Uncertain Future

[DblDoc]

So you have already made up your mind and want our approval. Good luck!

And it is still made up...

DD

 

[BTravlin]

The world economy is weakening. Why on earth would someone follow a model that says to keep 20%+ of one's money in equities?

I don't get it.

The only place to be right now is in cash and cash equivalents.

A small return is better than a huge loss.

I'm not retired yet but have set aside a decent retirement portfolio. I keep this in a 60/40 diversified portfolio of equity & bond index ETF's. I tend a little more to the conservative side for preservation of principal since I don't need to swing for the fences and score huge returns.

During the recent market run up and subsequent crash I saw my portfolio rack up huge gains and then sustain huge losses but it was all mostly on paper as I never sold out. And we kept adding to it at regular intervals so that we bought a lot of shares cheap when the market was down. Looking back over the long haul though I've had decent long term growth.

Yes, taxes are probably going up in the near future. Inflation could well be a problem. Our dollars value will change relative to other currencies but I still think a diversified portfolio with regular re-balancing is the way to go.

You can't watch the day to day market gyrations and let that drive your investing strategy when you're investing for maybe a 25-30 year time frame.

 

[haha]

I'd be interested if anyone shares my view that keeping cash for the next couple years might be a good strategy. I've done well in gold and am willing to cash in, wait, and then buy government bonds at some point in the future. I don't have a good feeling about the typical asset allocation model which requires that one put money in stock index funds and bonds... at least right now.

Thanks

I share your view that it might be a good strategy. But I don't know that it would be a good strategy. I do think that it is worthy of respect, but I am not at all sure that it is worthy of the all-in confidence you seem to have about it.

Ha

 

[Zathras]

Ditto what haha said.
I agree that holding cash only might be a good idea.
So might not holding any.
This is why a good allocation is so important. Take the fear and greed out of investment decisions.

 

[Dawg52]

This is why a good allocation is so important. Take the fear and greed out of investment decisions.

Having part of your allocation in equities might be a good idea for 'balance' reasons, but it doesn't take the fear out of it. I have less than ever allocated to stocks and I have plenty of fear going on these days.

 

[shotgunner]

There are so many uncertainties with regard to the future that it's difficult to know how to plan.

Even the worst case scenario in FIRECalc may not be bad enough to reflect what the future may hold.

Ultimo, it seems to me the premise of your strategy is based on a fear that the future may be worse than the past. FIRECalc includes the Great Depression in it's calculations. Do you really believe we are going to see economic conditions worse than that? I really don't think any of us who did not experience the 1930's can really grasp how bad it was. I think it took 25 years for the DOW to get back to the high of 1929.

I would say you could be right, the worst case scenario in FIRECalc may not be bad enough, but by far odds are it is.

 

[Zathras]

Having part of your allocation in equities might be a good idea for 'balance' reasons, but it doesn't take the fear out of it. I have less than ever allocated to stocks and I have plenty of fear going on these days.

Perhaps not completely, but do you allow your fear/emotions to dictate your investments?

It is good to be concerned, and to track your investments, or at least be aware of the companies you are invested with. But to allow your emotions to dictate your investments generally, from what I have seen and heard, doesn't work out well.

 

[Dawg52]

Perhaps not completely, but do you allow your fear/emotions to dictate your investments?

I allow it to dictate my med consumption.

 

[Gone4Good]

The only place to be right now is in cash and cash equivalents.

Could be. It certainly could be.

But please do tell us when it's time to move out of cash.

 

[REWahoo]

An interesting internet forum behavior appears to be going on here - the "plate spinner". A poster drops by every few weeks or months to put up a few caustic comments designed to go against the grain and stir things up, then disappears until the plates need revving up again.

It was almost six months since his last visit, I wonder when he'll spin us again?

 

[Steve O]

You can always hedge stocks by going long/short...

 

[Spanky]

I allow it to dictate my med consumption.

me too ..

 

[Spanky]

You can always hedge stocks by going long/short...

No, thanks.

 

[brewer12345]

And for anyone keeping score at home, I think that we have a self-sustaining recovery underway as long as the financial system does not come apart. BDI up another chunk yesterday and the freight futures market spiked even as equities dropped. Off in the background, containership rates have recovered in the last few months and continue to rise. PSVs in the North Sea have gone from laid-up ships (docked for lack of work) 3 months ago to a sold-out market as of yesterday. Yeah, the markets are dropping, but the real economy of moving "stuff" seems to be chugging along.

 

[Dawg52]

And for anyone keeping score at home, I think that we have a self-sustaining recovery underway as long as the financial system does not come apart. BDI up another chunk yesterday and the freight futures market spiked even as equities dropped. Off in the background, containership rates have recovered in the last few months and continue to rise. PSVs in the North Sea have gone from laid-up ships (docked for lack of work) 3 months ago to a sold-out market as of yesterday. Yeah, the markets are dropping, but the real economy of moving "stuff" seems to be chugging along.

DOW futures off 209 this morning. I wish the markets would read your posts.

 

[brewer12345]

DOW futures off 209 this morning. I wish the markets would read your posts.

Difference of opinion (and panic, manipulation, over-reaction, gubmint intervention, space aliens,etc.) Makes a market.

 

[Leonidas]

Difference of opinion (and panic, manipulation, over-reaction, gubmint intervention, space aliens,etc.) Makes a market.

I was going to say crazy people, but I guess panic, manipulation, over-reaction and anything to do with the guvmint all fit just as well.

Brewer, thanks for the info on the BDI - I've been meaning to go back and look at the shipping stocks this quarter.

 

[Gone4Good]

Difference of opinion (and panic, manipulation, over-reaction, gubmint intervention, space aliens,etc.) Makes a market.

Agreed.

I keep looking for reasons to be scared but I don't see that much changing on the "real" economy front. This seems mostly to be a crisis of confidence with people still shaken by the sub-prime meltdown and even the "flash crash". Certainly some of Europe's banks are at risk, but the chain of events needed to cause major losses at U.S. institutions borders on far fetched. I guess it is "tail risk" that didn't seem to exist several months ago, but I'd wager on eventual stabilization and reversal of the current "fear trade".

 

[ultimo]

And it is still made up...

DD

Yep, and more so every day.

But DON'T need approval.

Was interested in ideas only.

 

[ultimo]

Agreed.

I keep looking for reasons to be scared but I don't see that much changing on the "real" economy front... .

I'm not looking for reasons to be scared, either. I'm just looking for ways to make money.

 

[Running_Man]

I am keeping score at home

And for anyone keeping score at home, I think that we have a self-sustaining recovery underway as long as the financial system does not come apart. BDI up another chunk yesterday and the freight futures market spiked even as equities dropped. Off in the background, containership rates have recovered in the last few months and continue to rise. PSVs in the North Sea have gone from laid-up ships (docked for lack of work) 3 months ago to a sold-out market as of yesterday. Yeah, the markets are dropping, but the real economy of moving "stuff" seems to be chugging along.

A little fact checking and historical basis

05-22-2008, 01:02 PM #196 brewer12345
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...

Quote:
Originally Posted by CCdaCE
Ran across this article on marketwatch. Summary is: A daily gauge of ocean shipping rates that serves as a widely-followed leading economic indicator has roared back to new highs after dipping earlier this year, highlighting both the resilience of the global economy and surging inflation pressures.

-CC

Idiotic article in many respects. The BDI reflects what is going on in the BRIC economies, the steel industry, and a shortage of shipping tonnage and port capacity caused by decades of underinvestment. The index is quite volatile, but the underlying causes will take years and a lot of capital to resolve, so it will remain at relatively high levels for the forseeably future. Unless, of course, the Chinese and the Indans stop building out infrastructure, growing their populations, and would rather sit in dark, unheated buildings in the winter.
__________________

Quote:5/17/2008
Originally Posted by dm
These stocks are up over 50% since March. I'm not thinking of selling all of them, just lightning up a little. I was adding when they were down and now wonder if they have gotten ahead of themselfs.

05-22-2008, 01:02 PM #196 brewer12345
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...

The stocks are way behind the surging fndamentals. I intend to hang on as the media alerts the retail rubes that things are great in the industry and then I will sell when the idiot crowd rushes in and bids up the stocks. Expect this to happen within a few weeks to 6 months

5/18/2008Originally Posted by Texas Proud
And what is a target on NM
I believe it is worth $20 to $25. Having said that, let me give you an important caveat. There is currently a massive squeeze on for ships, to the point of a dire shortage vs. the cargos that need to be moved. If the squeeze goes further than I am expecting (think BDI north of 15,000), the stock may be worth considerably more.

As of right now the BDI (and NM) is 25% of where it was in May of 2008 and still below last November's high and has made no meaningful new high. The BDI has never confirmed the recovery in the economy as the stock market indicated may happen, it may in the future but it needs to get over 5,000 and hold it for an extended period to get to a prior much lower level.

 

[brewer12345]

A little fact checking and historical basis





As of right now the BDI (and NM) is 25% of where it was in May of 2008 and still below last November's high and has made no meaningful new high. The BDI has never confirmed the recovery in the economy as the stock market indicated may happen, it may in the future but it needs to get over 5,000 and hold it for an extended period to get to a prior much lower level.

Be my guest to do as you see fit. The reality is that the peaks of the BDI north of 10,000 were unsustainable and heavily driven by some short term things (principally congestion). The smarter management teams (like NM's) knew this and locked in long term charters at the time even though they often got something like half or less of spot rates for doing so. I view BDI of 4000-6000 as the likely long term sustainable range and base my valuations of companies/assets on that. You are free to do as you wish.

And FWIW, I think that the BDI is a lousy economic predictor. I merely mention the action in the dry bulk and other shipping sectors as a contrast to what is going on in the markets. The market action would have you believe that the world is grinding to a halt. I do not see that in the real-world industries whose fundamentals I follow closely.

 

[BTravlin]

And for anyone keeping score at home, I think that we have a self-sustaining recovery underway as long as the financial system does not come apart. BDI up another chunk yesterday and the freight futures market spiked even as equities dropped. Off in the background, containership rates have recovered in the last few months and continue to rise. PSVs in the North Sea have gone from laid-up ships (docked for lack of work) 3 months ago to a sold-out market as of yesterday. Yeah, the markets are dropping, but the real economy of moving "stuff" seems to be chugging along.

You're right about the transportation sector. I deal with imports and have seen container rates skyrocket in the last 45-60 days. Containers are being left at the shipping port because the ships are full.

I wish I could say my industry was in self-sustaining recovery but it doesn't appear that way in building materials. We had a nice run in March & April but somebody turned the switch off in May. Seems as if everybody let their inventories run down to bare floor and then all restocked at the same time getting ready for a hoped for spring rush. Sad to say there has not been much of a rush.

 

[BTravlin]

Be my guest to do as you see fit. The reality is that the peaks of the BDI north of 10,000 were unsustainable and heavily driven by some short term things (principally congestion). The smarter management teams (like NM's) knew this and locked in long term charters at the time even though they often got something like half or less of spot rates for doing so. I view BDI of 4000-6000 as the likely long term sustainable range and base my valuations of companies/assets on that. You are free to do as you wish.

And FWIW, I think that the BDI is a lousy economic predictor. I merely mention the action in the dry bulk and other shipping sectors as a contrast to what is going on in the markets. The market action would have you believe that the world is grinding to a halt. I do not see that in the real-world industries whose fundamentals I follow closely.

The container lines also mothballed a lot of ships and let a lot of crews go in order to reduce capacity and give them room to raise rates.

Inland trucking rates are also going up dramatically for the same reason. Over a hundred thousand trucks were parked during this recession and all it took was a little uptick in demand for shippers to see a huge change overnight. Sixty days ago I could take an order first thing in the morning and often get the truck loaded late that day. Now it is taking 2 to 3 days and the rates have gone up 20%.

 

[REWahoo]

(...panic, manipulation, over-reaction, gubmint intervention, space aliens,etc.)

Speaking of space aliens, this guy is apparently suffering from an alien abduction hangover. I'm always amazed at his constant message of gloom & doom, but this time old Paul has taken it to a new level:

Crash is dead ahead. Sell. Get liquid. Now Paul B. Farrell - MarketWatch

Think bear, think crash, think end of capitalism, think Great Depression II ...

Whaddya bet he's buying on the dips?