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26 comments:
Consistency and patience will be rewarded ! You got them both !
Great post!
I have to disagree with you. I do have control over my portfolio even if I can not change the market. I can increase or decrease my exposure to the market. I can increase or decrease my exposure to beta.
Making these decisions poorly will influence my life no matter how much you down play it. That said you do give good advice.
My wife just came in and asked if I was listening to "Ramblin" Roger again. I corrected her, "Robot" Roger. lol
I miss Lou's sage widsom. Maybe you should approach public television, or whoever owns the rights to Wall Street Week now, and propose that they revisit the show with you as the host.
Darn. No dogs. They must be out wrangling up some critters for the Nusbaum Tarantula Ranch.
Next up! Credit Card Co.'s GOB. I am hearin and reading more often of a sub 5000 DOW. It's getting late for Baby Boomers like myself. A 25% hit on the portfolio will take three good years in the market to break even. Not great years, but good years. It looks like 09 is shaping up to be as bad or worse than 08. In addition many are saying that housing could drop another 15 - 20%. Wealth destruction of the seniors and the boomers may and could put us in a no way back situation. The only ones who have a shot at having a nest egg are those under 55. I hope i am wrong, and i know anything can happen, but our government has failed us terribly and we are the victims.
BWJR
Thank you for your candid insight into the markets. I feel the same way in that with all of the help coming our way stocks do look pretty good right now. I also agree that predicting time horizons can be uncertain however in the long run, this is certainly a buying opportunity.
Yeah I agree, gov't failed us big time. I am in safe investments(bonds and large cap) but have taken a 27% hit so far this year. I blew out some of the positions this week to raise cash.
Roger I respect your optimism but the outlook you outlined is quite negative. I don't have a lifetime to wait for a financial reward for stock investments and neither does ANYONE else! I finally sold everything in July after viewing the market as a totally losing proposition. ( If not ridiculous) Smart money was short probably for at least 12 months. Your explanations indicate you are referring to only those that are long. Investors can put up and understand PE ratios, temporary setbacks, loss of earning but can they analyze fraud and political chicanery? (Enron, Worldcom) Wall Street has become the modern day financial version of Sadom and Gomorrah.That is the big picture!I am 73 and I have no place to park my money at a desirable rate. Bonds are going to tank!
Thanks again Roger,
I too miss Louis Rukeyser's weekly entertainment, was in high school back when his show was popular.
Speaking of Charles Kirk, his email quote yesterday is one to remember in times like this:
"Success seems to be largely a matter of hanging on when others have let go" - William Feather
This can't be the next Great Depression, there are too many people with too many guns to allow real, mass poverty into the developed world. Unless there's a secret Island, not on any of the maps, where the rich people can head to and hide at. Otherwise it's going to be a nasty downturn followed by some new economic model basically a mirror of the old one but with added spin.
*crosses fingers*
Timeframe is pretty much everything, which makes this market so confusing and difficult. Yesterday, the pundits who are advocating 100% cash were right. Thursday, the technicians were right. In some short run, Buffett has been wrong but will likely be right in the long run.
Trouble is, nobody knows what the long run is right now. Like anon 8:50, I depend on my investments for retirement income, but I'm running out of time to wait for a recovery. Even a couple of back to back 20% up years--which seems pretty unlikely--will only get most of us back to even.
I think I'll go all in with one of those new 3X etfs on Monday :)
Here is the Louis Rukeyser quote from his show on Friday October 19, 1987, the show after “Black Monday”:
"Let's start with what's really important tonight, It's just your money, not your life. Everybody who really loved you a week ago still loves you tonight. And now that that's all fully in perspective, let me say ... Ouch! And: Eek! And: Medic!"
Roger, I agree with Anon 7:12 AM. You would be a great host for a Wall Street Week follow-on.
JCarr
Roger your TV program could be called "Slow Money" :-)
"There have been only 64 days when the intraday volatility exceeded 8%-64 days out of over 20,300 market days.
Fourteen of them have occurred since September 29th.
this time it's different - until it's not.
anon 12:16--That's really funny, but true. For those of us who still like old media and don't trade every five minutes, Fast Money and Mad Money just don't fit the bill.
Roger -- You mention you feel comfortable with around 25% cash at this point. Does that mean 75% equities?
Do you have a specific line in the sand in terms of cash/t-bond allocation to maintain a firewall in the very unlikely case a great depression does happen?
Or do you maintain some other kind of fat tail insurance?
Another way to look at the market. It is just one continious appraisal of what a company is worth at a given instant. It is just someone offering to buy or sell at a certain price. Just because an appraisal is offered doesn't mean it reflects the true value or that you have to act on it. Just look at the real estate mess as an example.
If one is an investor, one should worry about the income an investment generates and ignore the continual appraisal process except to identify those times when stocks can be bought cheaply or sold at a high price. Anything else is speculation and should be avoided.
Most of of I'm trying to say comes from B. Graham. I think Roger should just ignore the market level and evaluate an investment on its own merits and its ability to earn compared to other investments available.
Did some lookig at some stocks I used to won after watching the video and I'll be darned. YOu concern yourself with where the market is at and keeping an eye on your allocations and yeah, you miss some absolute steals out there right now. Well, can't hurt to put a little cash into action.
lots here to catch up on.
anon 707, i'm all for tactical decisions, half my posts are about that topic.
Nusbaum Tarantula Ranch, my buddy Mike would call that a good piece of business.
BWJR, the bear case is always more compelling and thought provoking no matter what is going on.
anon 8:50, there is very little fraud failure that has occurred even if it has been more than ever before (I don't know just conceding the point if that is what you believe) and most of it have been in the financial sector. the yield curve warned us in 2006 that something was wrong (not what was wrong or how bad).
anon 10:11 i try to answer you in tomorrow's post.
TV show: Slow Talking Money, maybe.
anon 3:38, there is much less need for insurance after the fire.
anon 3:40 you are describing bottom up. I specifcally believe bottom up is inferior to top down, written about why many times. Not wrong, but wrong for me.
SD, there are plenty of 10 PEs (or lower) and 4% yields (or higher). Not the worst purchase you will ever make.
Roger,
Perhaps you could devote a daily post to the process of top down investing and why it is inferior to what I suggested, especially in a taxable account. Although I have been reading you for a while, I have never really seen an explicit statement of your approach to investing. There may be other readers who don't know what you're talking about either. Not trying to bash you, just would really like to understand the method you use in the re-equitizing process. Most of the time what you say sounds like a SWAG. For a long time you said you would not deploy your cash until the 200 DMA was penetrated. What gives?
Very Respectfully,
Anon 3:40
anon, i written about both of those things to the point of being asked why i write about the same thing so much.
why top down is no different than anyone else's opinion you've ever read on the matter.
the market is down more than 40%, more than i expected, this is buying low. simple as that.
Still don't know what top down means. Can you direct me to a previous post that explains it?
For that matter, any other reader that understands "top down" could you please explain it?
Anon 3:40
top down means big picture first. most important decision in or out of stocks. the best thing anyone could have done on oct 10 was sell it all. how many stocks that were cheap one year ago have since gone up?
stock valuation tells you something is cheap it does not do much for predicting out one year.
then slightly smaller picture which sectors to over or underwight. inverted yield curve (probably 100 posts on this) warned to reduce financials in 2006. history says underweight discretionary in a slow down.
not sure how you;ve naviagted this site and not read this before. i would suggest you do a search on the web for more content on this matter.
I totally agree with you, great post.
I was wondering though if you might have had a little too much coffee this morning or was it just a passionate topic.
Sincere thanks.
I have read this before, but guess I just didn't connect it to the phrase "top-down".
I guess I'm brainwashed by academic studies that sugguest in the long run what you do underperforms the market. Not saying its impossible, but statistically improbable. My hat is off to you.
Completely off topic. I'm a pilot in AZ and fly to Prescott on occasion. Would like to meet you in person sometime and give you an aerial tour of your area if interested. Don't know how to get private message to you. No quid quo pro, just a friendly offer. Completely understand that you have to be careful with kooks on the internet.
Anon 3:40
"Slow Sane Money"
your host Roger Nusbaum
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