Birchtree's Account Talk

[Birchtree]

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Greg,

Thanks for the pics-looks like how I feel.

Just 12 weeks ago, the Dow was trading at a four-year high, less than 7% below its all-time peak at 11722.98. A few weeks ago the Dow had its worst day in two years when evert major index fell to new lows for the year. These declines have spooked normal investors, but not the renegade contrarian. Blame for the slide has been placed on a combination of earnings warnings, weak economic data, Fed rate hikes, rising oil prices, and an expanding trade deficit. At present all these indicators and data have essentially reversed-but the funk continues. Could be the many dumb hedge funds reducing risk-they will all eventually have to buy back in.

To me the greater risk is being out of the market-not being in. I have been in this position many times over the yeras and I'm still around-bigger than ever. Every time I get hurt or intentionally hurt myself, my portfolio grows larger. I'm showing TSP participants my strategy so they can get an idea of the potential that is available to them. Most of what I do is designed to be long term-with flexibility of course. I really don't like taking profits unless there is an advantage to buy more shares cheaper. Taxes are also a consideration at this point.

 

[Birchtree]

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While it may seem like the end of the world to some, the Dow is still up 38% or so from its low point in 2002. Now that was a bear market-but it was ending and was more painful than this correction we are in now. The degree of negativity was equal to 1929. That 3000 point run from 3/03 was somekind of sweet. I was picking raspberries in the bear patch long before the bull started. Kind of like the squril storing nuts for another day, I collect stocks.

Interest rates have been going up, but in both real and nominal terms rates are very low. And I think the Fed now will pause at 3% and watch. Between 1995 and 1999, when the sp500 was rising at an average annual rate of 25.7% the fed-funds rate averaged 5.4%. Close to twice as high as today's 3%. The real rate (rate minus inflation) in the late '90s averaged 3%, while today it is virtually zero.

There is still job creation, still low mortages, still benign inflation rates and good profit momentum. Forecasts for business profits have been improving since the year began, not declining. Money has been moving into Treasury bonds, damping yields, which has the effect of lowering many market interest rates. That is good news for the economy, for consumers and for businesses, not to mention my portfolio.

 

[Birchtree]

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The almighty dollar every one worries about is not reaching for a new high, it is just trying to find an equilibrium or stable plateau trading range. US products still maintain an edge when competing only now there is more reasonable elasticity. The trade deficit will shrink in time, until then it's a good thing. Why worry about a global economic slowdown because oil drops, be content that there is little secular inflation.The Fed will be satisfied to pause-and when the market realizes that off we go on my rocket ride.

I was standing on the sidewalk to day when 50 million Frenchman passed by and guess who was walking behind them in tandem-it was Chicken Little. I turned and headed in the opposite direction.

We had a six year run inthe '90s and now we have had a six year sideways movement to correct the excess gains. 3/99 the Dow was at 10000-today the Dow is at 10000. Time to move forward and upward. How high who knows-how long who cares just GO. Dennid

 

[Birchtree]

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I've been thinking over the weekend-yes I so think-about inflation and why the talking heads are so jittery. There is a political reason the Fed will pause in June. Inflation is around 2.9% to 3.1% above where it was a year ago-in line with its average growth rate since 1990. The core CPI is still at 2.2% ahead of year earlier levels. That is below the 2.9% average since 1990. If inflation is that low now, it could get dangerously low if there was a recession. Remember, it wasn't that long ago the Fed was worried about deflationary risks, that is how we got a 1% Fed rate. The Fed does not want to run the risk of creating a recession, the world is not safe enough for a recession right now. They might even pause in the context of higher inflation, counting on a slower economy (Goldilocks economy) to damp price gains. Productivity continues with positive momentum and wage gains are still moderate. I get a 3.6% gain in August, just ahead of inflation. But I also put my money where my mouth is-this will not be the last bear type correction we encounter on the way to Dow 13000 or sp500 at 1600. "I want my Maypo" Dennis

 

[Birchtree]

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Alright now - lets finish last week. Showme talks about the beating he took last week-I wouldn't mind trading my ribs for his. On Friday 5/13 I dropped another $14,000. That makes $46,000 for the week and a grand total of $138,000 since the top on 3/7. Presently sitting at $797,284 as of 5/13. The question now is how long if ever will it take me to regain my lost ground? Frankly, I don't think it will be that long- remember I've been adding to my positions all the way down, except for 5/13.

I'm staying 100% C fund in my TSP account and will maintain a low profile in my outside account unless I'm forced to make more sacrifices with a lower new test of a bottom below 10,000. I'm prepared to make trades, but for now I need to heal and pull off these bandaids I accumulated from the bear claws. I hope if you are reading this that you know this is the real deal. Stick around and watch me start to get nervous on the way up. Your losses are always quantifiable- the gains however can have the potential to be unlimited. When to sell is much more difficult than when to buy-it requires even more discipline. I hope I can rally some good advice on when to take some off the table- I don't like to ring the cash register unless there is a sacrifice attached to it. That is the achilies heel of this renegade contrarian.

 

[Guest]

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Birchtree wrote:

On Friday 5/13 I dropped another $14,000. That makes $46,000 for the week and a grand total of $138,000 since the top on 3/7.

Hey, it's only Yankee money!

Birchtree wrote:

Presently sitting at $797,284 as of 5/13.

Wow, Birch, you da man !

Birchtree wrote:

I hope I can rally some good advice on when to take some off the table

I say that there is no time like the present.

 

[Birchtree]

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Greg,

No I mean when we get closer to Dow 13,000 and sp500 of 1600. Just don't want to leave everything on the table with new highs. That's the hard part-wait you will see what I mean. When you take it off the table you are giving up potential further gains. No one likes to do that-remember the techs of 2000-no one wanted to leave the game-and they all got trapped. Except me, I knew better than to get into that game-I just accumulated dull old stocks that nobody wanted. When 3/03 arrived I was in full throttle. And now I'm ready to go some more.

 

[Birchtree]

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Greg,

No I mean when we get closer to Dow 13,000 and sp500 of 1600. Just don't want to leave everything on the table with new highs. That's the hard part-wait you will see what I mean. When you take it off the table you are giving up potential further gains. No one likes to do that-remember the techs of 2000-no one wanted to leave the game-and they all got trapped. Except me, I knew better than to get into that game-I just accumulated dull old stocks that nobody wanted. When 3/03 arrived I was in full throttle. And now I'm ready to go some more.

 

[Birchtree]

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Ooh Mama what a day. Ihave permission to stay home tomorrow and tape read-my wife wears the pants around my house-yes I'm whipped and love every minute of it. We had a 3to1 ratio today-that is very strong. If we could see 2 more of the same back to back, it would be like the earth is moving. I remember when....the move off the 1982 bottom. No one was a believer only this buddung contrarian-Folks I pulled down $300,000 in ten months. Couldn't keep it though-certainly learned alot from that market.

The PCE (personal-consumption expenditures), which excludes food and energy, gained at a 2.2% annual rate in the first quarter, up from 1.7% in the final quarter last year and the highest rate in 3 years. Allen watches this index very closely. Now, with the latest CPI and core rates out today, the PCE will be back down around 1.6%. My friends inflation is benign - the Fed has paused. C'mon over to the C fund and enjoy the ride. I peeked into the shelter today and all the G folks were wearing sun glasses- and here I am putting on my oxygen mask getting prepared for high altitude.

 

[Rod]

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Come on over to (I) for a short vacation!

The sun is beginning to peak through the clouds on these foreign shores!:dude:

 

[Show-me]

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When your right your right! If I would have stuck it out I would have been over 2% better off. :' Maybe next time.

 

[Birchtree]

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Show-me,

It's going to be a long way up. I think the sideways motion is over for now. There is stll room on the rocket ship. As the guy from the Doors said- c'mon baby light my fire, you set the rocket ship on fire.

 

[Rod]

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Birchtree wrote:

Show-me,

It's going to be a long way up. I think the sideways motion is over for now. There is stll room on the rocket ship. As the guy from the Doors said- c'mon baby light my fire, you set the rocket ship on fire.

MAN, and am I EVER for ready for a ride!!!:dude:

I do not want to hear, "Houston, we have a problem." either!

 

[Birchtree]

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I can't help but notice the many folks running for the G fund and F fund for sanctuary. Unfortunately, as a sad comentary this is probably classic bull market deception. Sorry folks you have to take some risks or you won't make any money. You have to make money before you become defensive in posture-that's how the game is played. This economic expansion has several years left to run before we get back into a slow down or another recession. With the economy doing fine you must be invested-waiting will only add to your anxiety.

Dennis

 

[Rod]

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Birchtree wrote:

I can't help but notice the many folks running for the G fund and F fund for sanctuary. Unfortunately, as a sad comentary this is probably classic bull market deception. Sorry folks you have to take some risks or you won't make any money. You have to make money before you become defensive in posture-that's how the game is played. This economic expansion has several years left to run before we get back into a slow down or another recession. With the economy doing fine you must be invested-waiting will only add to your anxiety.

Dennis

At the same time you must realize that we have had a really good run all week long in which we have ALREADY made some $$$. That is now running out of steam and trending back down.

Anyways, it's not like we are seeking sanctuary forever. Why expose yourself when you don't have to, and especiallywhen you know there's a good possibility of the market trending back down.

You have to play it both ways.

God Bless:^

 

[Birchtree]

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Things this week were good-pulled up $37,000 to $834,000- thay leaves me with $101,000 to go to redeem my portfolio. If Elaine Garzarelli is correct it shouldn't take very long. A number of my auto parts stocks showed some rebound today. Will most likely start doing some nibbling on the way up while stocks are so cheap. Would like to add to my lumber holdings and chemicals. Can't forget steel-that area was active today. Perhaps hedge funds are covering some of their short positiuons.

I'm now permabull#2 as well as the renegade contrarian. I should take this moment to tell Dave (he probably won't see it anyway) that I never pull out quickly and never ever will. Why bother!

We may, incidently, be set up for a good week next week. There is so much money that is going to be looking for a home all the way up.

 

[coolhand]

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Birchtree wrote:

I can't help but notice the many folks running for the G fund and F fund for sanctuary. Unfortunately, as a sad comentary this is probably classic bull market deception. Sorry folks you have to take some risks or you won't make any money. You have to make money before you become defensive in posture-that's how the game is played. This economic expansion has several years left to run before we get back into a slow down or another recession. With the economy doing fine you must be invested-waiting will only add to your anxiety.

Dennis

Hey Dennis, with market timing there is no one "right" way. You are obviously going long and there's nothing wrong with that, but going to the "G" fund for most of us is quite temporary (unless you're talking about bears ). It has nothing to do with risk aversion and everything to do with trying tomaximize gains.

BTW, we need your optimism. It keeps many of us thinking that the sky really isn't falling...heh, heh...<bumb> ow!

 

[Rod]

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coolhand wrote:

It has nothing to do with risk aversion and everything to do with trying tomaximize gains.

Exactly. If I would have stayed in the (I) Fund as Dennis suggested, I would have lost a big chunk of change today. I saw it coming, and that's why I moved. Again, WHY unnecessarilyexpose yourself???

With my move to G&F, I didn't lose one cent.:^

God Bless

 

[Birchtree]

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Rod,

Are you sure I recommended the I fund to you. I believe the only time I've recommended that fund was for accumulation purposes-and it was to people who don't have much time in service. Eventually over time the I fund will make people a good amount of money-but not via trading-dollar cost averaging is the best approach, and I wouldn't put more than 30% in the fund-just to be diversified.

Hey Robo,

You are on the right track-we'll be more than glad to save you a seat. The train will be leaving the station shortly-and a lot of people will end up crying and unhappy. What else can I say-the market takes no unwilling riders. Anxiety levels are already starting to rise-the tension is exhilerating. Regards,

Dennis

 

[Rod]

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Birchtree wrote:

Rod,

Are you sure I recommended the I fund to you. I believe the only time I've recommended that fund was for accumulation purposes-and it was to people who don't have much time in service. Eventually over time the I fund will make people a good amount of money-but not via trading-dollar cost averaging is the best approach, and I wouldn't put more than 30% in the fund-just to be diversified.

I'm commenting on what you said earlier because I was 100 (I). You had said:

"I can't help but notice the many folks running for the G fund and F fund for sanctuary. Unfortunately, as a sad comentary this is probably classic bull market deception. Sorry folks you have to take some risks or you won't make any money. You have to make money before you become defensive in posture-that's how the game is played. This economic expansion has several years left to run before we get back into a slow down or another recession. With the economy doing fine you must be invested-waiting will only add to your anxiety."

You were questioning our (my)decision going to G & F.

That decision saved me $$$. If I would have stayed, as you suggest above, I would have lost $$$. I didn't run "just because". I saw that foreign currencies were weakening and I took the appropriate actions so that I would not be exposed to the loss that the (I) eventually experienced today. To reitterate what I said earlier, I "played the game". I indeed made $$$ prior to "becoming defensive in posture".

I made my move to G&F so I would not lose what I had made. That too, is called, "playing the game".

That's my point.:^