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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Mercer-Hursh who wrote (47753)	10/10/2001 2:19:36 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 54805

Hi Thomas, yes, quite true... I focused on one stock and not a portfolio. If one is invested solely in tech gorillas with low cost bases, and one traverses a bubble, then it is conceivable that each stock in one's entire "portfolio" could exhibit similar results to my little contrived example :) I'll take my tongue out of my cheek now and note a few things. Yes, I only focused on one stock as an example. Firstly, I just wanted an illustrative example. One can always find a reason why a specific example is not so significant. Like no single straw breaks that poor camel's back either. But I imagine that there are a lot of portfolios that are much farther away from their net investment objectives today than they were 18 months ago, and a lot of people are wondering "what if I'd sold"? So my example may be "just one stock", but the principle behind it retains considerable value. Even in the aggregate. Second, and related to the first, are all of those things I could bolt onto my example that would have made it more robust but less simple. But let's not bother, because it is the underlying principle that is important, not the specifics of an example. And third is the very point that you made. Stocks go up and they go down. The reality is that LTBH captures both gains and losses between the time a position is established and when it is later liquidated. The general upwards bias to the market usually means that LTBH ends up capturing more gain than loss. But it is not always the case that a stock is liquidated at a price higher than it has achieved at intermediate times. Particularly when one takes the time value of money into the equation. Another reason why LTBH ends up superior is that there are almost always frictional costs for switching one's capital from one pile to another. Taxes come to mind. Over the long run, these costs can be substantial. But in some cases (like an IRA) they can be negligible. So there are mitigating circumstances that speak against the general principles of LTBH. In specific instances. Which boils down to when the weighted expectation value of a held position is less than the friction accounted for consequences of selling. In such a case the implications of LTBH is the capturing of expected losses. Which is a very good time to deviate from the practice. IMHO. I'm not against LTBH. I'm a practitioner. When it makes sense. Which is almost but not quite always. Which is my only point really. This science called "Valuation" helps me figure out when it might make sense to move on over to the dark side for a while. John

To: Thomas Mercer-Hursh who wrote (47753)	10/10/2001 8:29:44 PM
From: Seeker of Truth	Read Replies (1) \| Respond to of 54805

Thomas, you are certainly right. But the ones that do well and provide the excess returns to counterbalance the occasional failure can do so if we get out when they are overvalued and instead of stashing it away in a fixed income instrument a la John Shannon's purely hypothetical example, we wait and buy something else very good when this something else is cheap, the total use of that chunk of money over time indeed provides excess returns. LTBHALAINO. Long term buy and hold as long as it's not overpriced.

To: Thomas Mercer-Hursh who wrote (47753)	10/11/2001 9:18:43 AM
From: gdichaz	Read Replies (1) \| Respond to of 54805

Thomas: Thanks. In the real world we all do the best we can to balance our investments with our own personal situation. All the mechanical stuff about the "silver bullet" - the "key" , etc. miss this point. Once upon a time when I was in college studying economics, one of the wise professors made a statement I have never forgotten. It was: There is no "perfect tax". All taxes have a limited area of hurt. Some hurt the rich. Some the poor. Some in between. Some hurt consumption, some investment. All hurt of course, but what to do? The government has to get its money to spend somehow. Since there is no single "perfect" tax, the best approach in the real world is a judicious mixture of "imperfect" taxes, so the overall drain on real production - the private sector - is minimized and the burden on the taxpayers is as "fair" as can be achieved when you are taking their money from them. Never have forgotten that. And in a similar way I would suggest that there is no "perfect" investment - by company, by industry, by general area such as technology. There are better "bets" and better "choices" but a mixture over a long period may make some sense, no? (But then there are such opportunities as Qualcomm where a strong positive weighting may be worth considering at a point such as right now - <G>) Best. Cha2