***Official*** 2011 Stock Market Thread

[IHateMyJob2004]

Closed a bunch of stuff today. 26% cash last I looked.

 

[lothar]

All you people keeping large cash balances...
I used to do that too, but I've adopted a somewhat different strategy.

 

[Imp]

All you people keeping large cash balances...
I used to do that too, but I've adopted a somewhat different strategy.

Details?

 

[darkxshade]

Tough decision, should I sell today or hold off and try to eek by on a possible slight % gain tomorrow? The market has been strong the whole day... so far!

 

[Imp]

I'm looking for a plateau (<0.5&#37; gain/loss day) before checking out some more. Where I'm at right now, I can afford to wait even if it means a -300 DOW day.

 

[Imp]

Okay, nerves got to me. Now at 41&#37; cash. Banked quite a bit.

Might be 75% out by Friday. Let's not forget that Europe is going, if not already, in recession, but some of that must be priced in by now.

Wonder if we'll get the holiday (Christmas + New Years) rally this year... Maybe the shit hits the fan next week, and those weeks are spent recovering lost ground?

 

[mshan]

Some food for thought* to follow up on the comment I made previously about the trading range lots of talking heads on CNBC all seem to be seeing (they all seem to see the same trading range (today everybody started to be hedge to the upside above 1250, at least for some sort of attempted run into year end), they just differ in how they recommend playing that range, if at all, based upon how risk averse or risk on they or the clients they represent are, and their underlying trading philosophies):



Bill Strazzullo (Bell Curve Trading):
- http://video.cnbc.com/gallery/?video=3000060640 (today; I think he made same comments before Thanksgiving when powerful current rally had not yet taken place)
- http://video.cnbc.com/gallery/?video=3000055574 (comments from Nov. 4; he sounded more bearish at this point)
- http://video.cnbc.com/gallery/?video=3000012022 (comments from March of this year; of note, 1080 - 1100 is fair market in the sense that that is where most of the money in runup since March 2009 (QE2?) rally started; IIRC, it was also before double dip in housing was official, after Japan earthquake, way before that Congressional debt ceiling joke, and before Greece was plastered on mainstream America's tv sets)


Abby Joseph Cohen (Goldman Sachs) on how high correlation of market has been untradeable (recently 0.9, is 0.7 now, historically 0.3 - 0.4): http://video.cnbc.com/gallery/?video=3000060649


Bob Doll (Blackrock)
- http://video.cnbc.com/gallery/?video=3000058926 (day before Thanksgiving; 1100 - 1250 trading range)
- http://video.cnbc.com/gallery/?video=3000058537 (Cyber-Monday; healthcare, technology, and risk of breaking 1100 with financial accident in Europe)
- http://video.cnbc.com/gallery/?video=3000060353 (a day or two after coordinated central bank action last week)
- http://video.cnbc.com/gallery/?video=3000060447 (Wednesday, Dec. 7; tempered optimism?)


John Manley (Wells Fargo)
- more constructive on market today (Tuesday Dec. 6) vs. day after Thanksgiving (start at 1 minute mark: http://video.cnbc.com/gallery/?vide...nUGFnZSI6IjEiLCJzeW0iOiIiLCJzZWFyY2giOiIifQ==); can't find video clip from day after Thanksgiving, but I remember him describing market as two steps forward, one step back, two steps forward, two steps back (he now sounds more constructive on market, at least over the longer term)


BaC/ML investing thesis and 2012 SP500 year end target of 1350: http://video.cnbc.com/gallery/?video=3000060454






I read commentary previously that most of that powerful move off Oct. 4 lows was short-covering, presumably removing tail risk of disorderly default of Greece, and removal of immediate risk (this year) of double-dip recession in U. S. Using that analogy, if risk of a Lehman type financial panic in Europe, at least temporarily (cockroach theory), was taken off table with last weeks coordinated central bank action (e. g. did ECB explicitly or implicitly state they would be lender of last resort for their banks, but not their sovereign debt, last week?), that powerful 52 point move in SP500 last week might have made a lot of sense. Steve Grasso always refers to SP 1265 to be pivot point, which if breeched definitively and with strength, might pull in a lot of money waiting on sidelines. I don't know how to analyze trading volume and market internals, but kind of wonder if, despite markets running into resistance right now, there is actually rotation into those areas which lagging money managers believe will need to outperform into year end if they are to close gap with their benchmarks). And again, please use what I write here as food for thought for your own due diligence and nothing more. (I don't want credit for even a penny of any sort of profit you may conceivably make, because that also implies I will get blamed when you lose a dollar).


Bear Market Rally or (eventual) New Emerging Bull?: http://www.cnbc.com/id/45109344


Distressed Debt Investor's Timeline for Ultimate Resolution of Eurozone Debt Crisis (best case scenario - 2 years; worst case scenario - 5 years; overlaying the timeline of Lehman 2008, he said we were not summer 2008, March 2009, but late 2008 / early 2009: i. e. post initial crash in stock market, post TARP, but before stock market ultimately bottomed in March 2009 and powerful 2 year QE rally started)
- http://video.cnbc.com/gallery/?video=3000060922
- IIRC, Warren Buffett a month or two ago commented on opportunities available in stock market over 10 year time horizon
- Larry Fink (Blackrock) also saw opportunities in stock market over 5 - 10 year time horizon (pt. 1 - http://video.cnbc.com/gallery/?video=3000056776 & pt. 2 - http://video.cnbc.com/gallery/?video=3000057412)
- John Manley (video link above) said there was select opportunities in stock market right now, but investor might not be happy in next year or two, but would most likely be happy in 3, 4, or 5 years into future
** (John Bogle was asked on CNBC if Buy and Hold is dead. His response (paraphrase) was "it depends upon what you buy" and I think it is always implied for Bogle that he is assuming a time horizon at least one decade, but is really thinking two decades or more so his tyranny of compound interest argument can truly show its power) **








Given that I don't have any money on the line in market in terms of short-term trading, I think it is easier for me to step back and try and look at market less emotionally than those who are trying to actively trade this market, so please don't view my comments as a view on which way the markets will go (my view is like Warren Buffett, in that market is voting machine over short term, weighing machine over long-term - earnings and fundamentals will eventually matter).

I have learned so much on so many different topics from other members throughout these forums, so just trying to give back a little, perhaps looking at things through a different lens than those who are much more emotionally invested in day to day fluctuations of stock market.




* I don't trade stocks at all, all of my money is tied up in long-term buy and hold stock mutual funds, and I have an investment time horizon measured in decades, not years, so I am very comfortable with what I own and can tolerate tremendous amounts of short-term volatility because I have done a lot of research about the mutual fund managers, their investment philosophies, and their firms, and how long-term shareholder friendly they are, and am very comfortable with what I own, for the very long term.

 

[Cattlegod]

I've been moving to cash as it has been climbing this week. Sitting 50-60&#37; cash right now.

 

[Arachnotronic]

I'm gonna remain bullish. Guys, ride out the storm. There will be salvation from Santa.

 

[lothar]

Details?

Interest rates are too low for me to be keeping an enormous cash balance in a brokerage account.
PM stock is my cash balance. Technically, some of my shares in JNJ are as well.

Even if their stock goes nowhere, I still collect 4&#37; dividends.
I've only been testing this strategy for ~6 months so we'll see how it plays out.
So far, it looks good.

I sold some JNJ to buy shares in a financial firm last week. B..

 

[IHateMyJob2004]

lothar,

The only risk is risk is risk of loss of capital.

I quote people often. You can guess whom that sentence originates from (I think I got the words mixed but the spirit is the same).

FWIW: Manish Pabrai used to use BRK as a cash proxy. I don't think he does anymore. Granted JNJ is a better cash proxy or atleast it has been over the past 4 years or so.

I guess the longer I have been buy/hold the more I have become disillusioned by it. It is good for a CEO like Buffett, but not me. If you own a company your time horizon and long term goals are different in various regards. By various regards, I mean to say that I am what some English people would called "pissed" and am not in a state to more tightly define "various regards". Sounds smart though donut!

EDIT: Now actually pissed because I need to seek out the holy hand gre...plunger.

 

[IHateMyJob2004]

I'm gonna remain bullish. Guys, ride out the storm. There will be salvation from Santa.

I went the sell the news route. Now waiting for the rumor .... Oh ... eurozone downgrade!

Everything is looking up. jobs, housing starts, lumber numbers from rail time indicators. Now is the time to pounce! But I am sick of the ups and downs. trying to "play it" this time. Sick of going from havcing more $$$ at any time in my life to down 20&#37; and back to where I was 3 months earlier.

 

[IHateMyJob2004]

mshan,

Regarding Buffett. You have learned much! Keep in mind though that he runs a corporation. It is a slightly differnt mindset than that of an investor. Learning from his is vastly important. But I am learning that the duration of a holding for an investor is different.

 

[lothar]

lothar,

The only risk is risk is risk of loss of capital.

I quote people often. You can guess whom that sentence originates from (I think I got the words mixed but the spirit is the same).

FWIW: Manish Pabrai used to use BRK as a cash proxy. I don't think he does anymore. Granted JNJ is a better cash proxy or atleast it has been over the past 4 years or so.

I guess the longer I have been buy/hold the more I have become disillusioned by it. It is good for a CEO like Buffett, but not me. If you own a company your time horizon and long term goals are different in various regards. By various regards, I mean to say that I am what some English people would called "pissed" and am not in a state to more tightly define "various regards". Sounds smart though donut!

EDIT: Now actually pissed because I need to seek out the holy hand gre...plunger.

Loss of capital can certainly happen but depending on which stock you decide to use for this, you can reduce such risk greatly.
Using a financial stock as a cash proxy is very risky IMO(yes, even if it's BRK).

 

[IHateMyJob2004]

JNJ yield up to 4&#37;.

I might have to rethink that one.

 

[Miramonti]

The best way to reduce risk in the 'buy/hold' category is to buy during a good broad market down cycle, and not buying just when the market is comfortable/popular to get in.

This way people have much better odds, even if they don't pick the perfect stocks to buy. Too much is made of stock selection imo and not enough of volatility opportunties, because the companies that have more consistent performance often have shares with more excess premium due to their popularity.

And when the market goes down, particularly by a lot, they all go down. (and if the "good ones" don't at that time, then you probably want to sell them anyways to move money into others that have gotten relatively too cheap.) Imo.

 

[IHateMyJob2004]

Clifff notes:

Be greedy when others are fearful and fearful when others are greedy.

 

[Miramonti]

Clifff notes:

Be greedy when others are fearful and fearful when others are greedy.

Exactly, that's the way it is and probably always will be imo.

But one has to be very careful to not shoot their wad on small opportunities, because when they become big opportunities, they will already be 'all in' at much less favorable prices, and inevitably they become one of the fearful ones.

Easier said than done of course. But these are big pitfalls for people 'playing' in the market, where there usually aren't enough financial/psychological resources to do it sensibly over the long run during different market behaviors, and the entry points didn't really provide the edge with respect to volatility that they believed they were taking advantage of based on other analytical factors.

 

[SSSnail]

The problem with philosophy is just that, because if it was easy, everyone would be doing it.

 

[Miramonti]

The problem with philosophy is just that, because if it was easy, everyone would be doing it.

Imo if you're doing it and it's easy, you probably shouldn't be doing it. On the other hand, gutwrenching = $. Atleast that's been mostly the case for me (predominantly shortterm trading but is same for me w/holds.)

 

[IHateMyJob2004]

Well, one of the problems that goes hand in hand is that people have trouble doing nothing. People forget that hte decision to do nothing is still a decision.

And the thing is, not everyone is doing it. Few are. So if you are one of the few doing it, you are not participating in a zero sum game.

Value a good company. Buy it for half price. Buffett has said if he had $1 million he could easily make 50&#37;+ a year. It can be done. it just requires patience and the willingness to spend more time reading than trading and omitting non-financial things from your life (within reason).

Still learning myself but compared to where I was 10 years ago, I am in a very good place.

 

[KB]

http://www.bloomberg.com/news/2011-...-payment-as-safety-sign-await-fed-review.html

I mentioned this before when I talked about GE. Today they are asking the fed if GE Financial can start paying dividends to the parent, which should be beneficial to the shareholder. If the Fed agrees GE should rise, if they say no, expect it to fall in the short term.

One stock that is being punished today, perhaps unfairly is DRI (Darden Restaurants). They are >10&#37; down because they downgraded their Q1 earnings by 10 cents. FY2012 revenue was lowered to the lower end of the earnings scale. I might consider getting in at $41 - 42.

Things I like: > 3.5% dividend (has been raised several times recently), steady growth over the last few years. They even made money during the 2008 recession. Restaurants do best when the economy is doing well and if the consumer is feeling good enough to shop, perhaps they feel good enough to eat out. There was some insider buying in September and plans for shares buybacks.


Things I don't like: dividend may have been raised too high too fast. I would prefer a slow and steady dividend growth. Debt ratio is high, as is Price/Book, but thats typical for the restaurant industry, so not that big a deal. I don't like Red Lobster, but I like Olive Garden.

 

[Miramonti]

Well, one of the problems that goes hand in hand is that people have trouble doing nothing. People forget that hte decision to do nothing is still a decision.

Totally agree. It can be especially difficult to see things move and not feel one is wrong for not being in or getting into something.

And the thing is, not everyone is doing it. Few are. So if you are one of the few doing it, you are not participating in a zero sum game.

Value a good company. Buy it for half price. Buffett has said if he had $1 million he could easily make 50&#37;+ a year. It can be done. it just requires patience and the willingness to spend more time reading than trading and omitting non-financial things from your life (within reason).

Still learning myself but compared to where I was 10 years ago, I am in a very good place.

There's nothing wrong with Buffet's fundamental approach, only that it's just part of the picture when reducing risk for holds, something us smaller players need to always be conscienscious of.

Broad market sweeps can create significant change in prices/valuations that often are not relevant to changes in a good company's fundamental prospects, and create hold opportunties for buyers. But cr@ppy stocks can also become great opportunities here too because they are often the first to get slammed and even the last to stabilize.

I don't think considering market volatility contradicts Buffet's approach, but adds to it when one is very selective of what they get into and hold, imo. (on the other hand, I think smaller players need to take advantage of strong market moves in getting out of things as well, even if it means at a level lower than one originally expected to hold it for...that is contrary to Buffet, who can afford to wait until investments reach a good selling value.)

Anyhow, yes it's easier said than done, particularly when every situation is always atleast a little different. And people will learn different things based on what they gain/lose over time.

 

[Imp]

Now sitting on 75&#37; cash. Was getting uncomfortable sitting on earnings from a 10-20% rally. With my luck, it'll keep rallying past Christmas, but it just feels like something's about to give.

"OMFG, Euro-credit crisis solved, now investors focused on fact that Europe is already in recession and dragging the world with it"?

 

[Ms. DICKINSON]

I envy you guys that got on AMR, up 67&#37;, WOOT!