To P and All, A poster who does not wish to post in public asked me some questions via e-mail. I think the answers may be of interest to others, so I am posting them here without blowing his cover.
1. I totally disagree that the only investment alternatives are between overpriced US stocks and cash. That is what Wall Street would have us believe, but it just ain't so. Let me name several alternatives: Foreign stocks, Closed End foreign funds, the entire gamut of equity options and futures strategies, bonds, the entire gamut of fixed income options and futures strategies, real estate, REITs, rental property, precious metals, non-precious metals, diamonds, gold, platinum, palladium, futures markets of all sorts, insurance co. annuities and variable life policies, convertible securities, entrepreneurial endeavors, gambling, and Ponzi schemes.
The 401 K and other individual stock money is only programmed to buy equities when the market goes up. We saw that with the massive fund redemptions even during this recent little tradeoff. The public only buys after it goes up.
The point about the staying power of the market bubble is a good one. We are already into more than a decade of overvaluation in the stock market. Many of us realize that, but we still see rotation of groups, most wildly overvalued, some undervalued. You can be bearish on the market and still own a lot of stocks. I know I do, especially in my income accounts. They are mostly hedged, but they are still stocks.
In straight equity accounts, I was long tech/long puts on biotechs in the early 1990s. Now, that position has reversed. I was short (there weren't any puts) foreign closed end funds (CEFs) selling at discounts and long domestic Cefs like Central Securities, selling at discounts. Now I am long deeply discounted foreign CEFs and long puts on fat US stocks.
My opinion is definitely more bearish than bullish, but it is never black and white.
I think everyone who participates on this forum is very well aware of just how strong Wall Street's marketing efforts have been to sustain this bubble. All of which would have been useless without a Fed willing to print money for any idiotic speculator to waste. It is the depth and success of this effort and the Fed's enabling of the mania, that have made the prices we see today.
However, I don't see any reason to give the marketing effort anything other than cursory, and cursing <G>, notice. If the local winery can convince yuppies that a very dull wine like Merlot is worth $200 a bottle, then, rather than give them credit for fooling the easily gullible, I would become interested in shorting Merlot futures. I will certainly not buy cases of Merlot in the expectation that there are even more crazy yuppies out there to be fooled.
2. Why do I write on the Internet? When I was managing money in the past, I always had a bully forum where I could tell folks what I had already done. First, I'm a nice guy and I want to help them discover a value if I've found one. And, second, it helps me if others buy what I've just bought. O.K., forget about #1. It's all #2. <G>
As a contrarian, I have always had to defend my ideas and opinions before shareholders, bosses, peers, directors, regulators, etc. Although I pissed and moaned about it, I found that experience helped me hone my thinking process. It also occasionally changed my mind. O.K., one time it changed my mind on an issue. <G>
Now, working out of my home office, I don't have shareholders calling up and asking how I could be crazy enough to deep six my 70% cash position and buy stocks in August of 1982. So, I use the folks on SI. And not just on this thread.
And, I really dislike the fact that I lash out at hostile folks every now and then when they criticize me with what I consider silly comments. That is just wrong and helps no one. I can't expect the thinking process of a Hank Hermann or a Pete Anderson from every critic. Those two former bosses of mine now run Waddell & Reed and American Express Funds for very good reason. They are seasoned and often, brilliant pros. But, when guys like that grill you, you sometimes get defensive. But right now, I am an old chunk of coal, but I'm gonna be a diamond some day. <G> |
