1) Figuring out what to avoid can be just as important as figuring out what to buy
This is a top down concept. I don't know how many times I've written about a sector having a 20% weight in the SPX as being a flashing yellow light and any sector with a 30% weighting being cause to run screaming from the room (or words to that effect). Similarly, avoiding Japan has been right all but a handful of years since the peak in 1989 and it has been rare that investing in big Western Europe has been a good place to be over the last few years. These countries have a long list of obstacles and it is much easier to simply avoid them.
2) Don't invest with your heart
This week's Barron's interview is with a solar analyst who correctly crapped all over the industry in Barron's in 2009 and is back with more bad news now. I've never been a fan of investing in solar. A couple of articles I wrote for theStreet five years ago about what a lousy space this is was the catalyst to my string of CNBC appearances (while I occasionally get made fun of for this, it is a fun thing to do and something not too many people get to do).
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The idea here is simple. It would be great if solar was economically viable without subsidies and everyone had an array on their roof and all that empty real estate in the California/Arizona/Nevada desert had a sea of panels. But the economics have never worked. We want it to work but for now it doesn't. That may change in the future but not yet. Our monthly electric bill is $60-$70 and having enough panels would cost thousands of dollars (either us or someone subsidizing us), it would take decades to pay for itself.
Yesterday's post drew quite a few comments and I wanted to try to respond to a couple of them
Yes, even diet soda.
One reader said that, in his opinion, with any "stock/option play" you are just guessing. While I agree that any stock chosen could turn out to be a bad choice I don't think the idea that every stock represents a guess is correct. Some stock that generally moves from the lower left to the upper right over some long period of time and increases its dividend along the way is a good investment. Assembling a portfolio that includes several of these is not an impossible task. Note that there is no context here of beating the market, simply choosing what turns out to be a good investment based on the above parameter. If that is good enough for you as a do-it-yourselfer, along with a few funds, an adequate savings rate and the realization that you will be wrong with some choices is enough to get the job done and not 100% guesswork IMO.
Another reader said it was good that I have so much exposure to RRGR, the fund I subadvise, but he asked what my allocation to equities is. I have been quite transparent on this point over the years, my allocation is low for reasons I will explain; around 25%. While I think I am young, as the reader points out (I'm 46), we save about what we spend give or take (not the case in 2012 as we did some remodeling if the house we moved into) and this has been the case for a while now--living below our means. I obviously make my living off of the stock market so I believe I have a large personal stake in the stock market. It is crucial to the service we provide (as I view it) that I never get anywhere close to having an emotional reaction to the ups and downs of the market--I had no freak out moments during the financial crisis. At one point I had to reassure a colleague that the world was not ending. Speaking a little less dramatically, clients are not paying me to trade my own account.
One more life rule; the more you put into it (life), the more you get out of it.
The picture is the panel of Walker Fire Engine 86 from yesterday's training. The bright yellow hose is from the water tender which is feeding the engine. The gray hose is feeding another unpictured engine and also unpictured is that 86 is squirting water out the front. The vehicles have to perform multiple tasks on an incident--maybe there is an investing metaphor in there somewhere?
4 comments:
Great advice today, although I admit to enjoying regular cans of diet ginger ale and diet Vernor's ginger soda (the one regional product I relish that is originally from Michigan, and was popular in Chicago years ago).
The point about living life to the fullest strikes home. I suspect in many of your reader's lives,giving back to one's community, church, favorite charities, etc. in additional to personal pursuits of challenge and hobby adds exhilaration and meaning to the phrase "living life to the fullest".
T
I have two or three Stewart's Orange sodas a year:-)
It is the relative dearth in subsidies that make solar investment less inviting, not the reverse.
A number of advanced countries (not the USA of course) do subsidize solar more heavily than fossil fuels but in 2010 global subsidies for oil, gas, and coal still amounted to $409 billion compared with only $60 billion for renewable energy (http://tinyurl.com/8k7m47h).
Many of the subsidies for the fossil fuel industries are indirect and less visible, true, but that does not change the heavy degree to which they were historically, and to this day still are, heavily subsidized by the taxpayer; the fossil fuel lobby dwarfs the green lobbies and makes bloody sure it stays that way too.
Frankly, if countries priced extracting and burning fossil fuels anywhere near the costs they actually impose -- on human health, environmental degradation, climate change, etc -- solar would probably be competitive without any subsidies at all.
NB: Can't think of any renewable energy companies I'd invest in at the moment but did invest in my own solar array: Direct subsidy made the initial install affordable, barely, but yearly tax credits help to improve that on an ongoing basis and I have to say, when the electric meter occaissionally runs backward indicating I'm selling power to the power company, it's not a bad feeling, not bad at all.
Wouldn't claim it was more cost effective than just pulling from the grid and paying the power bill but, OTOH, there are intangibles and sometimes investing from the heart does the heart good.
Seems like a lot of the capital is going to subsidizing cheap panels when the actual problem is intermittency of solar (and wind) and manageable power distribution. Government funds would be better spent in R&D towards efficient energy storage and smart/efficient transmission.
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