Thursday, December 25, 2008


Ho Ho Ho.  What did the fat fellow leave us to deal with in 2009? As an economy we've been more naughty than nice over the last 5 years. So I'm worried that we may get the proverbial lump of coal in our stocking and that isn't good as coal has lost huge amounts of value of late. We've all been looking for a nice present and I feel we will be disappointed as we have more difficult times ahead.

Earlier this week I spent my annual, pre-year end, tax planning session with my CPA and our work confirmed my assessment. All of my gain harvesting and bearish bets from the first half of 2008 were eliminated by attempting to catch falling knives in the last half of the year. The good news is that I had enough losses to offset the gains and ObamaHood will not be getting any taxes from me in 2008. Still I don't want a repeat performance in 2009 as the Kabourek household spending machine doesn't know how to shift into reverse, or at the very minimum, neutral. We continue to do our part in stimulating the local economy, so I need to duplicate my first half of 2008 performance and avoid Santa's lump of coal.

If Santa's present isn't a lump of coal, my remaining long positions, less than 50% of investable assets, will gain enough value to not only make me feel good, but offset our spending spree. But, the difficult decision will be when to allocate more funds to equities. A bear market rally of significant strength is a distinct possibility and they can be very painful when the glee is replaced with the old lump of coal. That is the scenario I see and am planning around.

ObamaHood euphoria will most likely generate a stimulus,infrastructure rally that will eventually give way to the realization that joblessness, tax receipts, capital spending, and ongoing  credit weakness' will continue long into the future. My current covered calls expire in January and I'm nicely in the money at present. If we rally soon and my shares get called, I'll get about a 20% upside from the time I wrote the calls and I'll gladly take that as I will just buy more shares and write more calls against them. I also anticipate adding S&P 500 index positions when I see my calls being eroded by a rally. But I do not plan to own the spiders long term. I think the rest of 2009 will be a return to the 700 S&P levels of a month or so ago and I'm not making the same mistake as this year. I'm going to keep my first half gains in 2009. I'm not going to be as "smart" as I was during the last half of 2008.


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