First Quarter Interim Outlook

In the past couple months, the subprime crisis certainly made some people discouraged at the market. I decide to give this entry about market outlook ahead of the 1st quarterly report. As I had already executed, there are a few things you can also tweak during this turbulent time to your gains.

With half of equities in emerging fund, OneOnian fund was in a gyration since year 2008 started. At some point in January the fund was down 14%. The cause of this is due to the deteriorating of the credit issues in fundamentals of the market. However as banks started to write down big losses and Feds started to take notices and actions, I believe this bearish cycle is coming to an end. The market will start to alleviate and buyers will start to pick up bargains. Even the big wave of write down have passed, we might expect some secondary and possibly tertiary market effects that might cause a few more ripples. Mostly side effect will come from consumers and inflations related.

During the past quarter I did a few things to take advantage of the market downturn. First I swapped different tax lot of the same stock. For example, I had multiple purchases of ACH, some were brought at higher price than others. Assume you still believe in the fundamentals of the company, when the market offers a price at 20, 30, or 50% from your highest purchase price, you can sell those stock and buy them at lower price. The gain is the tax advantage. The short losses can offset your gains at normal tax deduction. With long-term capital gain tax at 15% and compare to my higher than 30% income tax, that’s 15% gain. However, to fully take advantage of this, the numeric gains should be much higher than the commission you paid to do the swap.

Next, I dropped my position in PTR, GRMN and all of my smaller positions like CHL and MT. Each had different reason (I will cover them in my next quarterly report), but the general selling is to free up some fund to purchase other stocks with higher potentials of returns. In addition, I dumped another $6k into the fund and brought more ACH at $33/share, 2000 share of ETFC (Etrade, Financials) at average of $4.79, 250 share of FNM (Fannie Mae, Mortgage) at $31.90, more shares of CREE (CREE, LED) now at average of $24.43, and today, 50 shares of DRYS (DryShips, Shipping)  at $82.50. I believe all of these purchases suffered a substantial drop, now with a much higher return potential then the stocks I sold. Also, through this series of trades, the portfolio is now better diversified. The advantage of diversification is subject to another discussion.

In the end, is not the behavior of the market that determines the size of your bank account, it is the ability to remain patient, clear-minded, judge and execute even amid the most panic influences that will yield you the greatest gains.