Ron Carson-buy and hold is gone

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Oct 20, 2008 4:22 pm

I had Peak send me their Ron Carson conference call web link and he is saying "the buy and hold strategy is dead" essentially.

 
Consensus on this board is that is still what many are doing. I'm curious if anyone has heard more from Ron Carson and why he thinks this, and/or what application he means it in.
 
I saw him live a couple of years ago and did not interpret his business model to be a trading model at all, but then I learned he was actively managing ETF's a couple months later. I saw him on CNBC talking about "bets" he was making essentially.
 
Oct 20, 2008 5:07 pm

i think most of us will change strategy when someone, anyone, shows us a proven long term strategy with a successful track record, which can be proven by numbers and statistics, and not just rationalized by the most recent "x" time frame. 

 
i know i know, this time it is different.
Oct 20, 2008 6:40 pm

Somehow I just can't buy into the argument that buy-and-hold will EVER be dead. Capitalism RELIES on it. If nobody bought and held, there would just be a massive churning sound of all those investors out there trading and losing money. I can't think of a single wealthy individual in history that has gotton wealthy by buying businesses and flipping them for quick profits.



The only way you can successfully do this is buy guessing on asset mixes of various classes, and being RIGHT. Consistently. I doubt you can really do it by just being a remarkable short-term trader of individual stocks (not that I think people can even pick the right mixes consistently....).



I agree that the buy-and-forget mentality doesn't make sense (it never really did). But if you consistently buy good quality investments, and they stay good quality investments, then why would you sell them? I'd rather get 6-8% from GE for life than gain 45% and lose 64% with some bender I went on. And I venture to say that most rational people would agree with that.

Oct 20, 2008 7:38 pm

I'm not saying I agree with his comments, just posting it for discussion. What amazes me is how he can get that big (#1-of everyone) with that point of view. Seems the biggest typically adopt buy and hold and just build scale.

Oct 20, 2008 7:52 pm

my problem with the whole premise is that people assume just because they DO SOMETHING, ANYTHING, that it is better for the client, and this just isn't so.  personally, one of the most important things an advisor can do is instruct their clients to do nothing, when doing nothing is most appropriate, and still be adequately compensated for it. 

LuvIndy-i didn't assume you were agreeing with anyone, my comment was directed at the school of thought in general, not you.

Oct 23, 2008 8:49 pm

My gut tells me he's managing his own portfolios within the SAM fee based platform at LPL and making quarterly changes.   As a wealth management practice his team can make the changes within funds or after clients sign a discrectionary form he can use ETF's. 


As a former AGE rep we had a ETF program run by the home office that made changes every quarter and they looked at how much large, mid, small, fixed, & international.  So making allocation changes is still long term in nature and in the market.  Its being proactive and trying to better the portfolio, but not traditional buy and hold.  A lot of LPL reps have been doing this for years.  Some follow the firm, some make their own calls. 
Oct 23, 2008 9:08 pm

If that's his intention, then it makes sense. Many investment advisory firms (i.e. funds, SMA's, etc.) employ the top-down tactical allocation theory. But in those cases, they are still bascially buying the profitable companies via ETF's or funds.



But if the idea is simply market timing individual stocks (which he probably isn't suggesting), I sort of question it. No matter that market in the short term, stock prices will ALWAYS eventually follow earnings. And short term can mean several years, so just because we have crazy bear market, it explains why returns always end up reverting back to the mean. SOMEONE always ends up being a big winner, and someone the big loser, and some in the middle, regardless of the markets. Despite the current drudgery, there will be big winners when the credit freeze thaws out. Someone is buying this crazy discounted CDO paper, and eventually they will profit handsomely from it. Or the people that buy cheap foreclosed houses will win, or the government will win when banks come back, whatever. OR (even scarier), the Chinese will win with all the U.S. debt they are buying. But SOMEONE will win at the end of this game.

Oct 24, 2008 12:20 am


He is "#1 everything" not because of his investment philosophy at all.  He's #1 because he relentlessly markets himself and he is also relentless in devoting massive effort and resources on giving his clients a service experience unlike any other they have had.

j

Oct 27, 2008 8:59 pm

I just listened to the 10/16 Conference call that LuvIndy is referencing and here's my summary:

Ron Carson:  Buy & Hold is dead on the short/intermediate timeline (it will come back in a few years, probably), you must take up a sector rotation strategy, or have a proactive plan on the intermediate term, otherwise you will get killed. 

Tips for clients: Admit you screwed up, and show them you have a new strategy going forward.

Bob (from VPM Management; looks to be a technical/software based analysis system that Carson has undertaken in the last year):  Bob called the collapse of the banking sector a year ago, and when LEH went under, he advised Carson to cash everyone out.  Carson pretty much went to 100% cash after that, where it was prudent.  Went into Tbills/Tnotes. 

- We will test the 2002 lows and probably even dip below them, 700-800 on the S&P. 
- 3-10 months from here, to see a bottoming, as we repair the bank sector (30-40% of the banking infrastructure is no longer there, can't restart the economy until all that gets fixed)
-Don't buy in yet, even at these prices, we are expecting the double-dip.
- Worst Christmas in over 20 years
- TARP program is great, and it will do great things in the long-term.  On the short term it does nothing.  Short term problem = housing.  Until that gets fixed, it's all up in the air. 
-Coming out of recession Middle of 2009. 
-Housing won't find a bottom for another 12 months or so, and prices will go sideways for the next 2-5 years. 
-Inflation will not be a problem
-'08 and 09 earnings are still too high.  Market is still correcting itself for the oncoming reduction in '09 earnings estimates. 
- Muni bonds are scary as hell, especially in the bubble states; CA, NY, AZ, etc...

Any thoughts?

Oct 27, 2008 9:31 pm

One guy's opinion. 

 
I don't see how he think we'll come out of a recession in the middle of 2009 when housing won't find a bottom for another 12 months.  I'm of the opinion that housing has to bottom first.
 
A lot of what he said is commonly thought amongst money managers from what I've read.  Hopefully it will be an example of herd mentality, problem is we need them to start putting money to work because there are no bids.
Oct 28, 2008 9:24 am

I would think that if he expects the recession to end middle of next year, that now would be the best time to be stocking up on good, quality investments.  The market historically is a good 6 months ahead of the curve and has typically headed way up before the recession is over.  Sounds like we need to call all of our clients and get them to put that money they have in their MMKT into some good dividend paying stocks.   

Oct 28, 2008 9:57 am
snaggletooth:

One guy's opinion. 

 
I don't see how he think we'll come out of a recession in the middle of 2009 when housing won't find a bottom for another 12 months.  I'm of the opinion that housing has to bottom first.
 
A lot of what he said is commonly thought amongst money managers from what I've read.  Hopefully it will be an example of herd mentality, problem is we need them to start putting money to work because there are no bids.



Why must housing bottom first?  Are people going to completely stop buying food, clothes, or computers?  What percentage of the nation's GDP is in the real estate and home construction business?

I'm not meaning to attack you, nor say that I completely disagree.  But there's an implicit assumption in your statement, one which has also been made by many economists and politicians, and I'd like to explore the possibility that what has been assumed to be true could be completely wrong.

Comments?

Oct 28, 2008 11:11 am

I would comment that if you're not smart enough to read the contract on your adjustable rate mortgage, you need to lose your house or get a second job to pay it.  WHy are we saying its the housing problem when in my mind its media doing everything in its power to make the ave plummer think the world is coming to an end. If Barrack wins, guaranteed all of a sudden the clouds will split and sunshine will come down on us.  THe news will be good again and the confidence of the ave electrician will rise, and consumption will start again. I would love to shove something up the Today Shows hosts arses...but by that time we will have lent trillions to the financial institutions to what.....buy other assets. Not strengthen their balance sheets, but to build even stronger businesses with low interest debt and a lender who has no ambition to take over any institution. Could you see going in to barney queer Frank and ask for a car loan. He may give it to you ..if you give it to him.

Oct 28, 2008 12:01 pm
HymanRoth:
snaggletooth:

One guy's opinion. 

 
I don't see how he think we'll come out of a recession in the middle of 2009 when housing won't find a bottom for another 12 months.  I'm of the opinion that housing has to bottom first.
 
A lot of what he said is commonly thought amongst money managers from what I've read.  Hopefully it will be an example of herd mentality, problem is we need them to start putting money to work because there are no bids.



Why must housing bottom first?  Are people going to completely stop buying food, clothes, or computers?  What percentage of the nation's GDP is in the real estate and home construction business?

I'm not meaning to attack you, nor say that I completely disagree.  But there's an implicit assumption in your statement, one which has also been made by many economists and politicians, and I'd like to explore the possibility that what has been assumed to be true could be completely wrong.

Comments?

 
Hyman, it's ok to attack me.  I've been wrong before, I'll be wrong again.  That was just my opinion, but of course, it can happen the other way.
 
Here's the breakdown of GDP according to JP Morgan:
3.5% Housing/construction
10.5% Investment ex-housing
20.1% Government Spending
70.9% Consumption
-5.0% Net Exports
 
I am just of the opinion that people have been spending money through their home equity and withdrawing it like an ATM machine.  Of course people will continue to buy and live off credit, but not at the pace they were.  But then again, I have no clue.
Oct 28, 2008 12:37 pm
bspears:

I would comment that if you're not smart enough to read the contract on your adjustable rate mortgage, you need to lose your house or get a second job to pay it.

 
I think me quoting Spears is a first, but I happen to mostly agree with this statement and that is one reason I am so disgusted with this election.  McCain is saying (presumably to buy some votes like his competitor) that the government should be buying bad mortgages and giving those folks loans they can afford to keep them in their homes.  Excuse me?  Where's my "I'm an idiot" handout?  I bought my home 15 years ago for less than $50,000 and have made a ton of improvements...when I had the CASH to do so.  I didn't go out and borrow 125% of what it was worth and If I'd been so foolish, I'd deserve the the resultant economic pain.  Sure, the government (for strongly encouraging reckless lending practices) and the banks (for being stupid and greedy enough to go along with the government's wishes) deserve some of the blame, but I'm sick of this lack of accountability.  It's time we learn to think for ourselves.  Damn it, John...sound like a Republican for God's sake!!!
Oct 28, 2008 12:54 pm
Indyone:
bspears:

I would comment that if you're not smart enough to read the contract on your adjustable rate mortgage, you need to lose your house or get a second job to pay it.

 
I think me quoting Spears is a first, but I happen to mostly agree with this statement and that is one reason I am so disgusted with this election.  McCain is saying (presumably to buy some votes like his competitor) that the government should be buying bad mortgages and giving those folks loans they can afford to keep them in their homes.  Excuse me?  Where's my "I'm an idiot" handout?  I bought my home 15 years ago for less than $50,000 and have made a ton of improvements...when I had the CASH to do so.  I didn't go out and borrow 125% of what it was worth and If I'd been so foolish, I'd deserve the the resultant economic pain.  Sure, the government (for strongly encouraging reckless lending practices) and the banks (for being stupid and greedy enough to go along with the government's wishes) deserve some of the blame, but I'm sick of this lack of accountability.  It's time we learn to think for ourselves.  Damn it, John...sound like a Republican for God's sake!!!



+1 with emphasis.

But the problem is....how does it work out that the economy adjusts and people deal with the consequences without massive economic dislocations and probabably a severe economic contraction.  That hurts all of us.

Oct 28, 2008 6:15 pm
gvf:

I just listened to the 10/16 Conference call that LuvIndy is referencing and here's my summary:

Ron Carson:  Buy & Hold is dead on the short/intermediate timeline (it will come back in a few years, probably), you must take up a sector rotation strategy, or have a proactive plan on the intermediate term, otherwise you will get killed. 

Tips for clients: Admit you screwed up, and show them you have a new strategy going forward.....

[...]

Any thoughts?



Yes, VA's 

Oct 28, 2008 6:17 pm

Hah, I've heard Carson does a LOT of VA business.  

Oct 28, 2008 6:37 pm
gvf:

Hah, I've heard Carson does a LOT of VA business.  



That's probably why I think he can afford to not buy-and-hold with his A list clients' smaller accounts cause he's already got the majority of their portfolio covered.