Death of Beta-Centric Buy & Hold Long-Only Strat
82 RepliesJump to last post
Well, the smartest people in the world didn’t see last years crash coming, I sure couldn’t. But this time I’m not listening to the smartest people in the world. I’m making moves on what I see. There is only one way you can hedge a mutual fund, operated by some of the smartest people in the world, against loss … go to cash. I’ve been telling myself I would cash out when the Dow closed under 8000, so today I did. I hope I’m wrong. But if I am what’s the worst of it? a little missed upside? Buy and hold should be changed to “buy and hedge”
I cashed out client positions in mutual funds as a hedge. May sound stupid but I see a fifth leg down coming. I'm not letting their accounts get halved, again, buy the smatest people in the world. I have zero faith in "managed money" Again, if Im wrong no big deal.
I'm here for the long run.
I’m going to short the crap out of the S&P as well when it closes under 800 with a stop at 820, much of it with the cash from the mutual funds. The options positions are working very well. Maybe a bold move, maybe wrong. But I told myself “NEXT TIME” I would act in a decisive manner to what MY eyes see, not what others are telling me.
Are your eyes connected to your gut? Smart people tell me that there are more nerves in your gut than in your brain.
[quote=Gaddock]
I cashed out client positions in mutual funds as a hedge. May sound stupid but I see a fifth leg down coming. I’m not letting their accounts get halved, again, buy the smatest people in the world. I have zero faith in “managed money” Again, if Im wrong no big deal.
I'm here for the long run.
[/quote]So are you saying this is a 5 legged bear? I guess then it must be a male bear....or a mutant.
Gaddock,
If you are serious you made a huge mistake. The Dow is in a trading range, unfortunately you cashed out closer to the bottom than top of that range. 9100 is where you take the money out and put it back in at 7900. That being said, we have been experiencing a bottoming process on the Dow. The time to short the dow has passed at its current level.
I concur with 007. And I told myself in November that when we got back to 9000 I was pulling clients (nervous ones anyway) half into cash. But did I???
No one has any idea and that should be the point of all this…
Gaddock isn't right or wrong... I have been buying stock on the massive dips riding them up 10-15% and cashing out, because I had been riding them then buying more when they went down, but they would go up and then back down... So like Gaddock, I told myself next time any of my holdings get up 10-15% I cash out and wait for the dip and buy again...And I did so and road that 4 day rally and then cashed out in mid morning when it was up..There is no other way to play this market right now...Sold the other half of them today. The jobs report Friday may break the rubber band. Cash is an asset class. I can make a lot of money with cash. It is far from sitting there idle. Again, those of you that think I’m wrong … I hope you are right. Worst thing that can happen is I miss a tiny bit of upside. In the mean time I use the cash to sell options against. My two triggers were 8000 & 9000 + or -. Now we have closed twice under 8000 this week. The next fear is the S&P closing under 800. The more times it does the more those number go from support to resistance.
I see deflation with m y own eyes and wallet.Gaddock’s comments are PERFECT.
Bears have total control and total confidence.
This is a once in a generation buying opportunity.
last 2 weeks are much like early 2003.
we are very near a monster up move (35-50%)
Today erased any remaining regret for no longer holding equity MF’s. There is no valid bailout plan and the range has a bearish tilt.
On the flip side there are still huge credits out there for February expirations. 2 and 3% trades allover the place. Not bad for a week and a half. BUT those credits are peoples fear. It appears to be increasing again. I'll be buying at the bottom.Look at some long term graphs on DOW, AA, IP, EK, GE and you will see we are in nothing near a once in a generation buying opp. These all look like 0 is on the table. Can add KO, PFE and 100's others with a little bit of looking.Gaddock’s comments are PERFECT.
Bears have total control and total confidence.
This is a once in a generation buying opportunity.
last 2 weeks are much like early 2003.
we are very near a monster up move (35-50%)
Look at some long term graphs on DOW, AA, IP, EK, GE and you will see we are in nothing near a once in a generation buying opp. These all look like 0 is on the table. Can add KO, PFE and 100's others with a little bit of looking. [/quote] Great buying opportunity. Craziness. Use every rally to sell clients from the market. I pulled 1/2 to cash from all traditional equity strategies for clients in 12/2007 - only wish I'd sold it all. If you follow statistical probability of economic recovery, this is entirely different than 2003. In 03 there were: Rising home values Easy access to credit High business confidence Lower and already moderated unemployment Today we have none of these. All rallies are fools rallies. Ideal asset allocation for today's market: 1/4 Equities - 60/40 US to International 1/4 Cash 1/4 Market Neutral (long/short - make sure you have a good formula-based model here; no emotions) 1/4 Gold - yeah, I'm crazy, but we just bought about $8 million of the GLD yesterday and statistical probability and Marco Economics tells me it's going to 150 (the etf) in the next 24 months (2,000 oz) Call me crazy if you want - my most aggressive clients only lost about 14% last year and are up ytd. P.S. - buy and hold was never a valid investment srategy. Take away years 1980 to 2000 and the remaining years of 1897 to current the market has gone up about the same as T-bills with quadruple the volatility. Mean reversion is taking place - markets are about as efficient when left to "the smartest people on Wall Street" as flipping a coin. Check out crestmontresearch.com for all the facts, not opinions.[quote=CDO Squared]Gaddock’s comments are PERFECT.
Bears have total control and total confidence.
This is a once in a generation buying opportunity.
last 2 weeks are much like early 2003.
we are very near a monster up move (35-50%)
Seems likely that more debt will be written off in the Great Leveraging. Corporate debt will be exchanged for equity, treasuries paid off for less than face value, municipalities and pensions walking away from commitments. I've always thought the gold bugs were cranks, but it's making more sense to own hard assets of any kind -- gold, timberland, oil reserves, equity in companies that have a tangible product.
Says the genius who's clients are down 45%. ...and likely to go down another 25-40% ...and lose all his clients Iceco1l - did you borrow too much for your home because of the evil banking system? Maybe your'e about to be unemployed? It's okay - JUST HANG IT THERE. Things always get better, now is not the time to get angry.You’re an idiot.
[quote=brandnewadvisor]
P.S. - buy and hold was never a valid investment srategy. Take away years 1980 to 2000 and the remaining years of 1897 to current the market has gone up about the same as T-bills with quadruple the volatility. Mean reversion is taking place - markets are about as efficient when left to "the smartest people on Wall Street" as flipping a coin. Check out crestmontresearch.com for all the facts, not opinions.[/quote] W.T.F!?brandnewadvisor reminds me of the brokers selling Putnam OTC in 1999/2000 because it worked the year before. Just another sign that we are very near the market bottom. Personally I expect a 25% pop to around 1000 on the s&p by year end.
Sorry, been out of the market by 1/2 for over a year. Before 2008, that is. My clients average returns for aggressive portfolios since 2005 inception of my RIA - 13.87% CAGR. 2008 we lost about 15%. I'm just trying to be helpful. If everyone wants to keep holding on in this market with no statistical evidence that the bottom is even close; be my guest. Expectations of a 25% "pop" are unfounded and would only represent a great opportunity to sell unless there have been material changes to the overall economy. There is plenty of evidence here: sloppy monetary policy, consumer spending, business confidence, TED spread, unemployment, etc. At least my suggestions are based on facts. The guys hawking OTC because of performance only were speculating. There were no real earnings or prospects of earnings. Those who followed statistics, like myself, never owned a single dotcom or otc fund. Just boring stuff that made money. Good luck with your swell investment strategy.brandnewadvisor reminds me of the brokers selling Putnam OTC in 1999/2000 because it worked the year before. Just another sign that we are very near the market bottom. Personally I expect a 25% pop to around 1000 on the s&p by year end.
correction:
My clients average returns for aggressive portfolios since 2005 inception of my RIA : 13.87% CAGR (that is a positive, not negative number). 2008 we lost about 15%.