Thinking through the “re-purchase”

Bcgrzy5niThere are many factors to what stocks I would select, but not quite as many for a fund. The fund needs to have a meaningful dividend in most cases, or be an exceptional value because the sector is overly-beaten down (fortunately I didn’t do a lot with processed foods…there are sectors that are beaten down for a long time).

But the idea is I have a particular fund, lets say a utility stock fund. It has dividends, but it can still plunge in a panic. I would use a trailing stop-loss of 3% — if it came down 3% from a peak then I would sell it. If it popped back up 0.5% from there I would re-buy it. If I only allowed that to happen for 2 days or 5 actions (whichever comes first) then I shouldn’t be jerked around too much.

Doing the math:

Purchase at $10,010, appreciation of 5%, stop-loss sale at $10190 (comission removed). Repurchase for $10260, stop-loss sale again for $10190, repurchase for $10260, stop-loss sale again for $10190. So the two repurchases cost me $140, but I’m still left with a gain of $50. The goal of course is to buy and have a 10%+ gain before any kind of stop-loss occurs.

Now I need to analyze the funds I’ve selected previously to see how they would have operated in the last year with the above.

I didn’t get back to my overall strategy, but I will eventually.

The best stock market investment

That should be an interesting enough title to allow me to do one of my “background” items on my evolved investment ideas over the last couple decades. Very early in my consideration of how to invest I got advice similar to the following (thank you to someone who commented on my last post):

For most people, the smartest investment would be an S&P500 index fund with no load. Vanguard has excellent funds with very low fees. Reason being is that 80% of professional money managers cannot beat the S&P500. Do you really think you are smarter than 80% of money mangers? So you’re already in the top 20% of investors by parking your money there for the long term and not fooling with it.

This guy is right. For most people that would be the smartest investment. Here’s the reason why most people have a hard time sticking with it:


So there’s two “enormous” drops in that time span, but even the “corrections” of ’98, 2011, and 2015/16 feel “horrible” if you’re watching something drop. This is when people get upset and “get out” locking in their losses.

I actually got this interest in avoiding the major drops as a secondary thing to my primary interest: I want to invest in a way that makes fiscal sense. I don’t want to speculate, I want to be “repaid” for providing my money for use. So:

  1. I tried index things like the S&P 500. It was fine. I could handle the drops.
  2. When the “target” retirement funds came out, I tried them, but the impression I got was that I was muddying things — not getting as much upside in exchange for little avoidance of downside.
  3. I finally decided I’m a “value income” investor — wanting to get peices of solid companies that are managed in a fiscally sound way but are undervalued at the present time.

Trying to figure out how to pursue that I encountered a strategy that along with its other facets that I liked also asserted it was good at avoiding drops in the market. Trying to keep these entries short (so I can just do them and move on), I’ll leave that as a question: Do the 20%+ drops in the market (still very much a “thing” with an S&P 500 index fund/EFT) bug people? How do you cope with that?

Is it not about the sale but the repurchase

antiFlash-icons-graphs-800pxI’ve got a specific investment management strategy that I like, but it has a gap: what happens in continued “updraft” times like we’ve been having for the past 6 months (and more). I had formulated last year an approach of using “market sector” EFTs and applying the same individual stock picking principles and then having an exit strategy for downturns. I also have always liked income-producing stocks, but they have also gotten extremely highly valued.

So I experimented last year with purchases with a stop-loss price (I probably don’t have the term right). However the problem is, what’s the appropriate downturn? If you pick 1% you trigger a lot. If you wait until a day has passed, you could miss a huge plunge. If you wait for a larger drop…no matter what drop it is, it could merely be a dip. How do you not lock in losses?

What I’m going to try and explore now is not merely the sale from a stop-loss, but how to have a pre-defined plan for a re-purchase if the price goes back up from the low point. That does mean I will lose the gap between the stop loss and the re-purchase, but I don’t put myself in the endless analysis of trying to figure out when to get back in.

They say don’t try and time the market, and my biggest failing in the last decade is that I get nervous and implicitly try and time the market.

Note that I’m going to use this blog for different things at this point. I will work on renaming it.

Response to Barry Dain Steinhagen on Keystone XL

This morning on Erie Talk in the Morning on AM 1400 (, Barry took a call from someone who said the most recent pipeline leak in a lake was additional validation that the Keystone XL pipeline should not be built. Following that call someone attempted to use sarcasm to indicate we should regress and not use any fuels or electricity.

From what I could tell Barry took two specific positions to refute the second caller. The first was that spills do happen…that the fact that spills happen was a justification to oppose the pipeline. The second was that what we should do instead of the pipeline was green energy.

Applying my principles to this, the first is that freedom would indicate that we should not use government to impede the freedom of people to pursue competitive movement of oil. Fiscally, government restrictions on any particular activity where there is a capitalistic interest would inherently create an increase in the cost of that item. Energy is something that disproportionately affects the budgets of lower income families, so essentially the opposition to the pipeline is anti-poor-family as well.

Comparing to green energy we have a lack of competitive viability (which will change over time naturally with the depletion of less expensive sources), which uses more tax money to create incentives that could be used for other purposes. Government blind advocacy can also push through potentially significant environmental (e.g. injuring birds from windmills) that would otherwise have more balanced footing. Comparing allowing a business to build a pipeline versus government to subsidize energy that would still be more expensive continues the problem.

Unfortunately for the first point, however, is that opposition to the pipeline does not keep oil from being moved. Moving oil in trains is dangerous to people and increases the energy cost of moving the oil. It obviously also increases energy costs. Evaluating train movement of oil to pipeline movement would show that human and environmental risk is actually higher for any equal amount of volume of movement of oil.

Freedom, family, and fiscal responsibility allow me to see how the arguments Barry uses create a more unjust, repressive, and overall harder-to-get-by-in society. Barry already has it made: he can afford to pay more for energy. But those that are not so well off must feel the pain of Barry’s position on energy.

The only place to start: foundational principles

I get a little anxious when someone interjects into a discussion that either the “constitution says” or the “founders intended.” While there is a broad set of things that are clear in the constitution, and many things that the founders did intend, if something is being discussed then it’s likely that the clear application of the Constitution or intention of the founders is not established.

I’ve been trying to figure out, with the advantage now of being able to consider my next move, how to approach this blog. Various issues are definitely out there to discuss, both large and ongoing issues as well as things that are “hot” for a short period. But as I thought about trying to write something about them, I felt something was missing.

I’ve decided that I needed to return to the beginning and actually bring clarity I didn’t have when I started blogging for my campaign for Pennsylvania State Representative. My second blog entry tried to outline a “platform” for my campaign. But I think I was mixing two things. What I need to start with: what are my principles and what do they mean.

In talking to people during my campaign, I started to see how my principles allowed me to work to answer any issue that was raised. The one-word summary of those principles is: Freedom, Family, and Fiscal.

However, before I try and establish platform positions on things, I need to put meaning behind those words.

1. Freedom: Mankind is best served by freedom instead of having things being decide for him. While he is willing to surrender some freedom to allow for some safety, an erosion of freedom for any reason ultimately starts to cause issues with responsibility and initiative. We have a word for a man who is fed, clothed, housed, but is not free: prisoner. To maximize our pursuit of happiness, we should be free.

2. Family: Whether we have opinions on “love” or what people should be “free” to do, we can’t escape that another essential factor of the continuation of society is that we must reproduce and raise offspring to populate the next generation. Therefore, considerations (including freedom) must be considered how they relate to the relationships and interactions in order to have a stable environment for raising children. We also should not mortgage the next generation’s future to provide more comfort for ourselves.

3. Fiscal: Behind my back, people have made fun of me about the grammar on this one. It’s hard to let go of a single word trio like this, but it would be probably more accurate to say “Fiscal Responsibility”. A US Congressmen in my area has a good way to summarize this: you can’t spend what you don’t have. Debating if the government borrowing money creates a net gain to the society…its subterfuge. It’s craven politics. I need the other principles to balance my positions, but fiscal responsibility is a very big deal to me.

I don’t claim that the above are in the Constitution or that I have somehow been able to “channel” the founders intentions. My interest is in trying to express those principles as clearly as possible and then use blog entries here to apply those principles to issues we’re trying to address in the world today. While my position on issues may change as the dialog continues (a side comment in a speech today about “if you legalize something you get more of it” is causing some contemplation for instance), the idea is that the principles remain consistent.

You may chose to define the above words differently, but the definition I give is the meaning of my principles (and your alternate definition will not change my principles). I am glad to be evaluated on how I can effectively match up my platform/positions to my principles — and I fully expect that, through dialog, I may adjust positions I hold in the future. My hope in doing blog entries, however, is that my efforts to explain how my principles inform my positions will be of use to you.

Service to those who wrote a blank check for our country

Recently I had the enjoyable opportunity to participate with my family in packing boxes for Project Support Our Troops (see my earlier press release for further information).

2014-10-27 Project Support Our Troops

While packing boxes I realized it was very important to actively participate in service activities. It is easy to talk about support, but when you actually take the time to serve it does something to you. It’s like the transformation my supporters observed after I took the time to talk to thousands of people while walking neighborhoods. Giving of oneself changes you.


My son’s Observation flight as part of Civil Air Patrol was cancelled Saturday. Fortunately, four other cadets were able to get their flights in before the weather changed. I’m very grateful that I’m able to help my son have those experiences. The picture is from his first and only flight earlier in the summer.


The thing I have not experienced, and must continually remain respectful and in awe of, is the commitment people make when they join our armed services. They are committing to their country to make the ultimate sacrifice if needed, to preserve our freedoms. No act of service I give will ever measure up to that.

Pro business, anti corporate welfare, welfare is not “standard” deductions

At an event recently a Democrat in the area said that the economy is driven not by business but by the coin people have jingling in their pockets. It’s an attractive narrative that avoids recognizing that the coin in someone’s pockets gets there from having a job. We must have businesses to organize the production of things our modern society wants, and we need to recognize every cost placed on businesses is borne by the consumer. Therefore, I am not in favor of high business taxes.

However, I find distasteful that businesses engage in a lot of “gaming” of the tax system and also lobby extensively for the government to promote winners and losers through incentives in the tax code. Any time one industry is singled out for a tax break, that’s corporate welfare. Any time one particular economic activity is promoted for a deduction, that’s corporate welfare. And any time government is involved in increasing the profitability of an enterprise, it’s a worse long-term outcome because it promotes energy and attention spent on things other than pursuing better products more efficiently built.

People do go overboard when defining “corporate welfare”. Corporate welfare is not when a company is able to expense things used to purchase materials or equipment (taxes are for profits, not for gross income). We have a general/standard ability to expense property and durable equipment over the long term. That’s not corporate welfare, that’s allowing the tax system to not create strange approaches for businesses to do the long-term investments a business must do. For instance, there are huge numbers bandied about related to “subsidies” for the oil and gas industry…those “subsidies” are generally the standard capital expense deductions and amortization that all businesses get. There’s no reason to use the tax code to “penalize” a particular industry either.

Finally, I also am very uncomfortable when an incentive to a business specifically comes from an area that has fiscal challenges. The knee-jerk argument is that if one doesn’t incentives a company to locate/expand somewhere than the jobs/business/taxes are lost. Well, it is not helpful to the tax code for areas to compete against each other. While I would feel the need to work to offer “equal” incentives compared to other areas, I would intentionally avoid using money for, let’s say, schools to increase the profits for a business. If I could, I would like to see that all state and local governments would stop trying to create incentives to steal business from another place…the business needs to go somewhere, lets just work to have as equitable a code as possible and avoid “special” things as much as possible.

Why else do candidates get millions to run for offices that only pay thousands…because there’s a lot of corporate welfare money at stake. Everyone needs to ask their representatives to get away from incentives for specific situations.

Press Release: Former State Representative John Hornaman Endorses Luke Lofgren

Lofgren Family with John and JoAnn Hornaman
Lofgren Family with John and JoAnn Hornaman

Committee to Elect Luke Lofgren
P. O. Box 8964
Erie, PA 16505

Luke Lofgren


October 16, 2014

Former State Representative John Hornaman Endorses Luke Lofgren

Today the campaign to elect Luke Lofgren as Pennsylvania House Representative for the Third District announces that former Representative John Hornaman and his wife JoAnn are endorsing Luke as their choice for the 2014 election. John Hornaman was elected as a Democrat three times for the Third District in 2006, 2008, and 2010.

Luke Lofgren is also happy to announce a commitment should his candidacy be successful. He will reinstate the collection of items for Project Support Our Troops. This would allow items to be dropped off at constituent offices for the Third District to be sent to our troops abroad. “Our young men and women are serving our country and deserve to have tangible expressions of our appreciation,” states Luke.

John and JoAnn Hornaman explain their endorsement of Luke Lofgren: “We believe that Luke Lofgren is a solid family man and will bring maturity, honesty, and responsibility back to the office of Pennsylvania Representative.” Additionally John states that, “having knocked on almost 10,000 doors in the district, Luke has shown that he is a hard worker who will listen to the residents and work to best serve their long-term interests.”

Luke Lofgren responds: “Thanks John for your support! It is an honor to receive your endorsement. It is a big responsibility to follow in your footsteps in serving in the Pennsylvania House. My wife and five children come with me to meet thousands of constituents. It is for my kids and future generations that I hope to serve the Third District.”

Luke Lofgren or John Hornaman are available for comment.