curtailment of dividends (but the yield is 3.1%!! Hey – ever heard of a ‘value trap’?) is the equivalent of a 26% pay cut to the average retiree.

Most of the blue chip dividend players till 07 were the big banks, GE etc and we all know where they are today. Even JNJ which was holding up somewhat and logically is the one dividend stock I will buy if my life rested on it (servicing to the baby boomers as they retire will not go out of fashion too soon) has been pummeled.

The market is changing fundamentally and so is the decade old play book.

Out of the market

Got frisky and sold off AXYS (talked about yesterday here) at 40.xx, for a 10%+ish gain in 2 days. I think we will re-test the S&P 741 support today. Will it hold, will it break who knows?? Russian roulette .


Just to keep things in perspective here are the major support/resistances of the S&P in this bear market:

• 660: the low of the year,
• 741: 20 day moving average (right where we are now)
  
• 800: 50 day moving average

Well we also have a 1000+ number as the 200 day moving average for the S&P, but right now this is not even worth talking about.


Disclaimer: 100% cash, no positions in trading account

Profits in the bear rally for a retail trader

The current market is a range bound one and its likely to remain so for some time. Its essentially a bear market in which we sometimes get bounces off some extreme lows before hitting some form of resistance and start a downward spiral again towards a support or create new low , once the support/new low is reached RINSE AND REPEAT.

So in essence its a trading market, best visited with hedges, and NOT an investment market. Anyone who tells you blue chips/solid names are cheap so BUY BUY BUY, please let them know that they'll be cheaper next week (JNJ anyone).

I have a very small, well tiny actually, trading account with Tradeking. Usually it is a day trading account and I seldom hold more than 4 positions at a time (not by rule more by forced compulsion else the fees start eating into my profits). Well by friday I was 60-65% cash, while holding on to my old favourite name china fire, cfsg. I follow this stock with diligence and it has with great consistency traded in the 6.2-7.3 range in the bear market. So I got in at 6.2ish a week earlier (I like to trade in and out of this name) and by tuesday I was out at 6.9ish. GAH!! By wednesday the bear rally had set in and its now at 7.7!! So thats a 10% profit instead of 25%ish one. sigh :(

Not to worry I did manage to get into AXYS technology on wednesday in the 35s. AXYS is a favourite motley fool name, a stellar company but the stock has been decimated over the past 3 months (80ish in nov around 25 going into this week).

Anyway AXYS put themselves up for sale on wednesday with a target price of $60 and voila I am up 10%+ on the position. I didnt sell it today, which might backfire as tomorrow is friday and could be a sell-off day as S&P is hovering round its big resistance at 741. I have a sell order at $45 and will be happy to get out at that price (notice the beautiful 25 to 40 jump in 2 days after the "buy us" announcement)

Tomorrow is a big day, if we can hold on to the gains of the past 2 days then we CAN/MAY make a run towards 800 on the S&P, thats where our major resistance lies if we can go north from here.


On the watchlist, waiting for pullbacks:

1. MOS below 39, another stellar run company in the agro/fertilizer sector that has been brutalized (used to be cheap,screaming buy at $100 5 months ago).
2. JRCC, another commodity name,a coal company, below $10, ideally below $9. (used to be a screaming buy at $40 5 months ago).
3. Short LasVegas, I mean the LV casino names (Las Vegas and their casinos/hotels/resorts along with Trump in Atlantic city have been wiped out really by the economic downturn) like Las Vegas Sands,MGM grand, Wynn resorts, when we inch closer to the 800 resistance or break 741 as we start moving down again.

In the meantime continue watching Cramer vs Stewart while drinking Kool-Aid.

Disclaimer: Long AXYS in trading account

Things I dont believe in when it comes to investing

1. Be all and end all of employer 401k plans: My employer uses Prudential and it is by far the most frustrating piece of investment vehicle I have ever seen. I have a million restrictions essentially because of the dearth of an investment choice in Prudential's stable (oh yea they have all those standard large cap, mid cap, blend, international, martian, extra terrestrial funds that almost every other 401k has and believe me in a down-trending or sideways market they all suck, infact they suck in all cases except in a sustained bull market) which I like. The only reason I donate money to my 401k is because of the max 5% employer match. I dont and will never try and max it out and the day my employer stops the match program my 401k contributions will come to an end.


2.US Mutual funds, index funds : Again only in a sustained bull market are these profitable. Also MFs have the distinct disadvantage of being long only, well you might say that they can hedge or short a sector via ultra-short ETFs, but my dear friend there is a severe problem with that (topic for a later time). Also dividends being heavily slashed left, right and center makes MF investing even more mindless. Take a look at the chart. Without dividends the dow's appreciation (inflation adjusted) is just 10% TOTAL since the 1966 peak and 55% TOTAL since the 1929 peak. The market play-book has severely changed for us I am skeptical whether MFs can adjust to this new play book.
3. Stock picking is a waste of time: Yup it is a waste till you try and educate yourself on the market.

4. Nobody can time the market: True but you can position yourself appropriately. For example as of today the S&P has strong resistances at 720 and then a huge one at 741. If today's rally sustains for a day or two and we break 720 upwards and inch towards 741 set yourself up for some major shorting.

5. Frugality as a means to retire early: I have read some weird, hugely popular personal finance blogs where people have made their own detergent, lived a whole week on $20, are yet to see a movie in a theater for the past 5 years and counting, do not have cable, seldom eat out if ever at all, in essence derive themselves of any sort of anything even remotely resembling an iota of personal pleasure. My only reaction to these are "Wow, just wow". I believe in smart, responsible spending, the "some-time" binge spending when the occasion is right and still be able to attain my financial independence goals.

6. Gambling is for the degenerates leading to wealth destruction: I am an avid poker player and have been making close to 700-1k/month (pure savings) on average over the past 1.5 years playing small-micro stakes poker in my severely limited free-time. And I plan to work hard on my game and get ready to play much bigger stakes in the months to come.

And thus the journey starts, a journey towards happiness backed by financial independence, my own personal journey and hopefully I will meet you my friend, around the bend, where hearts can meet and souls can blend, and the numbers on our spreadsheets dont overwhelm.

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