Friday, August 05, 2011

The Stock Market and a New Opportunity

For about a year now I have been feeling uneasy about the stock market. Things just seemed to be too good. About a year ago I stopped putting new money into stocks, and although money markets were basically yielding nothing, I kept putting more and more money into that asset class. Now it appears that some of the storm clouds have burst open and the market has taken a hammering this week, reminiscent of some of the worst of the 2008 meltdown. Having said this, unlike in 2008, I am not feeling a sense of impending doom. I am actually optimistic about the prospects for the US economy, now that the insane debt ceiling crisis has been resolved for the time being (may the Tea Party idiots pay the price at the polls).

Don't get me wrong, I think we are in for a little bit of a bear market, but my point is that if the market declines another 5% or 10% I will start reinvesting money in stocks. Not large amounts, and not crazy bets, but a fixed, measured amount of money going into index funds every month. I followed this strategy during the worst of the 2008 stock market collapse and it yielded outstanding returns. When everyone flees the market, that's when I feel the time is right for sober, calm investors to slowly but surely wade in. Yes, short term losses can be severe, but over a period of years, buying in a stock market bear market is a fantastic opportunity.

I love buying things on sale. :-)

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Thursday, July 28, 2011

Ironically, Time to Buy Bonds?

I am thinking what to do about the ridiculous debt limit impasse, with the imbecile Tea Party members of Congress imposing a US sovereign debt default, by choice, in the name of... fiscal responsibility?!?!  Basically they're saying: "I think we're borrowing too much, so we should stop paying our creditors...". Insane.

Anyway, I have come to the realization that it may be time to defensively buy bonds. What is it, you say? Buy bonds in the face of a government default? Well - here is my dilemma. I have complete faith that the government will pay every last dime it owes to its creditors. It may pay a few days late while the political theatrics play out in Washington, but pay it shall.

Meanwhile, if the government defaults even for a few days, the stock market could be severely hit as economic confidence is shaken (and stirred). If the treasury defaults, money market accounts could be hit. Government contracts may be delayed. Folks fearing a massive recession (a very real possibility in the event of default), may run screaming away from the stock market. Where will they run? Ironically, I think they may run in the direction of... short term treasury bills. The default will pass in short order, but an ensuing recession, with its accompanying decline in corporate profits may seriously hit the stock market.

So, logical conclusion... does it make to buy bonds in the face of a US sovereign debt default?

Man, what an idiotic situation these Tea Partiers are pushing us into. Are you sure it's only tea they're drinking? Is there some crack smoking going on as well?

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Friday, June 17, 2011

401K Matching About to Start

Just learned that my employer is about to start a matching program on my company's 401k. First thing I did: suspend my contributions to the program.

Why continue to invest in the 401k when I can hold off for a few months and then get free money on my contribution?

Don't worry, I still have every intention of maxing out my contributions to my 401k, just as I do every year.

401k matching is awesome.

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Sunday, April 24, 2011

Inflection Points

There are certain times in human history when the world seems to change all at once. What once seemed to progress at a slow evolutionary pace suddenly shifts into warp speed and humanity never looks back. With the advent of agriculture the number of humans on the planet, stable for millennia started to grow dramatically. With the invention of the printing press the number of books began to grow exponentially. With the invention of the Internet the volume of data exploded. Human social and technological progress is filled with such discontinuities.

These inflection points are often unexpected and the changes they produce appear disconnected from everything that went before. If you were an auto industry watcher before the Model T, would you expect to see such dramatic growth in demand for cars? There were many smart phones before the iPhone, but no one expected to see the category explode with the introduction of one key device. I, for one, completely wrote off the idea of tablet computers before the iPad came along. It just didn't seem to be a brilliant idea.

It takes just one key innovation, and often one charismatic leader to get things moving in a whole new direction. Someone needs to get the recipe right, but they only need to get it right once.

This is why I am not stressing out about global warming ("not stressing out", not to be confused with "do not care about"). Looking at the current trends and current technologies one would tend to project continuous temperature rise and global catastrophe. However, a far more likely scenario in my mind is a technological solution to the problem. Artificial trees harvesting carbon from the atmosphere? Cold fusion removing dependence on fossil fuels? A price on carbon giving folks a financial reason to de-carbonise? Who knows. I just know that there are a lot of people looking for solutions, and one of them is bound to find one. We're a pretty creative species.

All that aside, however, what brings me to write this post is a press conference I just finished watching on the web. This conference was held by Elon Musk, CEO of SpaceX (also CEO of Tesla and Co-Founder of Paypal). This is a guy who is single handedly revolutionizing the world we live in. In the press conference in question, Musk announced a new rocket design, capable lifting twice the load to earth orbit of any other rocket currently on the market, and doing so at one third of the cost. Meaning, the cost of sending a pound of payload to earth orbit just got reduced by a factor of six. My friends, we are all going to space. This is the inflection point we were waiting for since Sputnik launched.  

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