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re: Is anyone else thinking of pulling out of the market and going
Posted on 5/21/10 at 12:06 am to kfizzle85
Posted on 5/21/10 at 12:06 am to kfizzle85
To answer the original question, yes. Did it a couple of years ago.
Still mostly cash, some shorting.
I see it as a good strategy because (1) I think we are still in a long-term bear market, and (2) I see it as a hedge.
Basically, a hedge against my business imploding. My company does the type of s/w consulting that is usually on the margin and likely some of the first projects to be cut by large enterprises when belt-tightening starts in earnest.
So, to be "long the market" both in my business and with my investment decisions is not the right thing for me. This is just how I'm playing it. Way too much market manipulation, political kneejerk initiatives, macro-events, contagion, volatility right now.
I'm sure Russian will put up the LOL'ing emoticon now, but I see it as either way I'm somewhat covered.
I will be in the mode until I see debt deflation / credit crisis easing. Several years, in other words.
Or until there is blood-letting in the streets and equities are scorned and written off as forever dead.
Still mostly cash, some shorting.
I see it as a good strategy because (1) I think we are still in a long-term bear market, and (2) I see it as a hedge.
Basically, a hedge against my business imploding. My company does the type of s/w consulting that is usually on the margin and likely some of the first projects to be cut by large enterprises when belt-tightening starts in earnest.
So, to be "long the market" both in my business and with my investment decisions is not the right thing for me. This is just how I'm playing it. Way too much market manipulation, political kneejerk initiatives, macro-events, contagion, volatility right now.
I'm sure Russian will put up the LOL'ing emoticon now, but I see it as either way I'm somewhat covered.
I will be in the mode until I see debt deflation / credit crisis easing. Several years, in other words.
Or until there is blood-letting in the streets and equities are scorned and written off as forever dead.
2
Posted on 5/21/10 at 12:29 am to clamdip
I think that is a fantastic point and one I encounter (although I just get to provide input) in business valuation regularly. An individual who owns a business is almost certainly not diversified in their investments. That's not a "bad" thing (why wouldn't you concentrate your investments in your area of expertise, essentially my argument in this thread fwiw) as much as its a fact of the circumstances. In your case, since you perceive your business to be very cyclical, it completely makes sense to adopt an investment strategy that essentially (or at least attempts to) hedges your business risk.
Posted on 5/21/10 at 7:00 am to clamdip
quote:
clamdip
Ever consider low beta stocks? What about holding a portfolio of companies that have economic drivers that persist through downturns in the economy?
I really do think your logic is solid, but just something to consider if you ever want to dip your toes back in the water.
Posted on 5/21/10 at 7:01 am to Zilla
quote:
I disagree ... if it worked before it will work again
You are one of those guys that crunches numbers at the roulette wheel, aren't you?
Posted on 5/21/10 at 7:49 am to athletemed
quote:
I think Buy and Hold is for chumps....
Chumps like Warren Buffet - he'll never be worth much.
Posted on 5/21/10 at 8:08 am to TheHiddenFlask
quote:
Ever consider low beta stocks? What about holding a portfolio of companies that have economic drivers that persist through downturns in the economy?
I really do think your logic is solid, but just something to consider if you ever want to dip your toes back in the water.
Yes, good points. I do have a tiny bit of stocks and did for the last year hold a preferred stock basket that paid dividends.
On kfizzle's point, I have lots of friends in that boat. most of them work for large corporations such as Shell, Chevron, GE, etc. I worked for two of those companies myself.
They are tremendously "overweighted" in their company because they depend on their salary + a lot of their 401K is tied up in company stock.
Should the company tank and they get fired, they are screwed.
Posted on 5/21/10 at 8:11 am to PlanoPrivateer
quote:That is a misnomer BTW. Buffet doesn't Buy and Hold. He Buys and Develops.
Chumps like Warren Buffet
One of my wife's Finance profs spun the yarn that Buffet bought Coke and held it, and that's how he made all his money. Silliness.
Posted on 5/21/10 at 8:21 am to NC_Tigah
Not to get off on a tangent, but what do y'all think of this pissing match between Buffet and Kraft?
Posted on 5/21/10 at 8:21 am to athletemed
quote:
I think Buy and Hold is for chumps....I bought in in 2007 and am still down $30k....
Buy and hold doesn't mean only three years. You need to hold a lot longer than that. Warren Buffett famously said that when he buys a stock he plans to never sell it. Ever. He's owned more than a few of his holdings since the 1960's.
That is buy and hold.
ETA: Yes NC, I see your post but he does indeed buy and hold even though he isn't passive.
This post was edited on 5/21/10 at 8:25 am
Posted on 5/21/10 at 8:24 am to kfizzle85
quote:
I think that is a fantastic point and one I encounter (although I just get to provide input) in business valuation regularly. An individual who owns a business is almost certainly not diversified in their investments. That's not a "bad" thing (why wouldn't you concentrate your investments in your area of expertise, essentially my argument in this thread fwiw) as much as its a fact of the circumstances. In your case, since you perceive your business to be very cyclical, it completely makes sense to adopt an investment strategy that essentially (or at least attempts to) hedges your business risk.
Excellent point. The reason behind diversification is that if you're contemplating buy assets where you don't have an informational edge, you lower your cost of risk by purchasing a diversified basket. If you really do know something (as you should if you own your own business) that's a different matter.
Posted on 5/21/10 at 8:30 am to foshizzle
If you read Bogle's book, he advocates buying for the long term. Additionally, its sort of a don't get caught up in the market day to day, enjoy your life check your indexes annually.
He also talks about continuing to invest when the market is headed down.
He also talks about continuing to invest when the market is headed down.
Posted on 5/21/10 at 9:04 am to athletemed
i moved 100k from a 90% stock fund to total bond for the short term......will be going back to 90% stock shortly....soon to be buy time again
Posted on 5/21/10 at 9:21 am to athletemed
I wouldn't worry too much and here is the reason why. I usually buy a stock too late and realize a loss with my small amount of "expendable play money" with that said I bought SDS yesterday so by the laws of my life the market will rebound nicely. Happy buying.
Posted on 5/21/10 at 9:22 am to bossflossjr
I've been in 100% cash for about 3 weeks now. I'm really wanting to jump back in but really having to practice patience here. I do feel we are getting to levels where institutional investors will begin bargain hunting soon. But I'm going to wait until I start seeing LARGE volume blocks coming in on the green side before I get in. I'm not going to try and catch a falling dagger as they say...but I'm getting the feeling that we are nearing the bottom of this most recent down leg. I still have to let the market place it's opinion on me and not vice versa however.
Posted on 5/21/10 at 9:43 am to kfizzle85
quote:
Disagree. This is precisely why you should. Sprint is down 5% today, is there any reason other than macro events? They're on the precipe of the biggest phone release since the iPhone, certainly the biggest release in the history of the company. The only thing that happened yesterday was that a widely followed tech site published a favorable review. Yet, its down 5%. If you followed the company, would you then not buy it? I would. At the same time, 5 months ago, when it was continuing to flounder with mass customer exodus' and no catalyst (read: new awesome and clearly most dominant phone on the market) would you have bought it, considering the macro level indicators (C/S P/E 6x above historical averages, general economic fuzziness [generalizing here], etc)?
I guess I'm just saying, you can see dips and peaks, relatively speaking, at certain times, if you focus on a few fundamentally sound companies. When the macro events drag them down, you can favorably add to those positions. Admittedly, triyng to see the tops in those is much, much harder. So I guess I'm advocating a "buy and add on dips in general except sometimes when its clear ShitIsHittingTheFanRunForYourLives." I'm sure Rivers is ever more convinced I'm a WHOGAS Permabull now.
i don't really think we are on different pages here...i never meant to infer it was a one time investment ... buy those macro dips when you can... i think you are assuming there are only 2 types of strategies here, buy and hold vs ?
Posted on 5/21/10 at 11:31 am to clamdip
quote:
They are tremendously "overweighted" in their company because they depend on their salary + a lot of their 401K is tied up in company stock.
Should the company tank and they get fired, they are screwed.
This is true of a lot of people. It's a fatal mistake.
Posted on 5/23/10 at 1:20 pm to athletemed
(no message)
This post was edited on 11/27/11 at 10:23 pm
Posted on 5/23/10 at 1:34 pm to topstunter
Know how I know you're a FA?
Posted on 5/23/10 at 1:45 pm to foshizzle
“Wide diversification is only required when investors do not understand what they are doing.”
Posted on 5/23/10 at 7:15 pm to topstunter
quote:
First, it's too late to pull out of the market! If you get out now, you will have problems recovering your losses.
seriously?
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