Every time I'm tempted to sell and go to 100% cash, I tell myself no and hold on. So far it's been the right decision, but sooner or later it will be the wrong decision. I'm too old for this dollar cost averaging BS, though I tell my children to put money aside and whenever the market plunges, buy with both hands. I live in Thailand. In 2009, before I really paid attention to markets, I looked one day at the stock price pages in the papers. A company I had consulted with and I knew for a fact was very well managed was trading below book value, 9.5 baht. I should have taken a million baht or two and bought the stock and forgotten about it, dividends averaged 5% over the years. I didn't. I don't trade the Thai market because of the restrictions on foreigners, but the last time I checked it was at 75 baht, and for all that increase, dividends were about 3.5%. The market here wobbled seriously Monday because the palace issued a health update on the King, who has been unwell for quite some time, and he is in unstable condition. He has long been a unifying force here, and a few years ago when a couple of wankers spread rumours he had died, I was down 30% in two days. I expect the same irrational behaviour when the sad day actually comes. The baht has declined along with stocks. I'm looking at minimum balances for my overseas brokerage accounts. People will plan to be stupid, I plan to take the other side this time.
Yeah, 100% cash is almost surely a mistake. Even if you catch a crisis like 2008. The thing is, those who were bearish and were about the crisis and went to cash, had a difficulty changing their tune and becoming bullish, because they felt so good/smart about being bearish (I know I did). Most of crisis predictors became idiots in 2009/2010. But if they had a 20-30% position in stocks, they would probably find reasons to add on the way down. Surely, they would not get bottom prices, but even a poor average of ~1100 on the SPX for their adds, would still have been a good purchase. Plus, one can always put some tatical shorts on the index futures or ETF if a big crisis looks to be brewing. I know Soros tends to manage money in that way (passive portfolio with tactical shorts in ES futures in select situations)
The most obvious one is if you wish to receive dividends, you have to buy a restricted class of shares with no shareholder rights other than to receive dividends. There is a holding company set up and anytime you buy shares and check the restricted box, they become the beneficial owners of the shares and issue a holding certificate in your name for the quantity purchased. That doesn't bother me. I stopped trading the Thai market the day I called my broker and asked how to go about shorting shares; it had dawned on me that waking up every day and hoping to buy and make money was pretty stupid since the market spent many days going down. I was told as a foreigner, I could short but my position had to be closed by settlement day, T+3. I asked what if I was doing well in the position. I was told it made no difference, I had to close. I could reopen, but it would be a T+3 cycle. My broker suggested I open an account in the name of a Thai national. I could, but I have a chip on my shoulder about discrimination, so I did my homework and opened a US broker account. There, my money is as good as any Yanks is, and I have the same rights when it comes to trading.
This is one of the reasons why I'm comfortable with my position in Pershing Square Holdings. Ackman essentially copied the Buffett strategy but with additional elements to boost returns like getting involved with the company by going activist. He made most of his money by investing in stable cashflow companies (likely low beta) like MCD, PG and others. He became a billionarie and delivered huge returns to investors doing just that. Then he deviated from the strategy on HLF and VRX. On HLF he already said he is done with public shorts (a good thing) and on VRX, he said they will now be more careful about deviating "pershing square type holdings" with predictable cashflows and low leverage (essentially low beta stocks). So he will go back to the Buffett type strategy. And in terms of valuation, the stock trades at a 15%+ discount to NAV and there is no performance fee until ~$27 a share of NAV (from the current $17). There is a asset management fee of 1.5% but if you consider the discount to NAV, you are getting PAID to invest with him Buffett rode quite a few investments to $0 (off the top of my head I remember US Air and an american shoe company), in fact Berkshire Hathway itself (the manufacturer) was a failure that was liquidated. Ackman was bound to have a poor investment eventually. Doesnt mean much, now that he will go back to the improved Buffett strategy (leveraging low beta stocks plus going active on them and on CMG is looks like he is doing just that), to me it looks pretty good as a long-term hold. PSH is like a early stage BRKB, there will be more volatility (due concentration, lack of diversification) but it should beat the market without much difficulty
If a lot of people think stocks are cheap relative to interest rates and they hate bonds, aren't they long bonds by proxy?
So I was reading back this journal from the beginining to review some of the studies/trades/ideas from back in the day. Its absolutely hilarious I didnt remember all that stuff but its just ralph00 over and over again flaming me for suggesting the Fed would keep rates at 0% in 2011! (lol) We are like 5 years later and there is still ample debate for a 2nd rate hike I even talked about one trade where I could make 30bps on no hikes and lose 6.5bps on 1 hike. Those Fed futures markets from pre-mid 2011 were just a dream
I really think December Fed futures are priced almost perfectly right now. The only edge there is if you sit in the FOMC
But one thing I got to say, back in the day this journal had a lot of participation. Lots of people would discuss ideas (even if to flame ideas they disagreed with) and trades. These days I feel like I'm talking to myself! Please, lets get involved people. I developed an approach (All weather-type portfolio plus ocasional trades) and there is not really going on much on a month to month basis. But I'm open to people's ideas to see if I find good trades ideas to put on or improve my portfolio tactics
I'll comment on macro a little later but I'll say this from a day to day perspective. The fact that you are bored and posting and looking for discussion is a reflection of your style given the market conditions. In other words, you are doing fine.