The Tycoon Report

2008: A Year for Patience and Thanks

Friday, December 26, 2008 | Ethan Roberts

The week between Christmas and New Year's is always a time for reflecting back on the year as a whole.  When I think about all of 2008, what seems most apparent is that this was the year that investors everywhere had to learn the importance of being patient. 

It is said that patience is a virtue.  The ability to tolerate delay implies that one has self control and maturity.  That is why little children and psychologically stunted individuals have so little patience.  The ability to wait for something without excessive frustration is a valuable character trait.  You can't catch fish without having it and you surely can't make money as an investor without having more than your share.

Several times in my articles, I have quoted Tycoon's own Teeka Tiwari, who often says, "Let the game come to you".  That was never more true than in 2008.  October and November were particularly cruel months.  Waking up every other morning to news that the DOW was down 300 points or more became an arduous adventure.

This was no year for buying dips in the stock market.  That's a great strategy for bull markets, but you are likely to get your teeth handed to you in a bear market, unless you are simply trading very short term.  Another lesson of patience was to not get sucked into buying into the dead cat bounces of a prolonged bear market:


For example, one purchase I made this year was Ford (F), at 2.85 in October, because I thought it had just about bottomed.  WRONG!  I had to endure a gut wrenching dive, all the way down through November to 1.01, before it turned around and catapulted higher on government bailout rumors.  I finally sold my shares in mid December at 3.14 with a small 10% profit, content to let Ford go up, down, or sideways all it wants from here on.  I'm sick of the auto stocks to be honest, but Ford did teach me the value of patience this year.  Patience as in next time not buying too soon, but also patience in not selling at a loss.  Had I wanted to, there was plenty of opportunity to panic and bail out, but I knew it would come back at some point.  When it did, I sold.  Maybe it will go to 10 bucks eventually.  I don't care, I'm not looking back.  You can see the wild ride on the chart of Ford below:


2008 was the year that I really learned how to trade ETFs, thanks in part to Teeka's great DVD series on that subject.  I also did a lot of my own research on trading the double short and double long index ETFs, have had some great success with them, and at some point, I hope to release the strategies to you.  Trading QID, which shorts the Nasdaq 100, was a great way to hedge against the losses from some long-term IRA positions.  Then, when I felt the selling had temporarily run its course, I would simply sell the QID and buy the QLD, which is double long the Nasdaq 100.  Trading those two ETFs really saved my portfolio from destruction this year.  It was Chris Rowe from whom I learned the value of playing both sides of a market this year.  So a big thanks to you, Chris!

As for Real Estate, I finally broke down and bought two more rental properties in 2008, to add to my existing portfolio.  Although I bought them both really cheap, some will say that I may have bought them too soon as well.  I seriously doubt that we have bottomed in the real estate market.  But I'd been patiently waiting for over two years while the real estate prices declined, without having bought any properties.  For a guy who often would buy one or more homes per year, that was worse than water torture!

But you know, one thing that I like about real estate is that your "dividend" begins the very first month when you make sure to have a positive cash flow, plus the principal pay down on your mortgage.  So even if the prices come down a little bit more from your buy price, you have something to offset that each month.  In addition, most all of the homes that I buy are foreclosures, which are always purchased at a huge discount to current market values.

2008 was also a year for being patient with an economy that seemed to unwind day by day as the year went along.  Stores closed, people got laid off, and the bailout du jour became all the rage.  It seems like each and every day some other group was kneeling before Uncle Sam, asking for a bailout.  The effect of the bad economy on business was so profound that some local establishments were forced to combine their businesses just to survive.

2008 was an excruciating year for trying to be patient with the political process.  Did you find yourself yelling at these guys when you saw them on television?  I surely did.  I have previously written about how many of our most important politicians sold the American taxpayer down the river.   Average Joe and Betty will be paying for the actions and inaction of our spendthrift congress for years. Politicians from both major parties make my 2008 political "Hall of Shame", either for acting unethically, or for allowing the U.S. to reach the brink of economic disaster.  Rather than name them and rehash their transgressions, I'll just post some of their pictures below:


                 

         

I'm sure there are more scoundrels that could be added to the list, but we just don't have the space for all of them!

Finally, on a personal note, 2008 was also the year that I formerly joined the staff of The Tycoon Report.  It has been an honor to write for this newsletter on a weekly basis.  I have also had the pleasure to meet almost all of the Tycoon staff on two occasions, and they are a terrific group of people.  I have learned quite a lot from them this year, and hopefully they have learned some things from me as well.  There are many people who work behind the scenes at Tycoon Publishing to put together the daily newsletter and all of the products, and they don't get a lot of credit.  So I say thanks to all of them.  

I particularly want to thank Dylan Jovine for giving me the opportunity to write for Tycoon, and Ben Schott, whose picture you can see just above mine on the lower right hand corner of the daily Tycoon Report e-mail.  Ben worked with me for months on a Real Estate investment product that we hope to launch sometime in 2009.  Ben also taught me the value of patience, as he tirelessly highlighted in red all the sections of my course that he thought I could still improve.  And guess what, he was right!  So thank you, Ben.

To all the readers, now that Christmas has come and gone, let me wish you a very happy New Year.  Let's hope that 2009 will be a better year for investors than 2008!  It better be, because I for one am running out of patience!

See you next week!






Ethan Roberts
Contributing Editor
The Tycoon Report