Vol. 12, No. 3,009 - The American Reporter - October 19, 2006

Market Mover

by Mark Scheinbaum
American Reporter Correspondent
Boca Raton, Fla.

Printable version of this story

BOCA RATON, Fla. -- It took less than 24 hours after officials somberly reflected on the fifth anniversary of the 9-11 terror attacks for investors to get solid proof of the guerilla warfare mentality now needed to survive on Wall Street.

No sooner did Democratic grousing at Republican posturing enter a third news cycle than viewers of "Larry King Live: were treated to an inane hour of how and why the 20-year-old son of millionaires Anna Nicole Smith died in Nassau, capital of the Bahamas.

As a continuous loop of hugging, grooming, posing, and supposing danced across CNN in a display Oedipus would surely love, I nodded knowingly, sipped some more Canadian whisky, and knew for sure that investments have changed in the five years since Sept. 11.

The investment community, unlike politicians, mall operators, and all sports-talk shows, might be the only segment of society - with the possible exception of people actually serving in the armed forces - who understand the fleeting media interest in anything substantive. In this Cowardly New World, investors small and large have scraped together new rules of the game for large institutional clients, or small retail accounts.

Here are some of my own conclusions:

  • Smaller Is Larger: Looking for more modest gains and parsimonious dividend yields and the practice of "taking winnings off the table" protects you for the future.
  • Long term Is Shorter: The "invest and forget" philosophy doesn't work in a world of assassins and bombs. Six month or one year horizons make more sense than guessing what Google, Boeing, or Vodafone will be like in 10 years.
  • Sell Calls: Writing covered call options against quality stocks you own makes even more sense now, protecting you on the downside. LEAPS, whether in stocks or from a bridge, can be speculative to the point of dangerous. Keep contracts to three to nine months. As August, September, and October approach each year, in your fully taxable accounts look to write calls for January or later, pushing any tax consequences into a third calendar year. This allows you instead of the IRS to use the "float" on your money.
  • Currency Hedges: Most wealthy people and large institutions need an "insurance" policy against a debacle in the USA or the U.S. dollar. Commodities are often unsuitable for conservative clients, but Foreign Currency Options traded on the Philadelphia Stock Exchange can allow a small percentage - say three to five per cent of a portfolio - hedged in the Euro, Sterling, Swiss Franc, Yen, etc. Smart money always keeps an alternative to the U.S. dollar.
  • Precious Metals Are A Trade: If you want to be a gold bug or silver mogul, fine. These are not long-term investments which perform for generations. They sit for generations and make people feel warm and fuzzy while they can languish in value for decades. When hype and fear pump prices up, take profits, or have fun in short-term trading. Enjoy the game as you would blackjack or Keno.

Larry King is a casual acquaintance and former Miami colleague, so I want to thank him most sincerely. The stark reality of Anna Nicole's cleavage shook me back to the reality that on any given day outside influences can completely change your money and your life.

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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