A Year on: Ramblings From Feb 2009
One of the good aspects of blogging and discussion boards is they help overcome revisionist history. Here’s what I was thinking a year ago.
Despite not knowing the answer I clicked four, At/near bottom and things will start gradually improving soon. [77% of respondents had a considerably more pessimistic view...no surprise there!]
When my kids are tired and hungry (in recession) I have a few options besides ignoring them.
- I can give them sugar (consumer stimulus package) and the results are almost immediate. Full of energy off they go at full speed. Only to crash again soon.
- I can make them wait for their healthy dinner. That is difficult as their pleas grow ever louder and behaviour deteriorates. However, I know that ensures they will eat properly and will not become addicted to empty sugar. It is painful in the short term, but they become healthier and learn to remain more in control during their next slump.
While that may sound too Forrest Gump like (I’m not sure if it does as I’ve never seen the movie) I think it is a good analogy. [Unfortunately Governments choose sugar, so it's pain delayed.]
Too many people are expecting lower prices, me included. However, history has taught me to swap tracks when I side with the masses. So I am now fully invested. Fortunately I believe in using margin, so if the worst does happen and we drop 20% or more then I’ll vomit, have an antacid and use margin to load up, backed up by my available non-callable debt facility.
The markets could go down 20% or up 50%. I dunno which, but I know no-one is going to ring a bell to let those in cash or short know that it is time to go long. In fact, R.Dan excluded, I think most people in cash now will be even more petrified if the markets drop 20% and won’t invest then. They’ll wait until they are sure the recession is past and then I’ll be among the people selling them shares. Me 10 Feb 2009 TMF:BMW Method
The important thing this down cycle has reminded/reinforced in me to never forget the cyclical nature of the financial world. To always look at things through the lens of history rather than a narrow focus of today. Mike Klien and MDCigan posted some references to mean reversion of S&P profits on the Liquid Lounge. What I found amusing is that these guys, Katsenelson and Hussman not Mike and MDC, present these ideas as new.
I got up very early today so I could shuffle some deck chairs around on the Titanic, my portfolio. FWIW which is zero, I sold half of my largest position, CVTX, and pumped that into GE and FACT plus I held some cash back to support selling Puts on LUK.
I saw goofyhoofy’s sold out post of the day and thought we must be getting close to the bottom. Even if not, I like to stick to my knitting of selling fairly/overvalued companies and buying undervalued.
It’s hard being so removed from the US at the moment. Things are still very rosy here in Australia. Our Reserve Bank is even talking about sidestepping a recession. me Feb 23 2009
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