Thoughts on Macroeconomic Issues, Market Cycles and Investing. I am not selling anything here. My focus is managing my own investments. I am on the web to gather and discuss data and viewpoints. This site is mostly to document my views and forecasts. You are welcome to add your comments.
Wow! After today’s market declines I am glad I cut my stock position a few weeks ago.
posted by zephyr @ 5:43 PM
6 comments
Investor and Retired Fortune 500 executive. Formal education in Economics and Investment Finance, with over 30 years of professional experience in the capital/financial services market, including more than 10 years as a CEO. Recently CEO of a financial services company with over $1 billion of invested financial assets. Privately, my investment focus is Real Estate, where my annual after-tax return on invested equity has averaged about 23% over the last 25 years.
6 Comments:
78% of your port is either yeilding 5% (cash) or severely underwater and still declining (RE), and you are gnashing your teeth over a short term, buying opportunity correction in equities?
I am not gnashing my teeth – I am just lamenting that I did not sell more of my stock at the market top. I believe the top has passed.
My real estate is not underwater at all. It is true that my property portfolio is declining in value, but on average it is still worth multiples of my cost basis, and the cash flow is very positive. I also have very little debt, and could pay it all off tomorrow if I wanted to.
I agree that the correction will create a buying opportunity, but it is of little benefit to those who ride the correction down. I am positioned to take full advantage of the correction by being in cash before the decline. By doing this I should avoid the losses of the downturn, and then buy back in at the bottom, as I did in the last cycle.
The value of your RE holdings have been declining for 18 months, and will continue to decline for at least that long. Consequently, you will not revisit your RE highs for another 5 years or more. Equities, on the other hand, will regain lost ground and hit new highs prior to years end.
"The top has passed"? Not by a long shot.
By being so heavily in cash you have missed a nice run up - even considering the latest hit. A plain vanilla portfolio of Total Stock Market and Total International Market mutual funds is still +6% YTD. Add in a couple of sector funds and your up well into the mid teens - YTD.
And those of us with substantial monthly investable funds who have sat out the last two months (and will continue to sit until volatilty subsides) do have cash with which to go bargain hunting. I've spent the last 6 hours making a list.
God bless over leveraged hedgies and moronic mortgage brokers.
Anon,
The general market has now given back the gains you cited above, and is down substantially from its peak in July.
I agree that buying opportunities are coming, but I believe that waiting will be rewarded for a while.
The portfolio is up 6.85% YTD as of 08/20/07 - far off it's highs yet still far better than cash, not to mention your ever-declining RE. I believe the next 30 days or less is the buying opportunity in equities, and that the market will regain and overtake it's previous highs by year end.
The share prices of the stocks I sold have declined by an average of almost 20% since I sold them. So, I am feeling pretty good about my decisions to sell.
I agree that a buying opportunity is coming. It is likely that the market will recover when the Fed cuts the Federal Funds Target Rate.
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