Risk/Reward Vol. 138
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"You know it seems the more we talk about it/It only makes it worse to live without it
But let's talk about it/Wouldn't it be nice."---lyrics from "Wouldn't It Be Nice" by the Beach Boys
"I'm half a world/Half the world away
I had too much to drink/I didn't think
And I didn't think of you."---lyrics from "Half a World Away" by REM
"High anxiety, whenever you are near/High anxiety, it's you that I fear
My heart's afraid to fly/It crashed before
But then you take my hand/And my heart starts to soar"---lyrics from "High Anxiety" by Mel Brooks
Next week, the First Lady and I depart for a sojourn in Nice. I will be thousands of miles and several time zones removed from my trading desk. But, it does not "make it worse to live without it." "Let's talk about it". Armed with a third generation Kindle that has international capabilities and with wifi in the apartment we have let, I can do my daily reading (IBD, WSJ and Financial Times) and access all of my stock accounts. On our day trips throughout the Riviera, I will carry my iPad which has international 3G coverage thus allowing me to trade at a cafe, on the beach or in a casino. With a daughter, son in law and grandson in London, we have made the trip across the Pond many times, and this array of technology has allowed me to buy and sell seamlessly. But, "wouldn't it be Nice" not to worry about the market ?
Yes. So this trip, "half a world away", I decided to halve my portfolio. "I don't want to think, and I want too much to drink." And this is how I did it---painlessly. Half (actually about 40%) of my tradable portfolio is in self directed retirement accounts (IRA's or a 401k). Income and capital gains in these accounts are not taxed until withdrawal, so they make excellent vehicles for holding high yielding securities that are not otherwise tax advantaged such as real estate investment trusts, oil trusts, exchange traded debt and various closed end funds (but not master limited partnerships). Having already reaped this quarter's dividends, I sold these holdings after Thursday's move upward, with no tax consequence. My only potential loss is an uptick in the market in the next ten days or so. When I return, I can repurchase any or all of them with nothing lost other than $7 in selling commissions and $7 in repurchasing commissions. I am looking forward to some carefree REM.
Frankly, I may have pruned my holdings even if I were staying Stateside. With last week's riots in Spain, with labor unrest at the Foxconn (Apple) plant in China, with the Dow heading lower in 5 of the last 6 trading days, with Israel and Iran no closer to ending a nuclear standoff and with threats from both sides of the aisle that Congress may actually stalemate us over the Fiscal Cliff , I have "High Anxiety". Although "my heart is still not afraid", this week I sensed more "fear" in the market---the kind that I sensed when it "crashed before." I certainly do not believe that the market "will soar"---at least not while I am gone. And I am not alone. One longtime reader and a person whose investing acumen I admire emailed me this week that he had exited.
Not counting my spouse-imposed 25% cash cushion, I am 60% invested. I am heeding advice from that noted philosopher, Mel Brooks who penned:
"Hope for the best/Expect the worse"---lyric from "The Twelve Chairs"
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