golddiggers

meeting minutes - 11.18.08

we started off the meeting by moaning over the sad state of affairs that is our current portfolio. everything is down. it ain't pretty. that said, we have in the neighorhood of $3050 to invest, not including outstanding dues. so, last tuesday we had ryan mitchell in for some wtf'ing. some initial questions we had were:

1. do we buy anything now or just sit here until things seem better?
2. when do we sell?
3. how/when, if ever, should you adjust your 401k?
4. if there's an option for real estate purchase, is that a good or bad idea?

first, he did an extremely good job of clarifying some points and opinions. first, a recession is defined by 2 consecutive quarters of negative growth. though this may not have been made official, it's definitely happening. we're in the midst of a bear market, which means that that the market is trending downward in the neighborhood of 20% of it's previous average. there are certain measures, including staggering investments by dollar cost averaging, where you set a certain number of purchases usually monthly to be purchased automatically. that way, if the market stays volatile, you're not locked into a higher price.

when it comes to the economy, one can subscribe to one of two theories. one is armageddon, which would be the result of a string of very bad things. in those markets, you want to focus on cash, commodities and real estate. the second is a recession with a very bad bear market. as a country, we've been through these and some are worse than others. usually, they are specific to certain markets. right now we're about a year into a bear market and can likely expect an upswing in 6-9 months. the stock market acts first and the economy usually follows the upswing. once the economy is back on stable ground, it's usually too late to act on anything within the stock market.

also, as a rule, if you actually practice selling profitable stock and buying into smaller riskier ones, on average you'll have a better investing experience.

now onto the questions.

401k plans: when we see an upswing in the market (6-12 mos from now), if you pull out of your current investments, you'll have to reenter them to get back at the right time. having a bad 401k investment now isn't necessarily a bad thing due to our age. if you keep feeding in now, you're acquiring more at a lower cost (due to non-taxed investment), so your chance to gain is better. the other recommended option is to put money in a bond on a monthly basis, but the only problem is that if it does go back up, you're automatically behind in your quantity of investment.

asset allocation: modern portfolio theory states that it's less important which assets you pick , but which class of assets you're in. asset classes include small, mid and large cap stocks, international moarkets, fixed sectors (bonds), real estate, commodities, alternative etc.

for example, energy technology is going to be a huge solution to the future of china's pollution problems. incesting in indian and chinese (or BRIC) mutual funds (ETF and IIF) is a good idea, though international emerging asset classes are as risky as one can get.

real estate: we had a generally broad based conversation, but can discuss in more detail at a future meeting. overall, the sf/bay area is different tahn the rest of the country, as prices haven't really come down much and value is retained because supply is small and demand always stays high. the tax breaks (deduce % of interest from your annual income) and the fact that the bay area's real estate market isn't in real jeopardy makes it a solid option. in general, one needs 20% down and needs to have stellar credit. condos and foot in the door options should be pursued. there are options out there for first time home buyers, credit unions are still lending, so go and talk with mortgage brokers and the like.

selling stock: one benefit of asset allocation is a more systematic and thoughtout approach to buying and selling. we need to set a strategy for diversification and setting percentage points for selling on both the low and high ends. if you get a +25% on any stock, it's a good idea to sell some and reinvest in other small options. we might have some tax issues with buying/selling which laurin is welcome to pursue with ryan. thus, we have some new goals to discuss:

1. meet before christmas and pick some mutual funds (we can still be agressive here)
2. use our bucket of money (~$3,500) to diversify (don't chase last year's winners)
3. set %'ages for up and downside selling so it can become automatic
4. need to set a %'age of asset allocations across the board
5. meet quarterly in 2009!!

ta da,
erin

posted by e-bro @ 12:33 PM