Tuesday, June 29, 2010

It's an ugly world out there

The Dow dropped 268 points today - and took most of my portfolio with it. All I can say is I don't think this will be a permanent state. I have 20 years to go to retirement so I can afford to sit and wait it out. If you have money you need sooner, you have to decide what to do. One thing to consider, it's not a loss until you actually sell....

Friday, June 18, 2010

BP Rebound, Looking at Fannie Mae & Freddie Mac

It's been a decent week. I'm up about 25% v 40% a few months ago and 20% a few weeks ago. I'm still down in BP about 10%. Hearing about the $20 billion fund they're putting together for the Gulf of Mexico oil spill disaster says they're not going out of business and in a year, if not less, barring anymore SNAFUs I think they'll be right back to where they were a few months ago.

Looking at Fannie Mae (FNM) & Freddie Mac (FRE). Five years ago, Fannie Mae was selling for $70/share, Freddie Mac was selling for about $50/share. They've both been delisted by the New York Stock Exchange, because they're selling for less than a dollar a share, about $.50/share each. They are both still government sponsored enterprises, which I think means they're not going anywhere anytime soon. I'm trying to let it drop a little more, but I think I'll be buying in the next week or so.

Thursday, June 10, 2010

Finally a Good Day

Today was a good day. After a week of bad days. Very bad days. I'm still down from my high by about 50%. That translates to mean 2 months ago I was up 40% for the year, now I'm only up 21%. I'm down 15% in BP, but yesterday I was down 28%, yeah, it rose 13% in one day. Welcome to the illogic of the stock market. This in the midst of them SNAFUing the Gulf of Mexico oil spill every whichaway they can. But I stand by my thought that it is a good time to be jumping into the stock market. I'm currently reading Michael Lewis' The Big Short: Inside the Doomsday Machine. Fascinating reading. It reinforces my theory that the big brains on Wall Street are just as dumb at the rest of us.

Thursday, June 3, 2010

Why I might buy British Petroleum (BP) stock

Slowly the market is coming back, rising over 200 points yesterday. I'm still down, but having some really good days. I'm looking at British Petroleum (BP), yes the company responsible for the biggest oil spill in history. Why? Because it is getting hammered. This is where personal choice comes to play.

About 20 years ago, several financial companies started marketing mutual funds that excluded "sin" type companies like tobacco, gambling and alcohol. The goal was to attract people who had aversions to the kinds of products and services these companies sold and, therefore, would choose not to invest in them. Very valid point. If you don't agree with what a company does, you are well within your right not to invest in that company. My problem/issue with that type of investment mix is that 1) investing is about, for the most part, getting the best return, not expressing your distaste for drinking, smoking or any other questionable yet legal activities, 2) these portfolios have been put together not becauase someone did research and decided they were a good mix from an investment perspective, they were put together because they are a good mix from a marketing perspective (I don't invest in marketing) and 3) I don't care for mutual funds, see previous posts.

Getting back to my point about British Petroleum, I think they have handled this whole spill horribly, starting with before the spill. They had no plan for cleaning up a mess of this magnitude, yet they've probably thrown millions into figuring out how to drill 5 miles below the surface of the ocean. Having said all that, they are still in business. Their stock has lost about 50% of it's value in the last month, and over the last 10-15 years they have made a boatload of money. Assuming they don't get liquidated due to lawsuits (see Arthur Anderson) or taken over by a competitor, they will be back. Why? Because as George Bush said, "We are addicted to oil." and that addiction ain't going nowhere no time soon. So, yes, it's a gamble, but I can see this working out for BP such that in a year or so the stock price is right back where it was a month ago. A 100% return in 12 months ain't bad at all.
Do I feel bad about investing in a company that royally screwed up the GULF OF MEXICO for decades? Nope. If you want to get picky, go protest the people you see lined up at BP gas stations. They're the ones supporting the company, I'm just gambling.