Double Journey

I went to an all you can eat sushi place for dinner tonight.  I was determined to get my moneys worth so I ate and ate and ate.  All told I had about 10 pieces of sushi a Rainbow roll and a roll that consisted of a spicy tuna/shrimp roll topped with Salmon.  To give you perspective, my girlfriend, who normally probably eats as much as I do, had the same Spicy Tuna/Salmon roll and was quite full.

I seriously don’t remember ever filling so full as I did at the end of that meal.  I was full to the point of feeling a little nauseous.  It’s odd how people try to maximize something even to the point of their own detriment.  There was actually very little point in me to continue to eat.  The amount I was going to pay for the dinner was a sunk cost, there was no way my eating was going to affect the final price I paid.  I probably would have enjoyed myself even more if I had stopped two pieces of sushi earlier, but my consumer instinct told me to have that one last piece just to make sure that I got a good deal.

It was a completely irrational act but I did it anyway, and I’m sure I will do it again.  We all do.  Humans obsess over things that in reality have no bearing on the future.  The stock market is actually a pretty good example.  So is housing at the moment.  I held on to my e-trade stock, as well as a few others, WAY longer than I should have because I was so under my cost basis.  It was dumb.  My cost basis really had nothing to do with what the stock was going to do in the future, but for some reason, I kept thinking about it and refused to sell it when I should have.  It literally was a mistake that cost me a few thousand dollars.

Etrade was down another 20% today.  This stock is ugly.  I got out of it not too long ago, cutting my already significant losses.  But, if I could watch this stock like a hawk tomorrow, I would consider trying to buy up a few shares and then day trade it.  I still think it will sink down to around $2, but at some point very soon, the shorts are going to cover and you should be able to eek out a 5% gain or so.  Again, you would have to have a very tight stop-loss on this stock, because it still has a ways down.  That said, I won’t do this.  I don’t have the time nor inclination to day trade.  But it will be interesting tomorrow to check out the chart and see if it does indeed bounce.

For all other people thinking about getting in now and trying to pick a bottom, FORGET IT.  Do not go long this stock.  I promise you, it will go down more from here.  I honestly think this sell off is overdone, and that Etrade is worth more than this, just for the fact it still has quite a few customers (myself included).  If you have money that can sit dead for about two years, and don’t mind waiting it out, than maybe just maybe you can get in.  For everyone else, the risk of bankruptcy probably doesn’t outweigh the potential gains.  Don’t fight the stock at this point.

I’m actually not one for New Year’s resolution. I’m much more the type to just start something whenever the mood hits me rather than wait for a specific point in the year to take on a new challenge. However, since I have this blog up, I’ve decided that it would be good to lay out some financial resolutions for myself and see how it stacks up at the end of the year. So my financial goals for 2008:

1. Double my $20,000 - Obvious but worth mentioning.
2. Develop another source of Income - Right now I have two. I have my job and I have my investments. I really would like to have at least three if not four. It would be great if I could get this blog to make money. But if not that, I really want to at least come up with an idea on how to get my income to go up. I could probably save myself to being rich, but it will be a much easier journey to get there with another income.
3. Watch my basket more carefully - Warren Buffet advises that you put your eggs in one basket and then watch the basket very carefully. That is something I got away from in my investments this year with all the other things going on in my life. I need to be more choosy in picking stocks for my long-term portfolio, and watching that basket like crazy. I made a big mistake with ETrade, and should have gotten out much earlier. I paid the price for it.
4. Spend more money - OK. I know, this is usually the exact opposite of what most people try to do. Problem is, I’m not most people. I suffer from the exact opposite problem that most people do. I save way too much. I probably save about 60% of my net take home pay in one form or another.

That’s it for now. They are actually pretty big goals. #4 may seem easy to some, but it has proven very difficult for me in the past. I even started a “spending” plan about two years ago, and it didn’t work. I couldn’t make it stick. Odd huh?

What are you New years resolutions?

Yesterday was free trading day at E*Trade. Being that I want to do some short term trades, it would have been a great day to just get in and out of stocks today and hopefully catch a few bucks this way. However, I’m not going to trade while I’m at work, so this really wouldn’t have been possible for me. That being said, I was tempted. But as MoneyNing correctly points out, you shouldn’t let a promotion make you make an impulsive investment. So I’ve stood to the side as I haven’t had the time to properly investigate any stocks.

One thing I do like to do is to look at the days top gainers and losers to see if there is a trade built around them. Sometimes, a stock pops for very bad reasons, or drops for the same reason. One stock that caught my eye was CAKE, The Cheesecake Factory. I’ve not been a fan of this stock for a long time. Yesterday, it went up because hedgefund manager Nelson Peltz has decided to take a position.

I’ve always been boggled by Cheesecake Factory. The place is ALWAYS crowded despite the fact that the food is somewhat mediocre and pretty overpriced. It has a lot of choices, but one thing I have learned is that more choices is not always better. I would love to short this stock. I think it may go up slightly from here, but I don’t think that Nelson Peltz buying into this stock is going to keep this stock up. He also bought into Wendy about a year ago, and well, that stock hasn’t done so hot.

Just some quick thoughts on the market that opened this morning.  I’m watching it somewhat closely so that I can find my first trade which I will do this week.  Not quite ready to do it yet, but soon.

Two stocks I’m watching today.  The first is ETrade.  Still not interested in buying more of it at this point, just want to watch.  But it had a big announcement today that  Citadel investment has invested $2.55B.  For that money, Citadel got a lot from Etrade, including 17% of the company.  The deal looks bad from a shareholder perspective, but it’s good that a large fund is taking a stake in Etrade.  These funds don’t do this to lose money.  They do it to make lots of money, so it does give some hope to Etrade investors.  Still don’t buy the stock here though.

Dell actually looks very interesting to me.  Again, I don’t think I buy here, but there is probably going to be some action here after the bell.  Dell is going to have a conference call today, something they haven’t done in a while.  Michael Dell has retaken the helm and PC sales have been strong for the last quarter.  I think Dell surprises to the upside.  It has been strong as of late, but I think with strong numbers, Dell can push through the $30 resistance which has held it down for years (much like MSFT temporarily pushed through its resistance).  I think it has $4 of upside, maybe $1 of downside.  Not bad.   Will know what you should do here in about 3 hours.

Etrade is back down another 20%. It is now where it was when it originally did it’s swoon. Back then, I said I would have gotten in because the stock would bounce? Would I get back on now? Not a chance.

There were technical reasons to get in before. the chances for a quick rebound were pretty high. But at this point, you should probably stay away from this stock. The volatility is unbelievable, and nobody knows where it will be going. The original bounce was predictable, as many shorts were going to run for cover and people were going to think it was overdone. Tim Sykes, who coincidentally is doing something similar to myself, named Etrade one of his “unpicks”. Right here, I absolutely agree with him. If you think the mortgage problems are overblown and Etrade will stay in business, I still would wait at this point until the stock finds a base and trades much more normally. Right now, as a trade, Etrade is scary and everybody should stay away from it.

So one of the things I was thinking about doing was to buy some shares of E*Trade. I actually own shares in my regular portfolio, and have been getting KILLED lately. The stock has probably lost about 80% of it’s value over the last year or so. So why the heck would I want to continue with the pain?

Friday, a Citibank analyst came out and declared that there was a chance that E*Trade would have to file for bankruptcy because it had several bad loans, many tied to the subprime mess. The stock instantly went down 60% from its already low price. Now, It’s not that I don’t believe they are in a mess, but I thought the selling was a bit overdone. This blogger seems to agree with me. I was contemplating taking another, short-term position in the company, and wait for a dead-cat bounce. For those that aren’t that involved with stocks, you should think of this phenomenon as something that happens when a stock gets pummeled in a very short time. It tends to “bounce” back as people cover their short position (they sold the stock without owning it, and have to buy back shares, hopefully at a much lower price, to pay it back). I wanted to get a few percentage points and then get out, and I would have sold if the stock dipped another 7% or the very next day, whichever came first.

But I’m not quite set up to do this yet. I’m holding off trading stocks for another week or two. If I had taken a position in E*trade at $3.70, which I was planning on doing, and held on to it until right now (which I would sell) I would have made a tidy profit of almost 50%. I would have taken a position of $5,000, so that would have given me $2500 toward my goal. Oh well, it could have easily gone the other way.