I am a huge NCAA hops fan. Before I was self employed I used to take off the first two days of the tournament to watch all the games. In the last couple of years Dick Enberg joined CBS and does some of the games. I'm not a fan of his. I stopped liking his announcing style about 15 Wimbledon's ago.
I thought of his tag line "oh my" as I was talking to a friend last night who is very worried about the state and fate of the dollar, is very worried that the market is going to go down a lot and he has started to get defensive. I don't know exactly what trades he has done but it sounded like he has raised a lot of cash.
He did not ask my opinion about raising cash in here so I did not give him an opinion. He went to a seminar or kind of money-show type of thing that influenced his thinking to some extent, I'm not sure how much though.
This made me think "oh my" because the market looks good right here. Recently I have raised about 4% or 5% in cash selling BT and AH. I have not re-deployed that cash. If the market doubles in the next month (intentional hyperbole) I won't miss that much. Anyone who is 30% cash (not saying that my friend is, I really don't know) would miss out.
I am not a fan of getting very defensive when the market is doing well. Monday's action was troubling to be sure, but so far the trouble has not panned out. A couple of readers were kind enough to share what they are doing and the outstanding results they have had so far this year. My comments would not apply to them or anyone else that is up, say, 20% so far this year.
Anyone putting up those kinds of numbers should do whatever they think they need to. My returns will never be up 20% in three months if the market is up 3% in the same time period. I will not make the concentrated bets needed (in terms of names or themes) to beat the market by more than 15% in just three months.
If you are not going to take these risks either, I would implore you (recurring theme) to not get too gung ho about getting defensive before the market turns.
Wikinvest Wire
5 comments:
While the returns were excellent I was rather surprised that "traders" were loyal readers of yours.
I personally like you approach most of the time. While I would love a 20% quarter I am not sure I would like the ride over a longer term. I am quite pleased with my 6.5% return for the first quarter.
I also have concern with the market timing concerns, which I may eventually take part in. I have been reading the sky will fall from numerous people for quite some time (and I think it will - eventually).
Tim W. Wood is an intelligent guy that has a blog I love to read. He has been warning about the market for quite some time. But if I had adopted that approach last year when it became prevalent I would have not made hundreds of thousands of dollars. I even think Mr. Wood is correct about the future, but timing these things is as much art as science. Of course these disagreements are what make a market, but I am really most concerned about the most reliable methodology to grow my portfolio – not market timing. This is why I love Roger’s Blog.
KL
What spooked me is the cognitive dissonance I observe on TV and in some newsletters I get.
Almost busted a gut several times watching Kudlow's program with his guests that paint a rosy scenario. When they don't, he cuts them off. No concern over a 23% drop in home sales on the west coast; inflation is nowhere to be found; unemployment is not an issue; there is no debt problem.
When I look at a blue sky out the window and then watch the weather forecast on TV and they talk about a pink sky with two moons, it worries me. That is analogous to what I see of late.
I can enumerate a dozen serious concerns that are disastrous to the economy with data to back them up. The other side of the argument just is not compelling.
Markets climb slowly and drop off like a rock. My conclusion is we are closer to a top than a bottom, and getting the last 10% is simply not worth the risk.
I'm not a Jets fan, but the Enberg-ism that always runs through my head is "what a day for Duhe!" from the 1982 AFC championship game.
daveb,
I agree with a lot of your comments. I think we are close to a top (1 – 3 months).
The problem is I felt that way last year as well. I keep pushing the top into the future. Lord knows there are big issues out there.
But that has not helped me time the market. I am staying invested with a relatively low risk (I hope) portfolio.
I honestly hope you and others convince me I’m wrong – eventually. But for now I think there are risks on both an upside surge and the down side. Timing is hard.
One old saying I remember goes something like traders drive Chevy’s and investors drive Cadillac’s. I’m not saying you are wrong (I kinda think you are correct), but traders frequently are wrong.
KL
I hope I'm wrong too. If some of the scenarios come to pass, cash won't save us either. I just put my ideas out there with no attempt to convince. The more I learn the more I realize I don't know.
Still long energy and buying some Canadian shares and trusts. Long the high yield freight carriers like EGLE. Bought puts on silver stocks. I keep a small laddered put on the QQQQs as terrorism insurance but can't use that in the IRA.
Thanks to Roger for the great flow of information, and good luck to all. This summer will not be boring.
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