In Search of the Perfect Investment

This year, so far, has been difficult. Most funds are down, some horribly so. Some of our most successful investors are hurting big-time.

The pain of losing money is far worse than the pleasure of making it — though most of us are playing with (i.e. losing) the bank’s money. Money we made last year.

My “favorite” mode is panic. When I saw the market tank at the end of August, I read the “learned” financial reports. They all assumed it would tank and tank and tank. Like 2008.

The financial press dredges up information to support the prevailing trend.

There are some times the trend is crystal clear. Like for the few years beginning in March 2009. But there are times when it’s really bumpy, like this year:

My friend Todd says, “When in doubt, stay out.” In recent months I’ve largely gone to cash, except for a few tiny shorts that I stayed in too long and some Vanguard index funds I’ve kept.

My friend Steve is up 12% this year. He’s very disciplined. He follows a handful of stocks. He puts buy orders in 20% or so below the market, waits for them to be filled, then sells them when they (inevitably) bounce. He emails me great wisdom:

There are an infinite number of unpredictable things that can impact a market, a sector, or an individual stock.

These days I limit my buying to sell-offs and then sell what I’ve bought during rallies.

In a way, stock price movements are like water on the ocean. They endlessly rise and fall. When a stock I like falls hard, I buy it. I sell when it rises — which sometimes is on the same day, or within a few days of when I buy it.

I don’t press my luck. I know that rises are followed by falls, and falls are followed by rises…ad infinitum.

Most of the time my limit orders sit idly for weeks; some eventually expire.

Your task today. (that’s you, my readers.) Make a list of your ten favorite stocks. Put in limit buy orders at 15% to 20% below where they’re trading today. Let the buy orders sit. This “blood in the street” “strategy” seems to be the best way to play today’s volatility. I’ll give you my list tomorrow.

My worst money mistake. From Bottom Line Personal newsletter:

A misbegotten herd of cows. In 1985, I bought a herd of 17 Holstein dairy cows at public auction for $175,000. I knew nothing about commodity investing and had no interest in becoming a gentleman farmer. But the tax breaks were too good to resist. I put up $20,000 and financed the remainder over five years. In the meantime, I qualified for investment tax credits that gave me $40,000 in initial tax savings. Two years later, Congress eliminated that tax shelter. And it got worse. One of my Holsteins was struck by lightning and killed. Then the US government reduced its support of milk prices and the herd’s value plummeted. I finally sold the cattle at nearly a total loss.

Lesson learned: Many investments, ranging from buying a home to investing in real estate or municipal bonds, offer attractive tax breaks. But reducing your tax bill is just one factor in deciding to invest—and typically not the most crucial one. You need to consider the current value of the investment, your time frame for holding it, the potential for appreciation or loss and what purpose the investment will serve in your portfolio and/or your life.

Source: Edward Mendlowitz, CPA, is a partner at the accounting firm WithumSmith+Brown, New Brunswick, New Jersey. He is author of Getting Your Affairs in Order.

Wi-Fi too slow at home? You need a new wireless router. Today the New York Times did a big review of routers and made good recommendations. The article is If Your Wi-Fi Is Terrible, Check Your Router.The artwork is cute:

For the article, click here.

The idiocy of the Check Engine light. The light comes on. Your car is about to blow up? No. It’s just the gas gap. You forgot to tighten it. Tighten it. A week or two later, the Check Engine light will go out.

From reader Lucas:

Had the same problem with the gas cap. Yellow engine light on the dashboard and the alert said engine malfunction. Took to service. Car spent one full day at BMW. Until they figured out the gas cap issue.

Too much tech.

Reader Red Cactus writes me:

Cars have a network that interconnects all, or most, of their on-board computers called a CAN – Car Area Network.  This is what service reps. connect to when they diagnose your car.  This interface is referred to as an On-Board Diagnostics 2 – ODB II – port.

 There are ODB II to Bluetooth dongles that can be purchased generally for less then $20 on Amazon.  Search for OBD2.  The software is usually a free App for a iPhone, iPad, Android phone, laptop, etc.

Here is a representative dongle.  http://www.amazon.com/gp/product/B005NLQAHS?keywords=obd2&qid=1444256590&ref_=sr_1_1&s=automotive&sr=1-1

  These OBD II dongles will save you money in a hurry.

How to survive an earthquake

WASHINGTON (The Borowitz Report)—Citizens of the Roman town of Pompeii who were victims of Mt. Vesuvius’s eruption in 79 A.D. could have survived if they had “just outrun the lava,” the neurosurgeon Ben Carson told Fox News on Wednesday.

“Most of the plaster casts we have of Pompeii victims show them basically just lying down and whatnot,” he said. “If I had been in Pompeii and I heard Mt. Vesuvius erupting, you can bet I would have made a run for it.”

He said another option open to residents of Pompeii would have been “to fight the volcano.”

“Archaeologists estimate that the population of Pompeii was about eleven thousand,” he said. “You can’t tell me that if eleven thousand people put their minds to it they couldn’t beat one volcano.”

Carson said he would spend the next week on the campaign trail dispensing helpful tips about how people can defeat earthquakes, tsunamis, and giant asteroids.

Harry Newton who’s playing in a tennis tournament this afternoon. His friends are all out birding. Here’s the best shot, courtesy Pete Rawlings. A very rare California condor:

Pete’s email:

Friday, Linda & I drove 2.5 hours south of SF to the Andrew Molera SP along the Big Sur.  Two CA Condors had been seen there on the Thursday.  We walked a mile in and out to the shore.  No luck.  We then drove another half hour south to the Julia Pfeifer Burns SP and walked another mile or so around there clicking the sites and some other birds.  However, we then deciding to give up and drive back to Monterey to have dinner and see Dave & Gillian’s show. As we were getting back into the car, Linda spotted one flying over our head. Boy, was I thrilled to photograph a new life bird.  But, it gets better.  As we started driving back up Route 1 we saw more Condors flying over us. There was a guy with a camera stopped at a pull off along the coastal highway clicking them.  He told me that he had been tracking them and that there were 13 in total. He said that he volunteers for the Ventana Wildlife Society and is able to track them on his phone. We both were able to clicked a bunch of photos of them as they right flew right over our heads. Timing sure is everything! Pete “

The background is the sky. In Peter’s original it was azure blue. On my Samsung screen it looks purple. On my Lenovo laptop, it looks blue. Go figure.