Articles by mgedwards

Year-end Investment Scorecard

I spent some time on Monday at home reviewing our investment portfolio’s 2005 performance and investment goals for 2006.  Our portfolio performed well, in spite of a down year for the Dow 30 index (down six-tenths of one percent for the year) and an inverted Treasury yield curve.  The Dow ended lower for the first time since the 2000-02 bear market.  The S&P 500 ended the year up about 3%, its smallest gain since 1987, and the NASDAQ rose 1.97%, its third consecutive year of gains.  The gains were modest.  Generally, global markets performed better than U.S. markets did.  East Asia and Eastern Europe were especially bright spots in 2005.  The domestic markets might have ended the year on a happier note had the market not reacted negatively to news of an inverted yield curve during the last week of trading in 2005.  "Inverted yield curve" is a term that suddenly rose from obscurity to a term on virtually every investor’s lips.  Essentially, the inverted yield curve indicates that the yield on the benchmark 10-year Treasury note has begun to decrease, indicating the prospect of lower future interest rates.  Lower interest rates may sound enticing to consumers.  However, with the Federal Reserve now in the midst of raising rates, lower interest rates could be a harbinger an economic downturn.  Lower rates are often driven by lower demand fueled by lower capital spending.  Thus, news of the inverted yield curve spooked investors.
 
In 2004 I started investing in companies that recently went public and continued this strategy.  I call my modest IPO portfolio "MIPOX."  My strategy has been to participate in Dutch auction IPOs through W.R. Hambrecht, and if unavailable, buy shares immediately following IPO.  This investing strategy can be risky because companies’ share prices are often volatile following initial public offering (IPO).  Fortunately, the past two years have brought many happy returns.  Here’s a summary of MIPOX’s performance in 2005:
 
Caribou Coffee (CBOU):  -17.68% return since October 2005 IPO
Cogent Technologies (COGT):  -1.42% return since purchase in September 2005
Morningstar (MORN):  +88.89% return since May 2005 IPO
 
Overall, MIPOX’s 2005 performance was 25.38%, compared with a 140% return in 2004 driven largely by gains from Google (GOOG).
 
This year, I have set price targets for my current investments and plan to sell them once they hit those targets.  I have thus far been disappointed with both CBOU and COGT, but I expect them to perform better in 2006.  Regardless, if their share prices fall to a certain level, I will likely sell them off and reinvest if their price continues to fall.  I also have researched some new investments for 2006.  The debut of the New York Stock Exchange (Proposed symbol:  NYX) as a public entity is the investment I am most keen to pursue this year.  Two other IPOs on the horizon that have caught my attention include Tim Hortons, which Wendy’s International will spin off, and Chipotle, a subsidiary of McDonald’s.  I also have my eye on investing in a Chinese technology stock.  Shanda Interactive, an online gaming company whose stock has taken a beating, is one possibility.  I may also consider Baidu.com, the Chinese search engine, if the stock continues to drop.  Lastly, I am looking at some private media or oil investments.  I hope that MIPOX will eventually form the basis of a private equity fund I’m keen to launch over the next decade.

Longing for some P & Q

I must be getting old.  For the first time in months, I am ready for some Peace & Quiet at home.  After having indulged in many P’s and Q’s at various parties, soirees, and shindigs, I am ready for a bit of P & Q at home.  In October I lamented that life seemed a bit slow and that I felt too homebound.  Now I truly feel I’ve reached the point of having a hangover, and I’m not even drunk.  I think I’ve overdosed in holiday fun.  As you grow older, it is possible to have too much fun and stimulation.  You get burned out much easier than you did when you were in your teens and twenties.  The days when I could make merry for days on end are long gone.  I’m glad that things will slow down for us in January and February.  We need a break.
 
On Friday night my wife and I went to back-to-back events.  A good friend of mine invited us over for dinner and drinks with others who share an interest in China.  We could only stay for tea before we had to leave for a birthday party.  We started the tradition of meeting up with two other couples last November when we all went out for my birthday.  We had such a good time that we decided to go out for each of our birthdays (about every two months).  We couldn’t very well break tradition.  Thus, my wife and I joined our friends for the birthday dinner at Il Ponte, an Italian restaurant in the Millennium Seoul Hilton Hotel.  The lasagna was delicious, the best I’ve tasted in Asia.  Afterwards, we retreated to the Areno nightclub in the Hilton for drinks and dancing.  Although admission, coat check, and the dance floor were free, the drinks were outrageously expensive.  The dancing was fun, though.  I love to cut it loose on the dance floor.  As the only Caucasian in the club, I truly enjoyed making a spectacle of myself.  One of my best friends started the mayhem by jumping up on the dais and dancing above the crowd.  I soon joined him, and we took turns pole dancing.  If you can imagine, picture a couple of guys in suits swinging around a pole, our arms flapping in the air.  I’m sure the audience was amused!  Or perhaps we affirmed in their minds that Westerners can be just a little crazy.
 
We left Areno before midnight on Friday just as the younger crowd started taking over the dance floor.  Everyone else went home, but I went back to the first get together, which was still underway.  They were very understanding that we had to leave for the birthday party and happy that I could come back for awhile longer.  I stayed until 2:30 a.m. and chatted with them, sharing a couple glasses of wine.  I finally rolled into bed around 3 a.m. on Saturday morning.  On New Year’s Eve, my wife and I took went back to the Millennium Seoul Hilton with our son.  The Hilton has a monstrous Christmas tree in the lobby.  In the lower level, there’s a huge model train set.  As my son is a train fanatic, we couldn’t resist showing him the model train set (in fact, I’ll probably take him there again tomorrow).

Following our visit to the Hilton, our family went over to some friends to celebrate New Year’s Eve.  We didn’t plan to stay until midnight because it’s much too late for our son, but we did anyway.  The most comical moment was when I was playing "Star Wars II Battlefield" on my friend’s new PlayStation 2 game console.  Mind you, I never play video games, but I really got into battling snow troopers on the ice planet of Hoth.  As I began my assault on an Attat, my wife says, "Mike, look at your son!"  I said, "Hon, not now!  I’m busy fighting the Empire!"  My son had taken off all of his clothing and began streaking through our friend’s house naked!  His dad of course was so engrossed in the video game that he scarcely noticed his son amidst all the laughter.  When I finally realized what was happening, I stopped playing the game.  We swiftly redressed our son and joined in the laughter.  My, did I ever feel like a lame father.  Here I am playing video games while my son is running around naked!  Oh my.  We all stayed up for the new year, including my son, to usher in the new year.
 
Tonight we again went out, this time to join some colleagues for dinner at their home.  They made a fabulous Mexican food.  It isn’t easy to come by good Mexican food in Korea, so I was absolutely thrilled to eat tacos with Spanish rice and corn.  It was a wonderful end to the new year’s festivities.  Tomorrow I have the day off and will spend it with my son.  Although we’ll probably go out to see the model trains again, I’m looking forward to spending a quiet day at home.  It may not be as peaceful as I would like, but I will enjoy it nonetheless.

New Year’s resolutions, anyone?

Last night was very busy and a lot of fun.  We’re on our way out soon to join friends for a New Year’s party, so I’ll write about it tomorrow.  Today I’ll write about a bit more concise topic–New Year’s resolutions.  Dear Reader, did you make New Year’s resolutions for 2006?  I tend not to, because they’re usually too difficult to fulfill.  I did last year, though.  How did I do?
  1. Finish Korean language class with an adequate testing score
  2. Arrive in Seoul safely
  3. Take a real vacation
Well, two out of three ain’t too bad.  I finished Korean language class last year with the required proficiency level.  However, I should have resolved to maintain it, because my Korean language ability has receded precipitously.  I am not taking any Korean classes right now, and I rarely speak Korean, unfortunately.  I speak a little once in awhile, although I never carry on conversations in Korean anymore.  Even my Chinese ability has decreased a bit.  My German improved, although not by much.  I plan to retest in German in January before I bid for my next assignment.  If I test well, I would be qualified to bid on German-speaking locales early next year (read Europe).
 
We also made it safely to Seoul.  However, we did not take a vacation this year.  My wife and son went to Shanghai, China in April and May, but I haven’t left Korea since we arrived here.  Interestingly, I feel like more of a homebody in Seoul than I did when we lived in the U.S.  We spent a few days in February in Hawaii en route to Korea.  We also made overnight trips to Gyeongju and Seoraksan National Park, but that’s all the traveling we’ve done together.  However, none of these were really "vacations."  We had planned to return to the U.S. over Christmas, but that trip has been postponed until next summer.
 
I thought about what resolutions I want to make for 2006.  Here’s what I came up with:
  • Lose 10 pounds.  I need to lose more weight than 10 pounds, but I need to be realistic!  I can never achieve unrealistic weight loss goals.  Can you relate?
  • Increase our net worth by 15%.  By aggressively saving, I think we can do it.
  • Spending more time reading for pleasure and reading what I need to read.  I never seem to have enough time to read.  It’s probably because I spend too much time on the computer.
  • Improve my Korean.  It would be nice to leave Korea speaking better Korean than I do now.
  • Take a real vacation.  This one carries over from last year’s resolutions.

So, Happy New Year, Dear Reader!  I hope you have a wonderful and prosperous 2006.  If you make any resolutions, I wish you all the best in fulfilling them.

 

From the "Things that Make You Go Hmm" Department:  This morning I found my son in the pantry trying to reach something on the shelf.  He was using a case of bottled water as a step chair.  The first thought that crossed my mind was, "Wow, my son can even walk on water!"  Now if he could just let us know when he needs to use the potty.