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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Justa Werkenstiff who wrote (12384)3/10/2000 8:17:00 PM
From: Justa Werkenstiff  Read Replies (8) of 15132
 
After moving to 85% cash and bonds a few weeks ago and cashing in on my long positions for the year, I moved to 97% cash and bonds today.

I am not net short anything but the thought has crossed my mind with respect to the SPY especially over $140 on up.

I particularly like my position in municipals which I have been purchasing in both the closed end and open ended variety. They have tax equivalent yields ranging between 10 - 12.5% and are highly rated securities with many being insured. That comes close to the average stock market return and is backed by the full faith and credit of the issuing state. Plus, all bond positions have capital appreciation potential.

Let's look at the possible scenarios and projected results:

1. Market Crash -- Justa wins. The bond market lives for market crashes and this could operate like a short on the market although the effect of an inflation scare crash would be questionable at first. But a crash makes the Greenman's job that much easier and Justa comes out on top as a crash will help the economy slow if not put us into a recession.

2. Inflationary Problems -- Justa wins eventually. Why? The Greenman will put an end to that and I do believe in the disinflationary forces of the internet. But in case we do get a recession from the Greenman working too hard, Justa wins again.

3. The continuation of a slow growth economy or a "soft landing" engineered by the FRB -- Justa wins. Justa gets an equity market return in the form of a tax equivalent yield and has the probability of capital appreciation.

4. Uncontrollable Inflationary Spiral -- Justa gets creamed. But I see the chances of this as minimal and the Greenman will eventually take care of any such problem one way or another. And when he does, Justa wins.

5. Alan Greenspan goes the way of Weekend at Bernie's -- unpredictable short term result. I guess I will need to take out life insurance policy on the Greenman <g>.

6. Exogenous Event -- Other than an inflationary event (oil), every other possibility would seem to be in my favor as a flight to quality should ensue.

I like these odds. It beats playing musical chairs on the Naz. Good grief, I would hate to tbe long the Naz going into next week. Sure, everything may work out okay but the risk is incredibly high with all the economic data coming out.
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