Liquidation Mode
I sold about 25% of my stock portfolio today and plan to sell another 20% within the next few weeks. I was 15% in cash to begin with, so you do the math. I have never done this before, so this reflects some serious concern.
I put about 10% into Morgan Stanley Asia Pacific Fund (APF), a closed end cross section of Asia, including Japan, trading at a 18% discount to NAV. (The specific country closed ends are all at big premiums to NAV. I would not touch them.) I intend to average more into this investment over the next several months, as I sell my U.S. stocks.
I am looking to sell anything that I do not have a big short term tax hit in. So if I've owned it 18 months and its near my price target, I'm selling. And if I just bought it recently, I'm selling all but special cases. Its not panic - that's when the market is going down. I just do not want to have my net worth in a market trading at 26 times trailing earnings, where earnings estimates are coming down and every single "expert" is wildly bullish. If this isn't a top, its got to be pretty close to one.
In reading the Wall Street Journal this morning, I read that three of the five largest mergers ever have happened in the last WEEK. And that bearish sentiment is about the lowest it gets, at a time when valuation is as high as its ever been. What that tells me is that everybody who could invest has. Thats what we call a top. Earnings are just starting to come out this week, and I think there is going to be some carnage. If we get through this quarter intact, something else is going to do it.
As anybody who has read my posts for the last two years knows, I am no market timer - I look at one stock at a time. But when sentiment and valuation are at extremes, as I believe they are both in the U.S. and in Asia, I have to act. Selling U.S. stocks and investing the proceeds half in cash, half in an Asia closed end selling at an 18% discount. This may look like a really stupid trade now, and may look even more stupid in six months, but we'll see how dumb it looks three years from now. |
