Is it time to go chill out on the back porch with an iced libation (iced mocha for me)?This will be easily misconstrued. The current bull market has had a good (probably not great by historical standards however) and long run.
There have been a few bumps of varying magnitude that have come and gone and there may be more bumps to come if the cycle continues to go.
Since the bottom in fall 2002 the S&P 500 is up about 90% which is not a lot compared to past bull markets but the five year run is historically long in the tooth.
If you had emotional problems during the past couple of dips (or more than the last couple) this might be a good time to ratchet down the beta of your portfolio.
This is not an attempt to call a top but a call for you to look in the mirror to determine what you can handle or more correctly cannot handle. If the cycle being long in the tooth resonates with you and you learned in August that you had too much volatility then I would say it is better to make a tweak when your emotions are not that high.
If this is something you decide to pursue you don't need to do much to change the characteristic of your portfolio. To be clear, blowing out a bunch of longs is NOT what I am talking about. Assuming you have a diversified portfolio free of lopsided bets, simply reducing a sector you believe is volatile by 20-25% (so raising 2-4% more cash) would go a long way to what I am talking about.
Tweaking a couple of sectors could be enough to noticeably change the volatility of the entire portfolio.
I have no trade to make along these lines as I have already done this. Heckles that have amused everyone notwithstanding, my goal was to reduce volatility in case the market got its phreak on which is what happened and I have been thrilled with the result. The thing here is to think about this (so decide what is right for you) at a time when the market is not making you overly nervous.
There is always room for this type of introspection and occasionally you should act. You can decide for yourself if now is one of those times.
14 comments:
Roger,
Sage advice as always. How wonderful for you and your wife to have a little slice of paradise. Is this a 2nd home, or a getaway? Your puppitos? Are they with you?
Roger: Good advice once again. Although I have lost money on a double short bought in August, it is times like these that this little insurance policy looks like money well spent. I too have pared back on higher beta sectors.
Norm
Roger,
Where was that picture taken?
Thanks!
thanks for the kind words.
the plan for Hilo is to come here for two weeks every quarter. No dogs, my mother in law is staying with them.
The picture is from a tiny town in NZ called Rawene, north of Dargaville.
I would go to cash until after the World Series....
Larry that is a tough bet because a RS win could easily add a couple hundred SPX points in just a day or two.
JOKE JOKE JOKE
Several weeks ago I compared the 2007 Red Sox to the 2004 Red Sox (for fun) and gave the edge to the 2007 team. I realize it means nothing. Neither does history. Neither does momentum.
But, I do remember that the Red Sox went to a full 7 against the Yankees in 2004 and then swept the 105 win Cards in 4. The Cardinals team was so much better than the Rockies team this year and they had a real closer who led the NL (47) in saves.
The Cardinals scored 855 runs that year. The Rockies scored 860 this year. (less than the Red Sox). However, look at their power numbers on the road. Big drop off. http://sports.yahoo.com/mlb/teams/col/stats/bycategory?cat=Batting&type=34&year=season_2007&qualified=0&sort=22
Having 4 games with the DH favors the Sox because the Rockies don't have a DH (typical for the NL team). Also, They have only one LHP who starts in Francis. They also haven't hit well in the playoffs. Sox faced an equally strong lineup in Cleveland and shut them down in the last 3 games. After Francis, Rockies pitching doesn't measure up. The D-Backs put up no fight in the NLCS.
i have not looked, are they going to DH Holliday? Helton? Then put one of the sppedy subs in the field?
The Sox have the disadvantage in Denver don't they? Oritz in the field? Do they sit Youk? Lowell?
Lowell, Youkilis and Ortiz will only miss one game in Denver. Papi's game will be the one that Francis (LHP) starts.
Helton is a GG 1B so he plays. They really have no DH and that's an advantage with 4 AL games.
Wakefield is not on the WS roster (back) and I am not unhappy about that.
What would be a good % for cash and/or bonds in this market?
Roger, what the hell are you saying?
Why so many words to say so little?
If you can't take the heat, you reduce your beta? Is that the point of all these words?
Wow....do people pay for that advice?
Larry.
If I was playing in the World Series I would go long.
Long underwear that is. Ya...nothing like baseball in November folks.
"Current rally long in tooth"...you say?
How has the market done in the last 7 years? Reminds me of the time ...somewhere around 1967 or so ...until 1982, when the market went up and down, but really nowhere, as it has the last 7 years. So, Roger are you really sure that "the cycle" is over...since the market IS up 90% from the bottom? Or are you like the guy who got out in early 1982? Right before the 15yr breakout?
jack I don't think I am like "the guy who got out in early 1982? Right before the 15yr breakout?" because I haven't gotten out.
Could I be wrong that the cycle is close to ending? Of course I could.
My understanding of history is that there have been far more 4-5 year bull markets than 15+ year bull markets.
I don't think this is like 1967-1982. That market went up and down and up an down. This market went almost straight down from the peak and has now gone almost straight up since the bottom in 2002.
Any outcome is possible and I think I mention that repeatedly.
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