2015 - Journey continues

J

Jakobsberg

New year so started a new thread.


Was having a look at my notes from this time last year reviewing 2013 and pretty much all of it applies to 2014. This is cut and pasted from a year ago:


“
· Finally had a core plan. Stuck to it fairly well and it worked. Understood importance of psychological match between your emotions and strategy.

· Finally learnt the art of patience. 3 or 4 good buying and selling opportunities per year. Concentrate on those and the rest is noise.

· Trading around the edges didn’t really work – early in year telecoms, alliance oil, facebook. All distractions and didn’t make money.

· Still spent too much time staring at the ticker.

· Emotional at times but improved. More comfortable with losing money to make money.

· Could have been a little more aggressive with kicker used more and increasing leverage when market starts to rise during relief rally.

· Overall the best year yet!!

“

Return for 2014 was 48% which is lower than the ca 70% in 2013 but cash amount was higher since account had grown. Now it stands just above 4 MSEK so I would be more than happy with 1 M SEK or 25% in 2015. The annual target of 1 MSEK and taking less risk as the account grows makes sense to me. 1 M SEK is also roughly twice my after tax take home pay (high taxes in Sweden).

Obviously we are now another year closer to the end of this large bull market but in my opinion it could still have a few years left as rates are still exceptionally low, US recovering and Europe still struggling to get going. European indexs didn’t rise that much last year. Maybe good chance of volatility this year with US starting to raise rates and European QE. Just hope to take the opportunities that arise.

In 2014 I made just over 500 trades but the majority of the money was made on about 20 of them. I guess I now just accept that im going to make lots of trades that do nothing as the “price” for following the market frequently enough so that a few times a year you get good opportunities.

So plans for this year:

- Keep swing trading the DAX, OMX and EuroStoxx50.
- Maintain underlying long position whilst US recovery continues.
- Try to make ca 25000 SEK per month selling OTM covered calls against 75% of the long position.

and try not to :
- Get involved with individual stocks
- Waste as much time looking at the ticker. Just place trades and let them run.
 
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Cut and pasted from wiki

"
Income tax
Sweden has a progressive income tax, the rates for 2014 are as follows:
  • 0% from 0 kr to 18,800 kr (~0 - 2,690 USD)
  • Circa 31% (ca. 7% county and 24% municipality tax): From 18,800 kr to 433,900 kr (~2,690 - 62,140 USD)
  • 31% + 20%: From 433,900 kr to 615,700 kr (~62,140 - 88,180 USD)
  • 31% + 25%: Above 615,700 kr (88,180 USD and up)
"
So Swedens top rate of 56% kicks in above ca 90,000 USD.

However investments are taxed separately and differently to normal income from work. You can choose between two types of accounts;
a) 30% tax on profits and able to offset losses or
b) Pay 0.27 % of the total balance annually and thats it for the year, you keep all your gains and losses. 0.27 = 30 % of Swedish state borrowing rate.

As long as you make more than the Swedish state borrowing rate (currently 0.9%) then b) pays less tax. Strange, given Swedens high tax reputation but if you can make large % gains from investments its actually one of the best places in the world to be. Plus you get the benefits of the social system funded by the wage earners.

The net result is that if I earn an extra 1000 in wages it will get taxed at the upper rate of 56% but an extra 1000 in investment income will be taxed at 0.27%. In this low interest rate environment the motivation for me is to maximize investment income rather then income from work.
 
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Started the year at 4,060,000 SEK (carried over from last years thread) and now at 4,250,000 SEK.

OMX hit new high today and I sold almost all leveraged positions before ECB meeting. Now hold ca 4.5 M SEK in Euro indexes (mainly OMX). Just seemed a good time to take some money off the table. Most folks seem to expect QE in the order of 500-600 Bn Euro so Id guess that's already priced in. Drop if it doesn't happen and a bigger number needed to take us much higher.
 
4,370,000 SEK

Well the EU printing presses have started and the Germans pretend to not like it even though they will benefit from even higher exports, lower state borrowing rates and an unnaturally low exchange rate given their economic strength. Can't help but think another Greek election surprise, court objection of another random EU country putting a spanner in the works and things will head south again. But for today at least the sun is shining.
 
4.430,000 SEK

Lots of big Swedish companies reporting this week. Most of them seem to be doing well. Major banks still available at PE ca 13 and 5% dividend. Not done much the last week. Just waiting now until the next dip and hope it comes before the options I sold expire so I can buy them back cheaply.
 
4,480,000 SEK

Seems I am wrong and making money which makes a change from being right and losing money which has happened many times in the past. Didn't think the Euro Markets would jump so much after QE announcement which I thought was priced in. Maintained a net long position (its a bull market afterall) but sold options expecting a pullback.

Changing my mind about that now and starting a few leveraged long positions again due to:
- Mondays S&P behaviour, drop 1% then up 2% to close 1% higher for the day. Maybe a bounce to a new high in the near future?
- Many euro markets are up 10% for the year but due to currency movements then in dollar terms its not that much.
- Been looking at Swedish company results the last few weeks. Still possible to get relatively low multiple and 4 to 5% dividend paying stocks. Given the other low yield options they still look a reasonable choice.
- Suspect another european fudge of the Greece issue is being produced. For political reasons the other countries cannot just write of the debts (Fritz would get annoyed by Angela throwing money at lazy Stavros) but the terms will be relaxed (rates, expiry etc) so much that it is effectively written off and it will be too confusing for Fritz to realise this.
- Momentum is upwards and no point fighting it.
 
4,500,000 SEK

Not much happening at work or in markets. Sunny day and fresh snow when woke up so spent the day snowboarding. Typing this with coffee in nice warm cabin.

Doubt it will continue but great start to the year. Already matched after tax salary and half way to annual target.
 
4,625,000 SEK

Still surprised by the continued strength of this upwards move. This week was helped by Swedish central bank reducing the repo rate to -0.1%. The Swedish tax authority are now also rapidly looking at new proposals. Apparently the rules didnt envisage the state borrowing rates going below zero and they calculate the tax rate on some trading accounts as a function of this. Not done the past few weeks. Just sit and ride it higher.
 
4,670,000 SEK

Well I made the mistake of trading my P&L instead of the market and took off the leverage too early as the Euro markets went higher. Just wanted to take some money off the table but it was the easy trade and should not have done it. Should have held longer until the momentum faded. Feel a bit stuck now. Don’t want to sell any more since momentum is still upwards and think the bull market can last longer. It may get another jump if and when the Greek can is kicked further down the road. Also don’t want to buy at this point after such a sharp rally. Ideally would buy on a pullback if and when it comes. In the meantime I am looking at a few other ideas which seems to have bottomed and could now be on the way up as long term plays:

Greece – Still think they will do a deal in which case large potential gains even if the market only rises to its level in the middle of last year.

Spain / Italy – Cheaper Euro and an apparent change in direction in the EU away from German led austerity to more emphasis on money printing and growth may be a trigger for these markets to continue rising from the depths.

SSAB – Swedish steel producer. Tends to have strong movements up and down. Currently going up presumably because the SEK is going down along with the Euro?

Russia – Very cheap if oil rises, ceasefire holds and/or sanctions lifted. Oil companies and Sberbank ?

Brazil & oil – Some sort of bottom seems to have formed. Question is whether its long term just short term trap?

May start some small positions on some of the above - buy more if it goes my way and get out if drops below the previous lows.
 
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