To all. I want to relate to you my recent conversation with my broker. I just called him to ask him to sell all my RRSP (these in Canada are the equivalent of US 401K's) mutual funds into cash and put the money into a money market fund that yields about 4%. He tried everything to convince me not to do this. I told him that I considered the market to be insanely overvalued and very accident prone. He told me that I should take the long-term view, and that even if we see a severe correction, prices will rebound. He told me that I should not try market-timing and that various studies showed that market-timing was the worst tactic. I listened and kept spewing out my statistics, S+P 550 trading at over 25 times earnings (highest in history), stocks now for the first time in history represent the biggest investment by the American population (real estate had always been the biggest investment), the M3 money supply keeps growing at an alarming pace, Warren Buffet is investing in zero T-bonds and silver these days, the savings rate of American households has been dropping and was at 3.8% in 1997 (this is the lowest since 1939 and tells us that more people are cashing in assets and buying stocks), stocks now account for 43% of people's financial assets (includes bank accounts, mutual funds and securities). In the end I just told my broker to sell my mutual funds. What I'm trying to tell you is that it wasn't easy. Most investors would have been talked out of it by their brokers. In my opinion, I will probably miss out on some potential profits, however, I feel that the upside potential is 10% at best, whereas the downside may be 30% or more. The money market guarantees me about 4%. I am sure that I will be able to repurchase mutual funds at half their current price when this mania ends and most small investors pull out. As Rockefeller once said, I am not interested in getting in at the very bottom, nor selling at the very top, but will be very content with a big slice in between. I know that I am in the minority, but until more people take their retirement savings away from the young mutual fund turks, these guys will keep investing in internet stocks and other insanely valued stocks, while collecting their huge bonuses. I for one, refuse to keep financing their 1,000$ bottles of wine that they order in NYC restaurants, or multi-million$ flats that they have been buying in Manhattan.
In this insane market, I am slowly converting my long term conservative portfolio into cash. I am still very heavily short on my short term speculative portfolio, and plan to remain short, although yesterday I covered my CTXS and AVNT shorts for my best profits of the year. |
