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7 comments:
Hey, Roger, good morning.
Your post today raises an issue that I've been trying to come to grips with for awhile now--just how reasonable is it to pass judgment on an investment based on its performance during a period that's unlike any that the world has faced in modern times (except maybe the Great Depression)?
During the Great Correlation of One, virtually nothing worked on the equity side of the equation. Beyond that, there were failures in the money market, treasury yields went negative, and the riskier end of the bond spectrum plunged along with equities.
On one hand, if your investment had performed up to expectations, you could argue that it would do so under almost any circumstances and is worth holding, hopefully forever. On the other hand, should you give your investments the benefit of the doubt, insofar as this wasn't "just an ordinary recession," but nearly total global financial collapse?
I just parted company with a long/short fund for the same reasons that you sold. Still, I wonder if I'll grapple with some remorse down the road for having done so.
The Great Correlation
That is awesome! Better than the great recession.
Concern that the thing I sold won't do what I hope when most needed is the catalyst. It being flat in a down 5% world is not a huge helper.
Roger,
Thought you may find this article with Roubini on countries whose economies have fared well.
Rob from WI
http://www.forbes.com/2009/08/05/recession-china-india-qatar-poland-brazil-opinions-columnists-nouriel-roubini.html
Instructive showing a sale after being patient is much better than selling at the bottom.
BTW, I keep saying it is a bull market because that is what all the indicators lead me to believe, I am not a big Dow theory guy, but no indicators are perfect so I look at that as well. Dow theory is now predicting a bull market.
We can argue cyclical vs secular bull market at some later point, but either way why pass up a bull market when it comes along?
Problem now is when to buy in as we are overbought but it is difficult to predict when and how large pull backs will be along the way.
This is the sort of thing that slowly changes active traders to passive investors. Due to the high expenses of active strategies, the odds always favor underperformance of the market. This is as it must be. As has been said, complex financial products were meant to be sold, not invested in.
I'm trying to be constructive by saying that I noted some more behavioral biases in this post, specifically the cognitive anchoring bias.
I must say, my hat is off to you for starting this discussion and revealing some of your setbacks. Hope I didn't come across as being too harsh, that is not my intention. I too like the "Great Correlation"
Roger,
A paper I was looking at determined the CEF structure added ~66% more volatility. The premium/discounts really amplify the markets response. Ouch!
I believe there are a couple of covered call funds based on ETFs that would probably be less volatile, but still...
Roger,
I am on vacation and will be peeking when I have some time. My numbers are still strong and will be seeing some more upward trust. I am doing some in and out tipe of trade. I picked hans and blew out of it on friday +15% currently I have mco. Well when warren sells better start buying. Roger, thanks to your blog I have become a better trader and have set up a system to analyse the market and stocks. What more can I ask. I sure have done better than the husmans, yamada's and the ritzholt. Your blog is great and the participans are a hell of a buch of smart people. I cannot say I am like them yet, but like to be one day like bill b, seg and rw. Like to thank them too.
Best,
Jeff from Milan, Italy
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