Happy New Year

May we live the New Year with a heart filled with gratitude and love. Not an easy thing to do but certainly worthwhile pursuing.

I see my last post was December 23. I really did not have much to say! Whatever the market lacked in zip for most of the holiday week it made up for yesterday.

We had a handful of people over for dinner last evening. A smaller scale than I've done in the past both in guests and fare. Past NY's dinners have been a bit overtaxing on both my energy and my pocketbook. I didn't want to spend $400-500 entertaining (as I had already done another grand scale dinner earlier in the year); however, I still wanted to do something nice. Rather than an expensive piece of beef, I fixed duck leg quarters. I served them with caramelized onions and spinach and butternut squash ravioli with shallots/bacon/cream. Our dessert was a simple, but delicious lemon tart. I had nice wine. We had crab stuffed eggs and smoked salmon.

The dinner came together well, and there was no compromise on the 'wow' factor. The smaller scale allowed me to enjoy my guests. I've been guilty of very elaborate meals in the past, that frankly left me exhausted. Graham Kerr remarked in one of his books that one should never have more than eight for dinner. I've had 10 and 12 in the past, and it really is too much. You wouldn't think that two people make all that much of a difference, but when you think about pan and serving sizes (desserts, entrees, wine), not to mention the seating, it really does. One hates to chop the guest list, but I did this year.

I'll spend a little time over the next few days reflecting on this past year. Because I've had my resolutions close at hand (by my computer), I was pretty successful in keeping most of them. A few were just on the radar and did not get within firing range. Oh well. I'm most happy with my fitness goals being reached, though I've fallen off the wagon in these last few weeks. I'll do my resolutions on a "mind map" format again. I really found that helpful.

I've also kept Miyamot Musahi's Nine rules close by. Here are my favorites: I also have Musashi's 9 things even closer...my favorites. . . .

• Learn to see everything accurately;
• Become aware of what is not obvious;
  
• Be careful even in small matters;
  
• Do not do anything useless.

With respect to the market: I did better than most hedge fund and money managers. My retirement accounts are higher yesterday than they were at the beginning of the year. I could have managed a few positions MUCH better and been significantly higher--the biggest fish that got away were my DIA SEP 125 puts AND my DUG $35 calls. I've a tear in my eye thinking of all the money that I left on the table--5 figures in both. Oh well.

I started out the year with the Lucky 13 that was given as a stragegy


You would have lost 29% of your investment. I guess that was better than the 34% that the S&P was down, but still..... I know that we will continue to hear about the worst being over; the stock market recovers before the economy; etc..... As I've come to learn, sometimes the hard way, the market is an odd mix fact and fantasy, with the fantasy being largely attributed to the emotions and lore (such as the Lucky 13, Dogs of the Dow, Best Buying Days, etc) surrounding the market.

The simple fact is this: If you lose 30% of your capital, you will have to make 43% on your entire investment to become whole again before any accretion. There's alot of compounding that nobody talks about much in avoiding losses. If the amount of time spent yapping about "long term horizon" were spent on preserving capital, individual investors would be much better off--they wouldn't need a long term horizon to make up for substantial losses suffered. Unfortunately, investors are admonished that market timing doesn't work.

Let's just call it something else: asset allocation. That's what the other money managers call it, right? "WE are not market timers; we are asset allocators." Asset allocation is all about managing risk and reward. Managing risk and reward is also relevant to particular positions. Where I've MISSED substantial gains is by not properly evaluating the risk/reward on some very favorable positions. In the same breath, but certainly not meant to minimize the mistake, I've also avoided most of the risks that exposed others to outsize losses. My goal this year is to do a better job of managing risk reward.