Pettit Funds

From the NY TIMES:

The debate over economic policy has taken a predictable yet ominous turn: the crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts. For those who know their history, it’s déjà vu all over again — literally.

For this is the third time in history that a major economy has found itself in a liquidity trap, a situation in which interest-rate cuts, the conventional way to perk up the economy, have reached their limit. When this happens, unconventional measures are the only way to fight recession.

Yet such unconventional measures make the conventionally minded uncomfortable, and they keep pushing for a return to normalcy. In previous liquidity-trap episodes, policy makers gave in to these pressures far too soon, plunging the economy back into crisis. And if the critics have their way, we’ll do the same thing this time.

The first example of policy in a liquidity trap comes from the 1930s. The U.S. economy grew rapidly from 1933 to 1937, helped along by New Deal policies. America, however, remained well short of full employment.

Yet policy makers stopped worrying about depression and started worrying about inflation. The Federal Reserve tightened monetary policy, while F.D.R. tried to balance the federal budget. Sure enough, the economy slumped again, and full recovery had to wait for World War II.

The second example is Japan in the 1990s. After slumping early in the decade, Japan experienced a partial recovery, with the economy growing almost 3 percent in 1996. Policy makers responded by shifting their focus to the budget deficit, raising taxes and cutting spending. Japan proceeded to slide back into recession.

And here we go again.

On one side, the inflation worriers are harassing the Fed. The latest example: Arthur Laffer, he of the curve, warns that the Fed’s policies will cause devastating inflation. He recommends, among other things, possibly raising banks’ reserve requirements, which happens to be exactly what the Fed did in 1936 and 1937 — a move that none other than Milton Friedman condemned as helping to strangle economic recovery.

Meanwhile, there are demands from several directions that President Obama’s fiscal stimulus plan be canceled…[Rest of article]

Well, I had every intention of helping some struggling “Third Worlder”, but, as it turns out, my first experiment with obtaining freelance help online ended up being with a fellow American doing the work.

A year or so ago I read the highly recommended FOUR HOUR WORKWEEK, by Timothy Ferris. That was where I first really learned about and gave some thought to delegating tasks to folks more capable than I, but who will work cheaply.

I signed up–for free–at a site called eLance, but never followed through with posting any projects.

Meanwhile, over this last year I’ve been mulling over the idea of coming up with an Excel spreadsheet that could duplicate some screening features I used to use back when I was good at picking stocks–but that have not been available for the last couple of years from my current screen provider at Investools. As I’ve gotten poorer and poorer, I became more and more desperate for this “lost feature” and decided to bone up on Excel and its Web Query and Macro possibilities using Visual Basic. Well, it hurts my head just to even read that last sentence, let alone actually do the programming that would be necessary and so, over this last weekend I decided to farm the project out.

During my GOOGLING for Excel-related help, I had accidentally come across a freelance site called GetAFreeLancer. I looked around and saw that there were a number of capable Excel gurus in lands far, far away–so I did the free signup. I then posted my project last Friday evening (which I believe you can see here–although perhaps you have to sign up and login to see it, I don’t know; be sure and click on the “View Project Clarification Board” button to get a better understanding of what I was after).

The next morning I had a dozen or more bids in my mailbox, ranging from $30 to $150. I had expected to pay $50-$100 for the project and ended up going with a guy (American) who quoted me $50. (I think he lived to regret it, since it ended up being a little more complicated than he had expected. Hey, that’s business!)

Anyway, 24 hours later I had the worlds best Secret Spreadsheet for fine-tuning my future stockpicks.

And I am simply delighted!

I can’t wait to do something like this again, although I don’t know what that would be. All I know is if I was younger and still in the workforce I would be all over this stuff. If I was using Excel or any number of other programs in my work, I would be outsourcing the heck out of it.

Any future websites I put up will be done through a freelancer–for a lot less than past websites (including this one) have cost.

Take a few minutes to check out the above-referenced sites, just to see what’s out there. Bookkeepers are emailing tax information overseas to have math whizzes complete tax returns. Doctors are zapping xrays over to doctors far, far away who are able to interpret them overnight for less than a local radiologist would charge. People with excellent English skills are doing research and article writing.

Like it or not, the world is flat. We can complain about work going overseas, or…we can take advantage of it.

This was a terrific experience for me, and I hope you will all keep the possibilities in the backs of your minds.

This is a pretty disturbing story from the FREAKONOMICS Blog at the NY TIMES. I have run into this phenomenon all through my career as an attorney/tax advisor/investor, and have also run into it all the time dealing with friends and family who are othewise intelligent and informed but virtually clueless regarding their finances. For some reason, even though there is a very good chance that (if you do it right) you will, in your lifetime, make more money with your investments than with all of your paychecks, people just don’t educate themselves on these matters:

Let’s begin with two questions:

1. Do you consider yourself financially literate?

2. If so, how did you get that way?

And now, a third question:

3. How important is widespread financial literacy to the health of a modern society?

Before you answer the first question, take this little quiz, borrowed from the website of Annamaria Lusardi, a professor of economics at Dartmouth who knows and cares more about financial literacy than anyone else you’re likely to encounter:

1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After 5 years, how much do you think you would have in the account if you left the money to grow?

a. More than $102
b. Exactly $102
c. Less than $102
d. Do not know

2. Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After 1 year, would you be able to buy more than, exactly the same as, or less than today with the money in this account?

a. More than today
b. Exactly the same as today
c. Less than today
d. Do not know

3. Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”

a. True
b. False
c. Do not know

The correct answers are …[Rest of article]

Cool!

The mutual fund that is run pursuant to the selections of the Marketocracy organization that I have been a part of for the last 5 years has just been upgraded by Morningstar to a 4-star fund (5-stars for the last 3 years!)

This should have happened sooner, except for a bad year a few years back–which was when Marketocracy took another look at how they were going to be making future selections. They had been buying hundreds and hundreds of stocks based on the selections of their Top 100 investors, and after their bad year started limiting their purchases to those recommended by only the Top 10 investors–which group I have belonged to for the last 3 years. Most of the stocks I have recommended here have ended up being holdings of the mutual fund.

While I have been through a less-than-stellar year since late last summer, if you visit the Marketocracy site you are going to see incredible performances by the other members of the “m10″ (what Marketocracy calls their Top Ten). Hopefully, I’m just pausing to catch my breath…

Anyway, it is exciting to see this experiment starting to pay off for the Marketocracy bunch. I’m going to encourage my kids to put some of their Roth IRA money into the fund.

FULL DISCLOSURE: As a member of the m10, I get a tiny percentage of the “Assets Under Management” each quarter–so of course I may be encouraging all of you to invest there out of sheer greed! Take anything I say with a grain of salt. Furthermore, past performance is no guarantee of future results (I think I read that somewhere…) Oh, yeah–and the Marketocracy site and the Marketocracy Masters 100 Fund are two separate and unrelated entities, blah, blah, and anything else I’m supposed to say to keep the SEC at bay.

My hands are always trembling when I make these picks now, but…here goes another try.

This time I’m going with Movado Group, Inc. (MOV), makers of the Movado watches. They have been taking a beating the last little while as they streamlined their operations by cutting out about 35% of their wholesale business. (Gulp!). I guess I’m betting that they are pretty much as low as they are going to go, and that the business is still solid. We’ll see.

Just for fun, I’m taking some smaller positions in Companhia Paranaense de Energia (ELP), which is in the electricity business in Brazil, and Gerdau Ameristeel Corporation (GNA), which is a North American steel producer–not full-fledged picks yet, but they came in as close contenders this time around.

Good luck!

Is the magic back?

I’m not sure: I’ve had a confidence-crushing six months or so in the market. On the other hand, my last pick (Twin Disc, Inc.) from 3 weeks ago is up over 34% since then. (You’re welcome). Additionally, some of my “dogs” of last year have bounced back (Australian railroad company Genessee & Wyoming, Inc., coming to mind–having coming back up about 40% since the beginning of the year). So let’s try, try again:

With some trepidation (there’s always some trepidation), I’m going with Hauppage Digital, Inc. (HAUP), but I’m taking a smaller than usual position because it looks pretty risky. They make digital video recorders. My last “tech” pick, Ceradyne, still remains an embarrassment to me (but I’m “keeping the faith” and haven’t sold)–but Hauppage was the only one that jumped out at me this week. Very thinly traded, at less than five bucks a share it’s practically a “penny stock”, and yet…well, it’s what I’m going with. Be careful!

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It is with trembling hands, that I make my first selection of the new year.

It is the nature of the stock market to go up and down. It sure is painful when it’s down, though–especially when I timed my retirement to begin right at its high point. I may be back out on a street corner selling pencils soon.

Anyway, my pick this month is Esterline Technologies Corp. (ESL).

They manufacture stuff for the aeronautics and defense industries–including lighted pushbuttons. My portfolio was low on lighted pushbutton manufacturers before, and now it is not.

Good luck. Keep the faith! The market has to go back up soon.

Doesn’t it?

The cover story for the current issue of CONSUMER REPORTS magazine is “12 Money Mistakes That Can Cost You $1,000,000″.

Number One? “Investing too conservatively during retirement. Cost: $360,000 to $750,000″ (!) (Note: those dollar figures are based on a hypothetical investor retiring at 65 with $500,000 in savings to invest. If you don’t have that much when you retire, your problem was investing too conservatively before retirement!)

This is no surprise to me, of course, having invested 100% in stocks for the last 30 years–as I will for the rest of my life.

From the article (with a surprising conclusion):

Overall, we found that an asset mix leaning toward Standard & Poor’s 500 Stock index than bonds provided bigger returns and annual cash draws. On average, over a variety of 20- and 35-year periods from 1940 through 2006, an all-stock portfolio provided our investor with $750,000 more than an all-bond one. If we had started with less money, $250,000, the advantage of all stocks over all bonds was about $360,000.

What you can do. Weight your asset mix as heavily toward stocks as your comfort level allows. If all-stock gives you the willies, consider for example, an 80/20 or 70/30 stock/bond mix.

Wow! 70/30 at the very least. Conventional “wisdom” has been to subtract your age from 100 to 120 (depending on your “risk tolerance”) and that was the percentage to have in stocks. I always knew that was baloney.

Retirees: it’s not too late. Pick up a book or two. Open a brokerage account. Buy some index funds. But be careful who you get your advice from…

Good luck!

Well, I was just getting ready to have my pick of the week be a stock called Aur Resources (AUR), when I discovered that I pretty much already own it. A pick of mine back in January of this year was Teck Cominco (TCK)–which is up over 37% since then, by the way–and this company has bought almost all of the shares of AUR.

So…I’m going to go with a nice big, boring pipeline company: Oneok Partners LP (OKS)–mostly because I’m a little under-weighted in energy in my personal investments. (But of course, my fantasy fund at Marketocracy–Pettit Energy Fund–is doing gangbusters…)

Happy Investing!