Only one thing worked spectacularly in 2011. And that, like all spectacular things, was a fluke. It was private investment in a Chinese Groupon-like venture. A month after I bought it, some nice person\u00a0 bought it for double what I paid.\u00a0 A couple of real estate commercial syndications were sold, one earning 12% and the other 15% IRR. Dividends and interest payments were key in 2011 to staying afloat. Equities performed pretty miserbly and I stayed away from them. Gold tumbled recently. My stop loses kicked me out.<\/p>\n
The backbone of my investments are triple tax-free muni bonds – none of which defaulted and all of which continue to pay interest.\u00a0 Thank you Todd. Surprisingly, my Vanguard Federal tax-free bond fund VWALX continues to do well and pay a handsome interest rate. I’ll put more money into it.<\/p>\n
Here’s a short list of what I learned in 2011:<\/p>\n
1. Capital preservation is key. I worked 24\/7 for the money. I’m not pissing it away on some speculative nonsense which my friend whispers. There are three elements to this: First, Tight stops.<\/strong> Sometimes as tight as 3%.<\/strong> Second, Don’t speculate. When in doubt, stay out. And, third, cash remains king. I ended the year with a lot of cash.<\/p>\n 2. Diversification is a free lunch. The idea of diversification is that some things go up and some things go down. Diversification gives you a balance. But these days, a lot of things move together. If equities go down, gold is meant to go up. But lately it and equities have fallen together. In short, you need to look further. There are oppotunities in real estate. But be wary of non-liquid investments. My friend Dan writes “Your lessons make sense to me. The only one that may need refinement is the notion of diversification. True diversification means investments that are not linked in some way. Too often, investments move up or down in sync. The trick is to find those that make sense in and of themselves but move in opposite directions. Not easy.”<\/p>\n 3. Dividends work. Bonds work. NLY will probably return me 6% this year. Not what its 14% dividend yield shows. VWALX<\/strong> will do better. It’s a Vanguard bond fund investing in government bonds. I recommend it.<\/p>\n 4. Money managers are human. You won’t find one who works consistently well for you. Don’t even think about looking. That’s harsh. There are good ones. Hard to find. Hard to get into. Some of the best ones blew up in 2011. Remember, if you lose 50% one year, you have to double your money the next year to get back to even.<\/p>\n 5. Wall Street is a product machine. They make things for you and me\u00a0 to buy. We want our investments\u00a0 to go up. They want fees. Their goals are different to ours.There were big IPOs in 2011, many of which tumbled badly. Wall Street got its fees. You got screwed. Wall Street’s measurements are different to ours. They measure themselves “relatively.” We lost less than our competitors. You and I measure returns absolutely. Did I make any money this year?<\/p>\n 6. Most entrepreneurs won’t make it. Don’t even consider giving any of them any of your serious money — despite the fact that there are some neat things they can do on the Internet.<\/p>\n 7. Studying this investment stuff helps. But there are very few good sources of consistently good investment information. My column is not consistently good. It’s occasionally good. Thank God I warned my readers about tight stops.<\/p>\n 8. Your time is the key. What do you want to do with your life? Sit in front of a screen all day?. Go traveling? Play tennis? Spend more time with the family? If you don’t like this investment stuff, buy bonds or a bond fund and bug the family.<\/p>\n 9. My friend Vahe says that owning individual stocks is VERY risky. He says only buy index funds over a diversified portfolio. Vahe is a devotee of the rebalanced portfolio theory. Every six months or so he re-balances his portfolio so he has even amounts of money in each of his chosen areas. he likes the philosophy of a company called Index Fund Advisors. He recommends everyone read their 12-step approach. Click here.<\/strong><\/a> You don’t have to use IFA, you can set yourself up with Vanguard index funds. See here.<\/strong><\/a><\/p>\n 10. Take profits. Play with the bank’s money. Eventually the rise stops and the fall begins. Nothing is forever. Take some money home.<\/p>\n 11. Buy-in price, says Jeff, is critical. Buy when things are gloomy and prices low. Cash is king when prices are too high. Jeff has a list of stocks he will buy when they meed his price target: e.g. AA at $5, HUN under $5 and HPQ under $20.<\/p>\n 12. Recognize upcoming train wrecks. It’s remarkable how many erstwhile “hot” industries have turned into train wrecks — like green energy, ethanol, biotech, financials and basically anything the Federal Government touches.<\/p>\n 13. Watch out for your emotions. Roy writes this morning, “I am a disaster at investing because I can\u2019t keep my emotions out of it. I tried the Vector Vest route some years ago and it was a farce. My online brokerage firm loved the transaction fees, however.”<\/p>\n Takeaways:<\/strong> Cash is King. When in doubt, stay out. Investing is close to gambling. don’t get sucked too far in.<\/p>\n Technology I can’t live without.<\/strong><\/span> Despite my love of technology, I use remarkably little of it every day:<\/p>\n + I use three Thinkpad X201 computers each with128 GB\u00a0 solid state drives and each running Windows XP. They run reliably and Lenovo’s service is superb. They are clones of each other. They’re ready as backups, should disaster happen.<\/p>\n + I have two Apricorn external hard drives, which I use for file-by-file backups. Also two Kingston 128 GB SSDs as cloned backups. My life is on my main X201 laptop. Hence I’m obsessed with backups. I don’t backup to the cloud. I don’t trust it yet.<\/p>\n + My iPhone 4 is more than a phone. It’s a note taker, a GPS, a camera, a music listening, video watching and book reading machine.<\/p>\n + My Verizon MiFi gives me Internet access pretty anywhere in the U.S. Saves me logging onto insecure public WiFi networks.<\/p>\n + For software: Firefox, Photoshop, Fidelity’s Active Trader Pro, Dreamweaver, WordPress, Outlook 2003, The Semware Editor, and occasionally Word 2003.<\/p>\n + My Dahon MuSL folding bicycle, for getting around town and to tennis.<\/p>\n + My Nikon D7000 and my Canon G12. Though these days I take more photos with my iPhone.<\/p>\n What I wish for in technology in 2012.<\/span><\/strong><\/p>\n + I’d like to see vendors treat their customers as though they cared. I’m sick of web sites that don’t list phone numbers, email addresses or even street addresses for their executives. I’m sick of being asked the same “security” questions several times on the same phone call. I’m not excited by call centers in India.<\/p>\n + I’d like to see the telecom and cable companies providing honest, easy-to-understand bills. I hate being lied to.<\/p>\n + I’d like my favorite web sites to leave an item in my shopping cart and even allow me to backorder an item. Amazon does best. Bezos is obviously hands-on. When I ran a company I was, too.<\/p>\n + I’d like Microsoft to act more rationally. Windows 7 won’t run some of my favorite software. It forces me into hours of re-configuring… For what? Microsoft’s pig-headedness\u00a0 is reflected in their go-nowhere stock.<\/p>\n Be proactive with your health: <\/strong>Writes friend, Robert Self:<\/span><\/span><\/p>\n Treadmill and angiogram I requested resulted in emergency bypass surgery. That was 12 years ago. Colonoscopy recently discovered three polyps. One was cancer. Had surgery. <\/span><\/p>\n Everything fine now.<\/span> Definitely saved my life. Get all the tests you can before it’s too late.<\/span><\/p>\n Retail is getting stupider and stupider.<\/strong><\/span> This week I bought two items at Banana Republic. The list price was a total of $203.91,<\/strong> including tax. I paid of $75.20,<\/strong> or a 63%<\/strong> discount.<\/p>\n I got several\u00a0 discounts — the items had been marked down, but were on sale. And I got another 15% because I opened a Banana Republic Visa account. My last Banana Republic Visa account had expired because I used it only once — for the same reason I opened an account again — to get a whopping discount.<\/p>\n Hugo’s story — Part 3.<\/strong><\/span> Remember Hugo’s\u00a0 Mac computer? His external hard drive crashed. He bought a piece of software called Disk Drill Media Recovery for $9.99 from the Apple MacStore. The software worked perfectly. It recovered everything on his busted external hard drive. If you have a Mac with an external hard drive, you need this software — just in case. Buy it fast. After January 1, its price will go to $50. The software saved Hugo’s tushy and taught him one valuable lesson — back up your life. Click here.<\/strong><\/a><\/p>\n We’re having a recession?<\/strong><\/span> I took Hugo, 14, to see Mission Impossible 4<\/em> at the local Imax. It was 4.45 PM. the place was packed. No empty seats. My senior ticket — $15.50. His adult ticket $19.00. That’s a lot of money to see ads for Apple and BMW on a very large screen in a very noisy theater.<\/p>\n The road to Mecca.<\/strong> It’s a fascinating play presented by Roundabout,\u00a0 my favorite theater company. It has three great actors, <\/span><\/span>Rosemary Harris, Jim Dale and Carla Gugino:<\/p>\n
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