Obviously too many things going on to cover them all so I thought I would try to hone in on a couple reader comments.One reader noted that I looked more tired in last week's video (buy signal) and less tired this week (sell signal?). If I were to be an indicator I would be incapable of recognizing it's value but have at it if you think there is something to it.
I actually felt more wiped out this week due to being pulled in progressively more directions in terms of emails from work, media inquiries but not trading. If you've been reading this site for a while you know most of the work was done ages ago.
The small portfolio tweaks are not usually time consuming. As the phone has been ringing for me a little more often it has been ringing for Joellyn a lot more often as apparently dog rescue issues have gone up as the stock market has gone down.
Another reader asked a question about entering and exiting the market during what he calls a complex market. He believes in thinking of the current cycle as a complex bottom and although he tends to be shorter term in nature wonders if points of entry and exit take on additional importance right here.
Well there's all sorts of things there I don't know. The first thing I think is buy and hold and whether that notion is dead. I've never thought it was dead dead but the tweak I have written about is buy and hope to hold. When I first bought Bank of America (BAC) a few years ago I figured I'd never need to sell it. Then the merger with Merrill came along and I sold it. Had there been no MER merger I'm pretty sure I'd still own it.
I'd love to be able to assemble a portfolio that never needed any changes but that is not realistic but that is my starting point in trying to answer the question. I do take a longer time frame than the reader and as a top down person I am more concerned the the exposure of the entire portfolio and reducing that exposure or increasing it depending on what I think the market is doing consistent with other more objective concepts I rely on.
I've outlined the couple of across board trades I've done of late (a few long sales a while back, selling the double short, buying a little Statoil) but I would say I probably have the next three offensive and defensive moves planned, which I do or the order they might get done depends on what the market gives and to tie in with some comments yesterday, I could add a few names and still have a cash position most folks would consider defensive.
There are a couple of things that are foremost on my mind these days. The most important ties in with down a lot. I'd been writing about trying to avoid big chunks of down a lot. We've now had down a lot (you can look at the quarterly recap videos to determine whether you think I was successful in trying to miss down a lot), many people are very afraid and there is a lot of questioning of the future of our financial system. Quite simply that describes a time to gear more toward entry than exit at the portfolio level.
At the index level continued volatility, although maybe soon we only move in 4 and 5% increments, should be expected. Apparently David Rosenberg from Merrill thinks SPX 750 is in the cards. That is 190 points from here. In the context of a 1565 starting point, 190 points would be another 12% after already falling 40%. If you do not think this is the great depression revisited then you probably need to realize the vast majority of the decline is in.
That does not mean that if we go up to 1050 this week that we don't go down to 850 the next week and scare the bejeezes out of everyone. And then that type of action repeats a few more times.
At the stock level we should expect more wipeouts. If you have a 2% weight to a stock that goes to zero you don't really have a problem but most people put more than 2% in one name. I do think there needs to be a willingness to come out of any stock you own in this type of environment, BAC as a case in point for me.
Market history shows us that buying some stock after a huge selloff that scares people has worked far more often than it hasn't.
Exactly a year ago I mentioned JD Drew's grand slam against Cleveland. He gad been having a dreadful time at the plate but all the while I kept telling Joellyn he would do something good. Last night was the exact same thing with Jason Varitek. He may not be a major league hitter anymore but when they flashed that 0-for the series stat, I knew the Rays were in trouble.
Game 7 tonight which obviously the Sox have a shot at which is good but that means we have one more night of Chip Carey and Buck Martinez announcing (Ron Darling is nowhere near as bad as the other two, in fact Darling doesn't bug me in the least). In addition to not being able to judge flies balls as homers or not Carey also has trouble with fair and foul. I swear to you I could do a better job than him.
The picture hearkens to a simpler time, 2006, in the Icelandic countryside.
14 comments:
Roger,
Turn down the sound on the TV and tune in ESPN radio on the net with John Miller.
Good morning,
Do you have any opinion about Emerging Markets like China, India and Brazil? I am from Brazil and we have been suffering a lots of pain due to the global credit crisis. Not just in terms of stock market but now we start to note serious problems in the real economy. Forecaters are making a big downward revision of the next yar GDP growth. Very normal fact. So, it's better keep watching the economic process until 2009/2010?
Or better start to think buy some commodities related stocks right now, like Petrobrás (PBR) and Vale Rio Doce (Rio), Gerdau (GGB)? Or even some of our financial stocks that never were exposed to subprime related problems, like Bradesco (BBD) e Itau (ITU)?
Or better strategy is waiting US market reachs a good and consevative fundamental valuation like the following article suggests?
http://seekingalpha.com/article/100533-fundamental-valuation-how-low-could-we-go?source=headline1
Sorry for my poor english.
The Icelandic countryside is still there. The banks are gone.
if we had reliable terrestrial radio signal that would be the solution.
Anon, difficult to answer in that I don't know the home bias of the typical Brazilian investor. I target about a 2% weight to Brazil. I think most people perceive Brazil to have more volatility than most other countries, I know I do.
As far as banks, I tend to be nitpicky about what countries to but financials in. Rightly or wrongly I've not had any banks from brazil. My one holding is a miner but owning PBR sometime in the future is plausible. My perception of Chile's financial system leads me to a bank stock there.
For now demand for stocks in just about every market is unhealthy so more defense does makes sense for now.
The Icelandic banks are gone from now. It'll be intersting to see what the re-emergence of Iceland's financial sector will look like. The people are resilient and so I think something healthier will come through eventually.
Roger,
I have been a long time reader of yours and some of the posts the past few days has confirmed academic research in that passive buy hold broad based portfolios outperform active management (net of fees and taxes) almost always over long periods of time. It is truly difficult to decipher luck from skill. By your own admission it is difficult to time the markets and know in advance what sectors and/or countries will outperform versus another. I realize that you have helped insulate some of the recent decline for your current clients however now is not the time to be invested in 20-30% cash if one is to outperform during the next uptick.
For those that are considering Your Source, please advise from your perspective what the pros/cons of passive by hold versus your style is? Thanks
anon 1129, not sure how you draw that from any of my posts. further, I believe you are mis-reading (or maybe I am not articulating very well) my thoughts on country and sector selection.
Lastly I don't recall ever talking about trying to outperform an 'uptick.' The time horizon i look at is longer than an uptick.
I know this will sound goofy and may not be appropriate for this blog, but a couple of things I consider are:
1) what if you're involved with someone like Roger who provides satisfactory results but then suddenly becomes incapacitated; car wreck, stroke etc. or for that matter suddenly calls it quits like the hedge fund manager who recently made news by saying he had had enough. Who then takes over the strategy sucessfully? For every good guy out there, there are dozens of sharks waiting to steal your retirement.
2) what's wrong with a buy and hold strategy that heirs can follow without the cost of an advisor and takes advantage of periodic rebalancing? It may not yield above average returns, but it won't lag either.
I come here regularly because I respect Roger's views and SWAGs. It is human nature to turn to someone for confirmation of one's beliefs... and I basically sense Roger is not taking big chances, rather he seems to be taking advantage of Mr. Market's irrational behavior. This is something Ben Graham would approve of.
i'll tackle that second one; there is nothing wrong with buy and hold necessarily. buy and hold should lag sometimes and beat some other times. The difference of course is the willingness to ride bear markets all the way down.
some people can do this others cannot. obviously once any money goes to heirs you have no idea what they will do with it.
maybe you can handle riding a bear all the way down and they cannot.
Anon 1:29,
Your assessment is fairly accurate as that is one of the largest concerns with Roger's firm since it is my understanding that Roger is the sole portfolio manager with no firm backup in place. This is the risk one has whether it is a Mutual fund, Hedge fund or an independent RIA whom managers privately managed accounts... What if the manager leaves and you are left holding the bag, forced to liquidate your positions, pay taxes and start over?
Perhaps Roger could clarify if he has any ownership position in Your Source? If not perhaps this is a sign that Roger prefers his flexibility?
Roger- I would also be interested in hearing your response?
Roger,
Your response to anon 2:08 is one of the most intellectually honest answers I have ever seen someone in your position provide. That's one of the reasons I like to visit this site. Fair winds and following seas my friend.
Very peculiar, almost tabloid-esque thread that is wildly out of any context for this blog.
Another 12% drop after already falling 40% with the great depression revisited isn't a very nice thing to read on a Sunday, can't you reserve doom for Mondays and talk about the good stuff on our day off?
Oh right, of course there is no good stuff.
an opinion of hey most of the decline is behind us is negative?
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