This is a rough market by anyone's measure. It would be reasonable to be a bit grumpy or concerned.Yesterday was yet another day of crash related selling. Fear is ratcheting back up, VIX is higher than the price of oil as they mentioned on CNBC. Not sure that matters but it is a little interesting factoid.
Given what seemed like an emotional reaction in the market as manifested in the run down to SPX 900 I bought one of the publicly traded exchanges almost across the board with about 60-90 minutes to go in the session.
I've been very underweight financials and an exchange is at least a couple of degrees removed from the meat of the financial crisis. I'm going to hold off on naming names on this one, what matters is the increased, albeit slight, exposure. Additionally, like most publicly traded exchanges the name is very volatile and if we ever have a rally again (feel good or otherwise) I would expect it to outperform meaningfully on the way up.
I titled my Greenfaucet post about buying a little Statoil as Bear Markets Should Make You Feel Uneasy. I talked about buying stock in a panic as being difficult in case it turned out very wrong thus causing anguish for clients (I'm not trying to freak anyone out after all). There was no such thought yesterday (not sure what to think about that). I think SPX was at 908 when I decided to do it, I mentioned the other day that down near 900 I'm probably a small buyer, we got there and I was a small buyer.
I would revisit a point I've made many times before. I am a big believer in trying to make a plan of action and then trying to stick to it. It should have been clear from recent blog posts that I fully expected to see another run down so I was ready for it emotionally and strategically. The notion of thinking of a decline ahead of time does a lot to insulate from panic.
None the above means we can count on a bottom, or ensures that the purchase will be "right" in the near term. My focus is (repeat coming) realizing the market is panicked and knowing that buying during a selling frenzy usually works out well.
I stumbled across something useful the other day when making the video for last weekend. I said I could buy a fair bit of stock and still be very defensive when I was done buying. I feel fortunate to be in that position. I know from reader comments that there are plenty of folks that were more aggressive raising more cash than me and lately have been more aggressive moving back in.
There is no guarantee that they will be correct but we do know they are not panicked, again a good place to be.
19 comments:
Saw Kudlow on the tube yesterday....he is always so positive it really scares me (although he is finally throwing in a few "reality" comments). According to your line of thinking, I don't think he has much of a plan. I'd much rather follow your well-planned course of action. thanks Roger
While I appreciate the kind word it really is true that people makes things tougher on themselves if they are in the I'm down 40% now what do I do camp.
I'm trying to anticipate where possible instead of react.
[rant]
None of the talking heads have plans. They're clueless. I hate to be blunt and negative, but it's the truth. They may have some guests that have plans and/or a clue, but they cut them off just like anyone else. And then they'll have Mark Haines or Kudlow jump in and force them to "make a prediction". [choke, cough]
[/rant]
This is why people like Roger are valuable. If you could get this sort of stuff on TV, poor Roger would have to close up shop, I'm afraid.
i had not known about the rant tag.
that is a good piece of business as my buddy Mike would say.
I've been over 90% cash for months but did some buying yesterday afternoon - mostly long term holds such as IGF, KXI, & IXJ (Ishares Global funds), PHO (domestic water fund). I've tried to get back in a couple of times in the past month but have been forced out by stop loss (mental stops). I bought only half what I want yesterday, because there might be a lower entry point coming. I don't expect to make much money if any on stocks for the next year, but will be happy if they just stop going down. Staying away from emerging markets and currencies for the moment.
I think what people might be realizing is the scary thought that many stocks are only now approaching fair value for the intermediate term. I see the same thing in housing, ie, denial by owners and realtors to accept that fair value is still another 20% down from here.
I've also had 10% allocation to gold for years. Too much, I know. Had to sell almost half of it because of the price increases, but now having to add to make up for declines. Gold sometimes performs well during bear markets, but not always. It seems to be now in a liquidation phase. Anyway, I hold on to it to protect against such things as global systemic meltdown, something I used to think of as highly unlikely. Now I just think of it as unlikely.
Jim
"None of the talking heads have plans. They're clueless. "
? They are commentators. They are paid to fill space on a television channel. You most likely wouldn't watch if the screen were just filled with rolling tickers.
If you are really expecting someone who is simply paid to talk (and clearly doing a good job) to "have a plan", then what's on television isn't the problem.
I have been in 90% cash as of the first week of Sept. Just four or five days prior to this 25% crash/correction over the past month. Commodity stocks look very tempting, like Monsanto- MON, Freport Mac FCX, and Nucor NUE. Is it too early to ease back into this sector, or is the slow down going to continue to destroy these names? Go Phillies!!
roger, i wonder if you think that the market is behaving so strangely is partly due to there being a prevalence of traders in the market (ie, most investors are out of what they want to be out of by now, or on the sidelines)?
I agree with Anonymous totally. Between traders, big investors and Hedge funds are ones controlling the market at this time. That's making it so dangerous.
BWJR
How can we get any stability back if the only people left are day traders and hedge funds? How much of this ridiculous volatility is due to investors who would be happy with moderate long term growth? And how much is due to algo trades from complex instruments and impatient traders? If they (the latter) keep up this pattern there will be no investors left and the market will devolve rapidly into chaos.
Roger, have you read this?
http://www.bloomberg.com/apps/news?pid=20601103&sid=apJdFBGrv6FY&refer=news
Roubini is advocating a market shutdown due to massive hedge fund liquidations!!!
Roger, how much heed should one pay to Roubini in one's planning? He's certainly a bear's bear, but then again, he was right about the current mess.
? They are commentators. They are paid to fill space on a television channel. You most likely wouldn't watch if the screen were just filled with rolling tickers.
I just plain disagree with your assessment on many levels.
Roger, even acting defensively you are down over 25% this yerar which is a lot better then the 40% average. What exactly are you buying with teh cash you took out at this point???
Roger, why do comment posters on financial boards always make the correct market timing calls?
I myself was in oil, rode it up to $150, sold near the top, shorted oil, then went all cash, shorted Iceland Krona of course, and will tell you what I did this week,next week..blah blah
time to put on some heavy short pos. as this is the beginning of a depression.
Roger,
Seems like the market is not yet ready for the good news bandwagon. Dow Futures Limit DOWN this morning.
The simplest answer is sometimes the best: if corporates can't move at 15% coupons, why would anyone buy the equity?
R in NY
(Taleb is looking prescient...)
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