Stephen Roach was just on CNBC spreading his message of cheer. He has been apocalyptic for quite a while now. I suppose eventually he will be right? Anyone that took action with their portfolio when he was making all the rounds a year ago with this message have probably missed out on some return.
This is a great example for what I write about so often. No matter how you think things look or no matter what you think will happen there is no real need to take defensive action until the market gives some sort of objective indication. To repeat myself from last week, long term money should be able to withstand down a little.
On a separate note I had a comment left about whether I think now is a good time to buy EWA and EWC. I have an article up today at Real Money about the Australian theme. I have written countless times about Australia. I don't really write about anything for a quick trade. I have both Australia and Canada in client accounts and would not hesitate to buy in today for a new account, but that is in the context of a diversified portfolio. If you buy 40 stocks all on one day to create a diversified portfolio it would be logical to assume that for some names you will have a great entry point, some names a lousy entry point and the rest will be a neutral entry point. There is no way to know which is which.
EWA is a personal holding and a few clients own it too.
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3 comments:
Ok, you've got me. This is Mike again who was so apocalyptic earlier on in your comments.
I'm still holding on to cash - (btw, I also have held onto BRK.B & DODFX - which I'm always in for the long run. I should've mentioned that earlier, I'm really not 100% out of the market).
I see the S&P500 rally like it did the last few days and am really wondering why I let my emotions get the best of me. I spend too much time on bearish boards.
So here's a question, what are the signs to look for in a market to move into a defensive mode?
What really signals trouble ahead?
BTW, regarding bears that are becoming bullish, Mark Hulbert has
a good article up:
http://tinyurl.com/9gyyb
the key to mikegws' comment is the word emotion.
There are plenty of fundamental things right now that signal trouble. There is nothing that says fundamental signals will translate into bad times for the market.
I have planned out what steps I will take (subject to a a tweak or two)if need to get defensive arises. But there is no action until it hits the fan, which may never happen.
I have said here an on CNBC Asia many times in the last couple of months that I don't think the yield curve will invert. If I am wrong I will make changes then. More importantly if/when the SPX goes below its 200 DMA I will start to make changes.
Signs of trouble and actual trouble are two different things.
Roach is the most extreme of a number of fairly good analysts. This doesn't mean their right.
A lot of this can be summed up in a Buffet comment that he could predict what would happen he just didn't know when.
Buffet has done this kind of thing in the past, even pulling out of the stock market completely. He has also had a tendency to sell out too early.
Many value oriented investment firms are also increasing holdings of cash.
If and this is the BIG IF their forecasts are right and at some point the market will dive towards significantly lower valuations then the loss of some gains now is not significant in percentage and there is a risk that these gains could dissapear rapidly when the fall hits.
I am not saying that this is the best strategy. It strikes me as rational. I think your approach is also rational and I think price averaging over long periods is also sensible.
It really depends on assumptions one is making about the economy. I do think that there is so much in cash that it's return as the market falls will buffer the effects at least in the first few rounds.
- Jen
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