February 8, 2007: Random thoughts/Cramer/stocks/bonds/ETFs

Here are a few straight forward opinions:

CNBC: Good entertainment for the investor hobbyist. Some good scoops. Don't run to your computer to buy or sell based upon a network opinion.

Cramer, James: Brilliant mind. Has brought many otherwise ignorant socialists to the capitalist investment table. Great with the quip. Today he came out against ETFs as being nondiversified and over-hyped, and I agree, to a degree (see ETFs). Boo-yah.

ETFs: Too many. Too soon. I use ETFs primarily for the Speculative Portfolio (see Portfolio). I really like wading through the growing mass of sector and index ETF portfolios. Investing is a hobby for me. Fun. I get a chuckle out of some of the new eclectic ETFs and can't wait for the next bunch to be even more parsed in sector splinters for the individual investor to comprehend. ETFs do have a place in a diversified portfolio, but watch the contents. Understand what you are buying, and why. Research at the website of the ETF and at www.etf.seekingalpha.com

Mutual Funds: Don't need 'em anymore.

Stocks: There is nothing so precious as choosing a profitable individual stock, so long as you concede that at some point the relationship must terminate. Stocks should make up the majority of your portfolio. If you do not have time to review your positions regularly, strike the previous sentence. Do not rely upon one source for your selection process. Do a Clinton: triangulate. And diversify. I tend to choose value stocks. I also enjoy looking for speculative stocks that have had a past of collapse, have mixed analyst reviews and have a recent management change.
There is nothing inherently wrong about a stock that pays a good dividend.

Portfolio: I have several securities accounts (taxable and tax efficient), but a checklist of only two portfolios, the Permanent Portfolio (75%) mix of stocks, bonds,a few ETFs (value oriented); and the Speculative Portfolio (25%) mix of speculative bonds, ETFs that are country or sector specific and the occasional commodity. I think this mix works best for just about anybody.

Diversification: Practicing diversification admits that you are fallible. Being diversified does not mean simply owning stocks. It means owning some real estate (preferably direct), some stocks, some bonds, some commodities and anything else of value that does not truly depreciate. It also means to lead by example, to be fair and honest to all and to have a variety of interests. Having a lifelong partner makes diversification meaningful. Having children makes the meaningful blessed. Diversification cannot reach fruition until it is approached holistically.

Politicians: Vote the principles. That is why I tend to vote Republican. Not a big fan of high taxes, class warfare and pandering.

Timing: Timing is everything, in stocks and to a large degree, in life. Timing is also luck for most of us.

Blogs: I like most of the financial blogs. My favorite is Random Roger (random rogersbigpicture.blogspot.com). The few I do not like are filled with a bunch of elitist crap that dulls the mind, and is crammed with pseudo-facts for the One Who Knows Better Than The Rest Of Us, usually the Blogger.