| |
 |
|
|
Science Forum Index » Economy Forum » #539 starting over of Portfolio; new book: Optimal Strategy of Playing StockMarket VonNeumann Game theory
Page 1 of 1
|
| Author |
Message |
| Archimedes Plutonium |
 Posted: Sat May 03, 2008 1:05 pm |
|
|
|
Guest
|
Portfolio of PAF on 2MAY08
VZ 17,010
Q 3,200
total share-wealth-units last reported which was 15APR08 was 17800
total share-wealth-units today 17810** (** where Q shares count as
1/4 share-wealth-units)
realestate land 3APR03 of 3 lots $19,000.
realestate land 30JUL03 another lot $11,500.
realestate land Sept05 another lot $75,000.
Well today, Friday, I decided to sell 800 Qwest at 5.37 and with the
proceeds and dividend-cash
to buy 210 VZ at 39.33.
I feel like starting over with the portfolio and so disgusted with the
selling of
SGP. Disgusted because in 2005 for a time I held 23,000 shares of AT&T
(SBC then)
which I could have easily, recently converted to over 24,000 Verizon with
its $2 spread between T and VZ. Instead of 24,000 VZ, today I have
a mere 17,010 VZ. But I decided to do that because I no longer feel
like holding on to a parasitized company in a parasitized industry that
is the Drug Industry. And I did it because of the tax basis. Sometimes
I get the feeling that Playing the Stock Market is really not much different
from a gambling casino where the only true winners over long
periods of time are the "house" where
the house of the Stockmarket is the government taxes. If I had held on
to the
23,000 T and sold for
24,000 VZ, the taxes would have been so enormous that I probably would have
had to forego buying 6,000 shares and ended up with 18,000 VZ.
Let me check a rough computation: I had $461,000 invested in Oct 2002
and T at
$37 times
23,000 by April of 2008 would have meant a profit of 37. X 23,000 =
851,000. So $851,000 subtract $461,000 is $390,000 profit. Let us assume
the taxes on that would be 50% so the taxes would be $195,000.
So that the selling of 23,000 shares
of AT&T in order to buy VZ would have been $851,000 - $195,000 = $656,000
divided by $35 would be 18,740 VZ. So, clearly I would have been better off
doing that, rather than my present situation of 17,010.
Of course the best plan was to have stayed put on AT&T the moment I had
gathered the 23,000 and if I so desired to sell off some T in small
increments
like 200 shares and bought 210 VZ. To switch in small increments would have
been the best plan.
But there is a hidden mechanism in the StockMarket that is the most
dangerous
of all, where the inflation becomes so wild that it destroys the "free
market" and
where companies and industries go broke or are nationalized leaving
shareholders
with little to nothing. The massive debt of the USA government is easily
bailed out
by taking away the assets of the StockMarket. So when investors speak of
diversity
the type of diversity that I see is prudent is not a mix of companies
over a mix
of industries but is that the portfolio has a mix of investments. So
that I can be
virtually 100% in one good company and the diversity is that of real-estate.
I am pretty much disgusted over the recent events of this portfolio and
have come
to the conclusion that the most important feature of playing the stock
market is
not so much the mechanics of switching between 2 great companies as the
picking
of a industry and then companies within that industry. To pick a winner
and stay put.
In two measures I am ahead today over when I started in October of 2002.
In Oct 2002
my tax basis was $461,000 and today my tax basis is $645,000. I think
the tax
basis has to be an integral part of the Optimal Strategy and something I
hardly ever
talked about in previous years but which I should talk about
extensively. I think after
about every 10 years a portfolio should start anew, unless, of course the
contents of the portfolio has picked an "excellent company" such as my
23,000 AT&T back in 2005. But if the portfolio does not have that
Excellent company then the entire portfolio is cashed
out, and the taxes reckoned with and where the portfolio starts anew
hoping that this time the excellent company is accumulated. The second
success
was the price of AT&T (SBC then) was about $22 per share whilst VZ was
about $33
back in October of 2002.
So that if I had started in 2002 with buying only VZ with the $461,000 I
would have
ended up with approx 14,000 VZ whereas today I have 17,010. So I should
not feel all that
bad. Not feel bad, because let us say that in year 2002, I was less
bright, and I was less
smart and I was less intelligent and that I took the $461,000 and placed
it all into Verizon
and ended up with 14,000 and let us say I was smart enough to stayed put
on that
14,000 VZ simply collecting the dividend and increasing my number of
shares of VZ
from 2002 to May 2008. Well, I would not have increased that 14,000 to
my present
holding of 17,010. So in those two benefits of increased tax basis and
more VZ now
than if I had bought only VZ in 2002, that I am ahead.
But what angers me is that if I had been smart I would have more than
23,000 AT&T
right now.
For let us opine on the idea that if I came to the StockMarket in 2002
and focused
only on VZ at $33 per share and with the investment capital of $461,000
ended up
buying 14,000 shares of VZ and stayed put with perhaps increases with
the dividend.
In that measure I am far ahead today even with the mistake of SGP and
the drug
companies.
Another thing I learned is that the Drug company industry is a
parasitized industry
no longer investment grade. That every drug company has one of its
"shoes ready to drop"
where lawyers are lining up to sue over the most piddly things. Where
investors are at the
back end of the line and lawyers at the front row; where the executives
of drug companies
spend more time in court than
running health care research. Pfizer stock has gone nowhere in 8 years
and just tonight was
news that its (Bextra??) if memory serves me correct is out litigation.
So I learned that the most important feature of playing the stock market
is the picking of a
Industry that is sound and then the picking of a company within that
industry. This is the
top priority of playing the StockMarket is the picking and so the bulk
of this book should be
on the science or art of picking. Now whether picking is a science and
able to be included
in a VonNeumann game strategy is open for debate. And I am not
sure as to whether a Optimal Strategy exists for the Picking of an
industry and of a company.
Picking is much like picking a wife or husband, and so can we have an
optimal strategy for
that picking? We can have an optimal strategy for living together in
some harmony as husband
and wife once the picking has been done. And already we can see there is
going to be
fighting whenever you put two people together.
Now some readers would also point out that this portfolio is not
diversified enough. I would reply
that the more diversity only indicates the lack of abilities of picking
winners. I was correct
in chosing AT&T (SBC) in 2002 at $22 per share and having amassed 23,000
AT&T by
2005, but then I was not smart enough to say, "stop here and simply stay
put on these
23,000 shares" To lock up those 23,000 shares and throw away the key.
Instead I was foolish in thinking that since I amassed the 23,000 by
switching
that this game of switching had more prizes in store and has more
accumulation of AT&T
still to come.
Well, I can start over again here in 2008 with those 17,010 of Verizon.
Do the switching.
And do not bother with parasitized drug industry.
Another feature of the Drug Industry in that they brought on much of
their own malaise themselves
due in large part to
their greed and foolish drugs such as cholesterol drugs. Drugs that have
dubious efficacy, and
dubious benefit. Where exercise is a far better treatment then pill
popping cholesterol. The drug companies
have become what the old nicotine tobacco companies became with a
revolving doors of
lawyer lawsuits.
So Pick the right industry and Pick the right companies in that industry.
Another comment, in that I have far better uses for my time than to be
hording money and
watching the stockmarket. Another reason I chose to sell the SGP and
finally say an
end to drug companies. The sheer time involved in tracking and thinking
and worrying
about stocks is not worth it especially when someone has found better
things in life
to do.
If one devotes their life to amassing money, theirs is an impoverished
and poor life. So at
a stage in life where financial needs are adequately met, then the
devotion of time should
be to something more important then the piling up of more money.
Archimedes Plutonium
www.iw.net/~a_plutonium
whole entire Universe is just one big atom
where dots of the electron-dot-cloud are galaxies |
|
|
| Back to top |
|
| |
|
Page 1 of 1
All times are GMT - 5 Hours
The time now is Sun Oct 12, 2008 6:07 am
|
|