[quote=joedabrkr]

O K folks let's put our heads together for something productive.....If the US or Israel were to attach Iraq and hostilities broke out in the middle East, which 3-5 stocks would you want to own(say starting the day before) and why?

Let's see if we can come up with some useful thoughts here...

[/quote]

Perhaps I'm missing something, but what's useful about guessing what stocks I'd want to own if I knew (and I alone) knew something was going to happen the next day? 

You guys are making light of this situation. When the arabs/muslims are

getting $200 a barrel and we’re paying $5.00 a gallon for gas and milk costs

$10 a gallon due to transportation costs, bullets won’t help, unless you’re

gonna rob a dairy farmer.



Doesn’t anyone see a correlation between the invasion of Iraq and the price

of oil? These guys know they can’t take us on in combat so they’ll bankrupt

us instead.

[quote=skeedaddy]You guys are making light of this situation. When the arabs/muslims are getting $200 a barrel and we're paying $5.00 a gallon for gas and milk costs $10 a gallon due to transportation costs, bullets won't help, unless you're gonna rob a dairy farmer.

[/quote]

Go join a survivalist group and dig yourself a bombshelter....

BTW, what percentage of  the oil we use do you think comes from the Middle East? Ever consider what other energy sources and conservation methods we'd be using long before oil reached $100, much less $200 a barrel? Did you happen to notice the demand destruction that happened when oil reached $74?

[quote=skeedaddy]
Doesn't anyone see a correlation between the invasion of Iraq and the price of oil?  [/quote]

Uh, no, and if you saw the chart, neither would you.

[quote=mikebutler222][quote=joedabrkr]

O K folks let's put our heads together for something productive.....If the US or Israel were to attach Iraq and hostilities broke out in the middle East, which 3-5 stocks would you want to own(say starting the day before) and why?

Let's see if we can come up with some useful thoughts here...

[/quote]

Perhaps I'm missing something, but what's useful about guessing what stocks I'd want to own if I knew (and I alone) knew something was going to happen the next day? 

[/quote] Mike-

I often take your side on many debates but not this one.  If you don't see the point in this intellectual exercise, well I'm not sure what much to say.  Then again, you give all your $$ to others to manage, right?

[quote=mikebutler222]

[quote=dude]I wouldn't buy 3-5 stocks, I'd buy several thousand through a conveniently packaged mutual fund wrap program that would preserve my money by combining non coorellated asset classes .  Then I'd make sure to rebalance quarterly so that my porfolio wouldn't stray too far from the allocation that I'm most comfortable with.  [/quote]

I'd do that long before I'd invest on an emotion, which in this case would be unbridled fear 

[/quote]

Not unbridled fear Michael....that would be why I posed the question and am trying to think ahead......

Unbridled fear would be what motivates the folks to whom I sell those stocks to for inflated prices.....

[quote=joedabrkr][quote=mikebutler222]

[quote=dude]I wouldn't buy 3-5 stocks, I'd buy several thousand through a conveniently packaged mutual fund wrap program that would preserve my money by combining non coorellated asset classes .  Then I'd make sure to rebalance quarterly so that my porfolio wouldn't stray too far from the allocation that I'm most comfortable with.  [/quote]

I'd do that long before I'd invest on an emotion, which in this case would be unbridled fear 

[/quote]

Not unbridled fear Michael....that would be why I posed the question and am trying to think ahead......

Unbridled fear would be what motivates the folks to whom I sell those stocks to for inflated prices.....

[/quote]

That emotion that the buyer is acting under would be greed. It's fear that causes people to sell, buy gold and dig holes in their backyard to live in.

[quote=joedabrkr][quote=mikebutler222][quote=joedabrkr]

O K folks let's put our heads together for something productive.....If the US or Israel were to attach Iraq and hostilities broke out in the middle East, which 3-5 stocks would you want to own(say starting the day before) and why?

Let's see if we can come up with some useful thoughts here...

[/quote]

Perhaps I'm missing something, but what's useful about guessing what stocks I'd want to own if I knew (and I alone) knew something was going to happen the next day? 

[/quote] Mike-

I often take your side on many debates but not this one.  If you don't see the point in this intellectual exercise, well I'm not sure what much to say.  Then again, you give all your $$ to others to manage, right?

[/quote]

Joe, it's just that I'm not sure what sort of exercise is involved in asking what you'd do now if you knew there was to be war tomorrow. If your asking what I'd do as a financial advisor  if a war occurred, when it happened, that's another question. I just wonder about the usefulness of a question that assumes I know something for certain before it happens.

Personally I'm telling clients this is a buying opportunity. If the balloon were to go up I'd contact clients and if they're in a panic I can't hold they hands well enough to get them through, I'd offer to increase the percentage of cash in their account, but I'd tell them I wish they wouldn't.

[quote=mikebutler222][quote=joedabrkr][quote=mikebutler222][quote=joedabrkr]

O K folks let's put our heads together for something productive.....If the US or Israel were to attach Iraq and hostilities broke out in the middle East, which 3-5 stocks would you want to own(say starting the day before) and why?

Let's see if we can come up with some useful thoughts here...

[/quote]

Perhaps I'm missing something, but what's useful about guessing what stocks I'd want to own if I knew (and I alone) knew something was going to happen the next day? 

[/quote] Mike-

I often take your side on many debates but not this one.  If you don't see the point in this intellectual exercise, well I'm not sure what much to say.  Then again, you give all your $$ to others to manage, right?

[/quote]

Joe, it's just that I'm not sure what sort of exercise is involved in asking what you'd do now if you knew there was to be war tomorrow. If your asking what I'd do as a financial advisor  if a war occurred, when it happened, that's another question. I just wonder about the usefulness of a question that assumes I know something for certain before it happens.

Personally I'm telling clients this is a buying opportunity. If the balloon were to go up I'd contact clients and if they're in a panic I can't hold they hands well enough to get them through, I'd offer to increase the percentage of cash in their account, but I'd tell them I wish they wouldn't.

[/quote]

Ok fair enough Mike perhaps I wasn't being clear in my line of questioning.....I'm seeking to stimulate discussion and thought(which might be useful to me as well) as to what one might do to tilt one's portfolio to respond favorably if the level of tension and hostility increased in the Middle East.

MikeB,

You think that someone trying to forecast a possible outcome is futile?  What the heck do you think those money manager's we hire do all day long?  What do you think actually drives stock prices, current EPS? .  No amigo, EXPECTATIONS are what drive stock prices, period. Whether you except it or not, when you put people into a MPT wrap product you are implicitly making a prediction, albeit that the future will resemble the past.   You may not want to play the role of maney manager, which is cool (I'm sure you take great care of your clients, which is what is most important here), but there are others who are astute in the art of direct asset management.  Not everyone is the sterotypical stockbroker building "positions" for their clients.

[quote=dude]

No amigo, EXPECTATIONS are what drive stock prices, period. [/quote]

Amen Brother, Amen.

<?:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” /><o:p>

[quote=dude]

MikeB,

You think that someone trying to forecast a possible outcome is futile?  What the heck do you think those money manager's we hire do all day long? 

[/quote]

If I hired them, they're the type that does bottom up stock picking, and not the sort that tries to guess whether or not we're going to war, and then guesses whether or not we should go to cash. In fact, the ones I hire are driven to be 100% invested and they leave asset allocation to me.

[quote=dude] Whether you except it or not, when you put people into a MPT wrap product you are implicitly making a prediction, albeit that the future will resemble the past.  

[/quote]

Hmmm, well, it's a bet, if you want to call it that, that the general relationships between asset categories will remain within historic norms. That has nothing to do with guessing whether or not there will be war, when it might happen, and what the financial effects might be.

[quote=dude]

 ..... but there are others who are astute in the art of direct asset management. 

[/quote]

If by "direct asset management" you mean they bring genuine value to their clients by not only picking stocks but timing the market based on their perceptions of world events, before they unfold, well, OK. That may be what they aim to do, but I've yet to see anyone with a timing sense so well calibrated that they actually benefit the client. Remember, people who do that not only have to be brilliant in their timing on the decision to get out of the market, they have to be equally brilliant in their timing as to when to get back in. The odds are stacked deeply against them.

[quote=skeedaddy2][quote=dude]

No amigo, EXPECTATIONS are what drive stock prices, period. [/quote]

Amen Brother, Amen.

[/quote]

In the short term, yes (fear and greed). In the longer term, profits determine stock prices.

"In the short-term, the market is a voting
machine, in the long-term it is a weighing machine."

Benjamin Graham

Market timing is tough. I don’t know of anyone or system that can do it

consistently and successfully. I’ve seen many whipsaws as a result. I also

don’t subscribe to a “fully invested” philosophy either. If I don’t see an

attractive opportunity I don’t deploy my cash. Right now I’m about 16% in

cash. (During the bear market, I had 45% in cash and Mom’s account went

100% government bonds.)



Having a plan in place for war in the middle east, isn’t a futile exercise.

There are many too many countries with interests in the region to take it

lightly. Meanwhile, there would be a flight to quality. I just wouldn’t add to

equities and wait for stop-losses to be triggered.

MikeB said:

BTW, what percentage of  the oil we use do you think comes from the Middle East? Ever consider what other energy sources and conservation methods we'd be using long before oil reached $100, much less $200 a barrel? Did you happen to notice the demand destruction that happened when oil reached $74?

Reply:

MikeB, a spike in Middle East oil would affect the prices of oil globally.  Why would Venezuela (Mr. Chavez) sell us oil @ $67 a barrell, if he could sell it on the open market for $100 plus?  Do you realize that a gallon of oil is about half the price of a gallon of bottled water?  Oil is cheap at current prices.  We enjoy extraordinarily cheap oil in this country relative to the rest of the world.

MikeB said:

In the short term, yes (fear and greed). In the longer term, profits determine stock prices.

Reply:

I disagree.  I believe that although current profits are one part of the equation, the primary driver of stock prices on any given day is the expected profits.  No one buys a stock for yesterdays profits.  Everyone buys stocks based on tomorrow's expected profits (not considering technical guys, this is from a fundamental basis), period.  The stock price will adjust based on how wrong or right the market is in estimating the profits and risks associated with the stock/sector etc....

Even Benjamin Graham was forecasting that "damaged" companies would restore to health and the market would eventually realize this.  People are buying expected cashflows.  It's that simple.  The market is a forward pricing and forward looking mechanism that reflects the attitudes of the underlying participants and their converging/diverging views about tomorrow.  I don't think this is a point that can be argued? 

You seem to imply that market timing is crowd following.  I would suggest that you can't make any invesment without making some decision about "when", even if "when" is allways "now".  Even Dollar cost averaging is a "timing" decision that makes a case for timing your entry points on a consistent periodic basis. 

I find it interesting that you quote Benjamin Graham to support an anti "timing" attitude, when his book "The Intelligent Investor" is all about measuring when to over or underweight stocks relative to bonds.  Maybe I'm dense but this appears to be one way of "timing" the market.  It, in essence is making a predictive judgement that when stocks are overvalued (yes, I know that's a subjective call) they will underperform.  Sometimes this works and sometimes it doesn't (depends on which rolling time periods you use).

You are making forecasts and timing decisions for your clients.  The key point is that you have a criteria that is different from those who are more actively trying to ascertain future trends etc....  In fact you have mentioned that you use "tactical allocation", which is undeniably driven by forecasts of relative under and out performance of different sectors and asset classes. 

It seems contradictory to me to say that it's futile to predict the effect of war or oil prices on the economy, but not which asset class or sector will perform better. 

If I had to place a bet I think that its much easier to predict tensions in the middle east v.s. semiconductors or international outperforming consumer discretionary or domestic large cap (sector/asset class)

[quote=SonnyClips]
Butler being as well read as you are on the subject of war don't you think in the long run adding Iran to the conflict might intensify it to the point of a full on war of attrition by both sides? A war that the US is uniquely positioned to win handily? Honest but maybe way too speculative question. 
[/quote]

I don't think there's a "war", as in occupation, in the cards here. Perhaps a tactical strike, like Israel did with Iraq's nuke program.

Hear Ye, Hear Ye!!  All who have ears please listen.

In one way or another we are all market timers.  There is no such thing as "I don't try to time the market".  Blindly putting your money in the market is a "timing" decision, albeit one that believes in the merits of the efficient market (generally speaking) and that the time is always NOW.  This is a timing philosophy that believes there is no value to be created by making decisions based on the markets ebbs and flows.  There are merits to this approach as well as to the approach of measuring market optimism and pessimism (sentiment)to gauge entry points (BENJAMIN GRAHAMS' Mr. Market, for those who use his quotes to support contradictory philosophies).  I would refer to the differing approaches as passive and active market timing philosophies (kinda like passive indexing and active managment). 

For the most part I don't try to measure the market's sentiment and usually invest my clients $$'s immediately (because of my incompetence in "active" market timing, although I'm trying to learn to apply a few guidelines based on over and underweighting stocks and bonds/cash).  Neither approach is better or worse and there is no conclusive evidence that proves otherwise (other than the fact that active timing is generally bad for retail investors to try on their own, since they are usually guided by media and don't know how to interpret it).  I have seen evidence from both sides of the fence that is equally persuasive and legit. 

One point though is that if you are trying to make serious $$ in the market (with commensurate risks of course) you most likely won't be able to do it through passive timing (which is fine for the vast majority of risk averse clients) or passive investing. 

I think our profession has become very systematized and brainwashed into thinking that no one makes exceptional returns in the markets.  This is simply not true.  Many (I know this is a relative term) individual investors are able to rack up 20% plus returns (certainly not me though), even in lukewarm markets fairly consistently.  Most of them are making forecasts about long term trends and engaging in more active timing decisions.  Most of them are not "day traders" (according to my subjective experiences of course, costs eat way too much return).

thoughts anyone?

SonnyClips wrote:

As far as gas a 200 dollars a barrel. At what point do distillers and ADM become energy players to rival the oil companies. Like Alcoa did in the 2000 power crunch when the aluminum plants started to pump energy into the electricity grid because it was more profitable than producing the metal. I would think before the price of oil gets to crazy immediate alternative fuels would become more cost efficient. Oh and the Canadian Oil Sands and Coal Oil are also out there.

Reply:

Currently grain alcohol operates at an energy loss (requires more energy to produce than it provides) and is not a viable option.  All energy prices will go up as a result of oil rising because it will cause a rapid increase in demand for alternative energy, which like oil has limited supply (although a potentially more sustainable supply). Oil sands is an expensive way to produce oil, but will also go up in price because of increased demand as stated before.

The main problem is that we've had our heads in the sand for too long and didn't prepare for an inevitable outcome: Peak Oil (I have yet to read Twilight in the Desert) and/or rapidly increasing global development (china/india emerging markets).  As such our alternative energy infrastructure is pathetic and is not even close to being ready to meet our supply needs.  In addition the energy policies of the Oilmen (make your own inferences) have been deluded and self dealing. 

We have the same types of problems with Social Security, where no one took it upon themselves to "forecast" and account for the future and left my generation to deal with the issue.  They took a "passive" approach and look where it's left us. 

From what I've read and heard about "Twilight in the Desert", it doesn't paint a pretty picture.

[quote=dude]

MikeB, a spike in Middle East oil would affect the prices of oil globally. [/quote]

Yeah, and? My point was that people don't know that the ME actually provides a much smaller percentage of our total imports than they'd guess.

[quote=dude]

"... the primary driver of stock prices on any given day is the expected profits."

[/quote]

I don't buy for a given day. I buy for the long haul. See the quote above. BTW, I'd say the primary driver, day to day, is fear and greed and it's just that emotion I want to avoid.

[quote=dude]You seem to imply that market timing is crowd following.

[/quote]

That's not what I said. What I said was I've yet to find a market timing who succeeds often enough to make it worth while. Guessing, if/when we'll have war and what that might mean to the economy is a speculation that is far from investing as I know it.

[quote=dude]

Even Dollar cost averaging is a "timing" decision that makes a case for timing your entry points on a consistent periodic basis.

[/quote]

LOL, it's "timing" that's mechanical and designed to avoid the guessing you're talking about. Get the irony in bringing that up to support your case?

[quote=dude]

I find it interesting that you quote Benjamin Graham to support an anti "timing" attitude, when his book "The Intelligent Investor" is all about measuring when to over or underweight stocks relative to bonds. Maybe I'm dense but this appears to be one way of "timing" the market.

[/quote]

Oh come on. There's nothing in relative value to support a timing process that hinges on the manager's speculation about global events.

[quote=dude]You are making forecasts and timing decisions for your clients. The key point is that you have a criteria that is different from those who are more actively trying to ascertain future trends etc....

[/quote]

I make “forecasting and timing decisions”? Hardly. Again, nothing that you've said in anyway supports the concept of a manager saying "I think we're going to war, I'm going to cash". In fact, using the historic correlations between asset classes is the virtual antithesis of a manger playing Ms Cleo about military/political events around the world, and running money based on it.

[quote=dude]

In fact you have mentioned that you use "tactical allocation", which is undeniably driven by forecasts of relative under and out performance of different sectors and asset classes.

[/quote]

Dude, again, tell me you’re kidding. Underweighting long term fixed income because returns there are at historic lows is nothing, I repeat, nothing like taking the top down view of global events.

[quote=dude]

If I had to place a bet I think that its much easier to predict tensions in the middle east v.s. semiconductors or international outperforming consumer discretionary or domestic large cap (sector/asset class)

[/quote]

Of course it’s easier to predict tensions in the ME. In fact, if you guessed in the last 50 years that, yes, there will be tensions in the M.E., you’d have been right. Now, would that have helped you make money for your clients? Doubtful.

[quote=dude]

Hear Ye, Hear Ye!!  All who have ears please listen.

In one way or another we are all market timers.  [/quote]

Simply and unequivocally, untrue.

[quote=dude]

Currently grain alcohol operates at an energy loss (requires more energy to produce than it provides) and is not a viable option.

[/quote]

"Energy loss" is not a reason to pursue a method. There's often a trade-off of "loss" here for "gain" there that's perfectly ratiuonal.

[quote=dude]

  All energy prices will go up as a result of oil rising because it will cause a rapid increase in demand for alternative energy, which like oil has limited supply (although a potentially more sustainable supply). Oil sands is an expensive way to produce oil, but will also go up in price because of increased demand as stated before.

[/quote]

There are so many alternative means available that aren't currently economically viable, but would be if oil moved to $100/brl that it's just wrong to say they're limited. Again, remember he demand destruction we saw when oil moved to just $74.

[quote=dude]

The main problem is that we've had our heads in the sand for too long and didn't prepare for an inevitable outcome: Peak Oil.."

[/quote]

Long before the doomsayer's "peak oil" comes about we will be well into alternative means. There's no reason to bring on line now available technologies that aren't economically viable with oil at current prices.

[quote=dude]  In addition the energy policies of the Oilmen (make your own inferences) have been deluded and self dealing.  [/quote]

Oh, brother, here we go again.....

[quote=dude]

From what I've read and heard about "Twilight in the Desert", it doesn't paint a pretty picture.

[/quote]

Alarmist screed never do paint pretty pcitures. BTW, fear not. The same "experts" told us we'd run out of food and oil in the 1970s....