The events of the last 18 months should bring a fatal flaw of [strategies based on staying fully invested] to light. Mostly, and particularly in a bull market, [they are] right. But often, as in a bear market, [they] can be the wrong decision....Those who had the luxury of being the G&K originals more than 2 years ago are fine, but the well meaning advice of some of the crusty venerables here led many newbies to hold gorillas at prices that appear now, in hindsight, to be rediculous. Maybe they will go back up. Maybe a covered call strategy will nurse them back to profitability. I ask the thread to imagine the value of a tool that would have saved these new folks so much grief. Allowed them to own these gorillas. But not at the price they paid. Merely adjusting the strategy of ownership from "must invest" to "invest at the right price". To think that maybe one of the pieces of most sage wisdom missing from this thread back then was "son, now's not a good time".
Lots of good sense here, but still....
first, you persist in misunderstanding why UF, at least, favors CCs. It's not to recoup his losses, but rather to generate a minor current income stream from others' misplaced hopes of short-term price rises.
second, you are assuming something which, based on the best academic research available, cannot be assumed--that market timing based on macro cycles is both possible and rewarding enough to compensate for the costs involved (primarily transaction- and tax-related). Yes, it makes sense to think it can be done, but in practice it has proven very difficult for most people to do. As a simple example, you are obviously right to crow about the last 15 months or so. But I was hearing the same stuff from friends with similar ideas for several years before that, and Greenspan's "irrational exuberance" line dates from a long time ago. So--someone who thought as you did may well have missed not just the bubble (luckily), but much of the earlier bull market as well (unluckily).
The bottom line is that NOBODY I am aware of was saying, "invest, invest, invest" up through late 99/early 00, then shifting to "sell, sell, sell" at the right time, and then picking up again with "invest" as the Naz was at 1600. Time will tell which approach works best, and I wish you well with yours.
tekboy/Ares@gottarun.com |
