Wm. Jepsen: Your post is too simplistic.
It is precisely because there are not many things to exploit that I think sitting on cash MAY become the best option going forward. Having said that, I am currently only 1/3 cash.
I think you are making the assumption that when the market recovers, it will be a "V-bottom" and not being fully invested will cause an investor to miss much of the rally. I am not in the "V-bottom" camp and think this recession (and, yes, believe me, this IS a recession) will last longer and have a slower recovery than many think. I'm betting there will be ample time to jump on board when the bull market reawakens.
With regard to "buying the absolute bottom of the barrel stocks in late December and early January", this did not work at all for the vast majority of investors. The real problem with 2000 is that every time an investor jumped in thinking it was "the absolute bottom", the market went significantly lower. Yes, if you jumped in when NASDAQ dipped below 2300, you made some nice coin. Problem is, I can recall many thread gurus saying that 3500 was the absolute bottom, 3200 was the absolute bottom, 3000 is the bottom, etc, etc.
In a recession, very few stocks or sectors do well and even fewer investors make money. I am far more concerned about avoiding another "slow bleed" in 2001 on top of the carnage in 2000 than I am about missing the gravy train. The bull market will be back -- and I intend to have the money on hand to take advantage of it when it arrives. |
