yes, i was bullish in April 2000. i make no secret that i was an uber-clown. and i am glad i was in April 2000, since i managed another 100% gain by taking that posture, although this was achieved by switching from bullishness on QCOM (where i was 100% calls through most of 1999) to bullishness on SDLI (a fiber optics co). i was able to buy into SDLI (common) at an average of 170 during that period. over the next several months, it rose to an intraday high of 460 in the wake of JDSU's acquisition announcement at the peak of the fiber-optic bubble. i exited SDLI at an average of a little over 340 through the summer and into the fall.
those who kept their SDLI shares received 3.8 JDSU shares for each SDLI share. at JDSU's current price of about $2.50 a share, that works out to $9.50 a share for SDLI. so if i'd held till now, i'd be down about 94% from my 170 basis.
instead, i was up 100%.
what is it? just luck. but i'll take it.
recognizing that it's luck, i won't try to do it again. (i remind myself of this kind of thing as a way of recognizing that i am just as susceptible of an insane investing plan as anybody else. but that's neither here nor there w/r/t the market and where it's going now.)
after being mainly cash in the last few months of 2000, i invested 100% in value stocks in the first half of 2001, catching a 15% portfolio gain on the tail end of the value outperformance from March 2000.
in the second half of 2001, i was largely cash and bonds. i was not in equities during the 9/11 plunge, nor did i take advantage of the subsequent rebound.
i have been largely defensive since then, but i would say my defensiveness began in summer 2000 with my liquidation of SDLI, and my decision not to again place big bets on tech stocks.
my approach morphed from QCOM to SDLI to cash to value to cash/bonds to cash/bonds/value/gold/shorts today.
at the same time, i stopped making concentrated bets on the market. a big long position for me today is 2% of portfolio, compared to, say, effectively 300% or 400% of capital via options in QCOM in 1999.
instead, i am now about 75% cash/bonds. a few percent short, a few percent gold, a few percent REITs, and the rest value stocks (mainly foreign).
the above approach yielded significant gains during the bull phase, and has largely protected me during the bear phase. it was a better approach than being entirely bullish or entirely bearish throughout this period.
however, i believe it was largely luck to get out of the bull phase intact.
those who don't recognize good luck for what it is are in no position to avoid bad luck.
btw, i was bearish from 1996 through 1998. i made a conscious decision to become a bull in 1999 as a trading decision. because the results were very good, i was probably as brainwashed as any bull by April 2000. however, because i had previously been a bear, i was able to be "deprogrammed" starting in the fall of 2000. |
