Sunday, February 08, 2009

So What Happened to Wonker?

The previous entries provide some context for the microeconomics that encompass Mr. and Mrs. Wonker's collective portfolios.

As a seasoned investor and former registered rep, I don't mind telling you that we're not the only ones whose portfolios got hosed in 2008. After leaving our places of employment in the summer, we got control of our own retirement accounts (several actually), put them with a discount broker, and, from nearly total cash positions, began investing in conservative, dividend and interest bearing investments so we could actually begin to retire. And finally find the time to write some good stuff we'd always wanted to write without having to regard on 9-5 and companies that consistently refused to pay any attention to our generally good advice.

Suspecting that something like this would happen anyway, we'd also been investing in specific kinds of real estate, hoping to use the cash flow to supplement the income we'd get from our market investments.

You may find it surprising to note that, as of today, out of our 6 investment properties, all have continued to increase in value, while only one of them has a negative cash flow, but for generally supportable reasons (like extra parcels of land that generate no current income).

The disaster in our collective portfolio has been solely confined to the stock and bond markets where every move we've made until the last 6 weeks has been an unmitigated disaster. The collective portfolio was down roughly 21% year-to-year as of close of business, 2008.

Ironically, this perfectly awful return makes Wonker, Inc., an incredibly effective investment empire, since, for example, the revered Warren Buffet is supposed to have lost roughly 39% last year, at least in terms of his Berkshire Hathaway investment vehicle.

Nonetheless, even a paltry 21% loss is pretty awful, and we'll guarantee you, the Wonker portfolio is a LOT smaller than that of the Sage of Omaha.

Yet we've begun to claw back. By detecting a theoretical maximum reasonable dividend return figure (up to 12% used to be at least moderately ok and safe, but now it's more like 9-10% max), we're up nearly 5% dating from January 1, 2009 thru Friday, Feb. 6, 2009. This week will probably bring some more roller coaster rides on the averages as the Obama Administration plays peek-a-boo with banking reform and its so-called stimulus package (in reality the Reid-Pelosi Public Employee Union Payoff Package).

Nonetheless, just enough fear has at least temporarily exited from the markets that you can place a few bets again.

But as you've probably read in many places, the time-honored "buy-and-hold" strategy of investing is DOA at least for now. This is disconcerting to a fairly conservative investor like myself, but it will remain present reality until the new SEC people decide to do something about the uptick rule (aforementioned) along with the asinine and predatory "ultrashort" Exchange Traded Funds (ETFs) that are actually institutionalizing Bear Raids and making individual stocks more treacherous than they were in 1929.

So we're committing funds again to higher grade junk bonds, undervalued muni bonds, high-yielding stocks that probably have their dividends covered, and (at least for now) resource plays that are responding to China's apparent reflation project abroad.

American industry remains, as a whole, moribund, and we'd be careful in most other sectors.

In short, before the Wonkers can breathe easier, we still have a lotta ground to make up. But at least the real estate is still above water and cash-positive. And the stocks have gained a little since the first of the year.

We can do this. But not overnite.

We'll keep ya posted.

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