My Pair Trades

I'm trying out some pair trades on Facebook. The idea is to long the strong ones in the industry and short the weaker ones or I was going to pair trade it off of the ETF, so say short the ETF but long the leaders that ETF holds or long the ETF but short the weaker ones.

I'm trying out the OIH, XOP, MOO, EWZ, PPH, or a combination of stocks in those ETFs... and I do want to try out the financials like KBE and UYG but with the short ban (which ends tonight) it's a little harder to gauge. I want to find things that are close in value or exactly half or a third to judge how many shares to take

I already longed 60,000 shares of MON and shorted 30,000 shares of AGU and MOS since those two's value is roughly half of MON. I will probably put on 50,000 shares of POT long with 33,500 shares of AGU and MOS short each when the market is slow MOS and AGU has a combined price of roughly 33% less than of POT so I'm shorting 33% more shares to match. I don't know if exactly that math makes sense when it's translated into dollar figures but since it's all an experiment I don't really care. In addition, I'm going to put on 45,000 shares OIH short and split my longs among RIG, SLB, and DO. The combined value of those threes is about twice the value of OIH so I'm probably going to do 7,500 shares each for 22,500 shares or half of the number of OIH shares I'm going to put on. For EWZ the max it'll let me short on facebook is 13,350 shares so I'm going to match that by longing 17,800 shares of PBR. PPH I can only short about 37,000 shares so I'll then split that in half and long 18,500 shares of JNJ and ABT.

It kind of makes sense to me with the numbers and the shares and all that in my but I'm not sure and if it's that easy I'm sure everybody out there would be doing it. Supposedly other people who do these kind of trades have some complicated algorithm, etc etc... woooo, wouldn't it be funny if I just crack it right now?

I'm at a point when I'm satisfied with my trading system and I want to continue to expand my repertoire. I have faith in the way that I trade that I'm going to consistently make money.

My Retirment Plan

Where am I putting my money? For my retirement I'm actually following the Good to Great Index or method. Good to great is a book by Jim Collins that talks about companies that are able to consistently perform and adjust to make the company Built to Last.

The Good to Great companies

• Abbot Laboratories (ABT)
• Circuit City (CC)
• Fannie Mae (FNM)
• Gillette (got bought out by Proctor I think)
• Kimberly-Clark (KMB)
• Kroger (KR)
• Nucor (NUE)
• Philip Morrs/Altria (PM/MO)
• Pitney Bowes (PBI)
• Walgreen (WAG)
• Wells Fargo (WFC)

The Built to Last companies:

• 3M (MMM)
• American Express (AXP)
• Boeing (BA)
• Citygroup (C)
• Disney (DIS)
• Ford (F)
• General Electric (GE)
• Hewlett Packard (HPQ)
• IBM (IBM)
• Johnson & Johnson (JNJ)
• Marriott (MAR)
• Merck (MRK)
• Motorola (MOT)
• Nordstrom (JWN)
• Phillip Morris/Altria (PM/MO)
• Proctor & Gamble (PG)
• Sony (SNE)
• Wal*Mart (WMT)

See anything in common? You guessed it, my money is in Philip Morris. Yeah yeah yeah, I know they make cigarettes and that stuff supposedly can kill you, but it's a great company. Great dividends, actually does have an uptrend. You don't hear people talk about the shitty cars Ford makes that kill people as much. How about the number of people that get cut shaving in the morning using Gillette razors each more made by Proctor & Gamble, or the number of divorces each year deep rooted in the problematic movies Disney produces that instill an unrealistic view of love in young people as much. Alright, I'm going to switch off the sarcastic mode now.

There are some real crap on this list though... FNM is not worth crap now, MOT is crap, CC is double crap, F is crap to the 5th power. If you look at the chart for ALLLL the way back, and I mean back in like the 80's or even further, the ones that actually do have an uptrend I like are (wth the current dividend % following) : ABT (2.44%), KMB (3.54%), KR (1.30%), PM (4.40%), MO (6.37%), WFC (3.87%), MMM (3.05%), JNJ (2.71%), PG (2.24%).

Some of the companies I really like as well like BA and IBM and some technically do have an uptrend but I didn't include them b/c the slope of the trend is not as great or almost flat or there's a lot more volatility than I'd like. So seriously, if you are putting in money into your 401(k), IRA or whatever retirement/pension fund you have like SEP or VUL... just go w/ these companies. Personally I'm even more selective. I'm down to just PM, MO, WFC, JNJ, KMB, and PG. Six companies... well, it used to be 5 before the PM/MO spin off. I simply just buy these shares no matter what price they are and I reinvest the dividends. I don't care if they go up or down. Will this work? Let's see... I'm almost 25 now, I'll let you know in 40 years. So let's talk again in 2048.