To All, I made a major strategic shift today into the Joe G. camp of bears. My cap. appreciation portfolio has never before been less than 20 pct. of my total portfolio. Today I moved it to 10 pct. and I am nervous about the 10 pct. There are stocks and cos. I love for the long term and they are in the 10 pct., but I fear for them short term. I figure such a low level allows me to keep these stocks, all of which have secular stories not tied to the market mania. But you know what they say about the piano player in the cat house. -g-
This bubble has been odd all along, but predictable. Investors paid up for positive "earnings surprises," ignoring questions like sustainability, quality of earnings, and the fact that the "surprises" were engineered by sleazy corporate managers who are paid with stock options. I think that is a dumb way to invest, but a perfectly understandable one. And it is hard to argue with a sheep who follows this herd-think until the market turns, and then it is too late for that investor.
The new market I am seeing is more perverted than that. Horrible eps are being excused and the bulls just won't hear about them. Unlike the momentum sheep, this is just an upside-down way of interpreting facts. For example, Motorola posting eps down 17 pct., saying bad things about losses at its very expensive Iridium satellite program (which I like longer term), and a revision, downward big time, of its projected chip sales. So the stock hits a new 52 week high. If this were the only one, I wouldn't be so concerned. But the lousy eps, up stock scenario continues to play out this eps season in names like AMD, Gateway, Hewlett Packard, etc. Of course, it is mostly goofus tech stocks, as former favorite Wells Fargo didn't fare as well.
With the shift in assets, I am sticking with 50 pct. in my income portfolio, as it is cranking out returns at a tremendous level and much higher than what I can spend. Or, at least what I can spend as long as I don't tell my main squeeze about them. -g- So, now I have moved the 90/10 portfolio to 40 pct. of the total.
One change. I will buy more calls in the future with this larger 90/10 portfolio. Calls never disappeared from the 90/10, as my wonderful adventure with Electronic Arts proved, but they are more likely to move to 10 or 20 pct. of the total # of options in the future. Basically, if I find a stock I like despite the market, I don't want to take the risk of the downside in the common, so I will
be more likely to add long calls when they are available.
Right now, there are no changes in my long names, just a change in the total capital committed to them. There will be many new puts over the next few months, and a few new calls.
Good luck, MB |
