Cute Fuzzy Bunny said:
Again...I think there's a gross difference between traditional "market timing" of trying to employ some hair brained scheme to measure valuations along with associated "buy/sell" limits and the 1999/2000 "market timing" of looking at things so frickin far out of whack that theres no way to attribute the valuations to ANYTHING within an order of magnitude or more.
Ding ding right answer.
My story is pretty similar to CFB's, partly cause we worked for the same company Intel. I was really really early with the net, meaning that I've been posting on Internet discussion board for more than 25 years. (And still can't managed to make a post without a grammar mistake
) I talked to, worked with, bought stuff from most of the Internet pioneers.
But the three things that convinced me that bubble was near bursting were when:
1. My friends and I use to enjoy making up crazy internet business, like selling $100 bills for $95. When companies with even more ridiculous business plans. were getting VC funding, and going public. E.g. the search engine which offered chance a winning prizes (IRRC $10 million was the top one) just for using their free software.
2. My friend, a brilliant engineer, who had perfect record in going from one cool technology company to another and never making a dime on his options, finally found a company that went public. As VP of engineering, he gave all of his poker buddies friends and family shares, for the IPO of his company. A Business 2 Business E-commerce software provider with a 2 year history, almost no revenues and 30 odd employees. The IPO was 13, first trade at 40 I sold at 45 a couple of days later. At $4,000 the most profitable poker session ever for me. Keeping with tradition my friend as VP had to keep his shares for a year, at which point they were down to $3-4.
But my lucky with flipping isn' t the point. Since I was selling my house, and I was amazed to find that the market cap of my friends company exceeded the
purchase price of every single house sold in Silicon Valley in the last year . Lets think about this which would you rather own a 30 person start-up or 600+ houses in one of the most expensive areas in the country.
3. Another friend Mike was the technical assistant to Intel's legendary CEO Andy Grove, so on my last day at Intel Mike, Andy, and I had lunch. Mike was a true Internet believer (as was I) and he still thought that the stock prices were reasonable. Andy on the other hand, explained that he just gotten the payout from a Venture Capital fund he had invested in several years and while it made him a boatload of money, he couldn't get his money out fast enough. I figured that betting Mike was smarter than Andy Grove, about making money wasn't a good bet.
By Jan 2000, I sold much of my Intel stocks, and all of my other tech stocks. I bought bonds, (because as a I retiree I knew I need them, especially TIPs with an real return of 3.92%) and REITs. Of course even my good timing was far from perfect. I also closed out of my short positions on Amazon, and AOL, (1 year too early) and if I had managed to sell all of my Intel I'd probably have another $750K.
Under normal circumstance a yearly re balancing to keep your assets properly allocated is the best way to avoid buying last years hot asset, but extraordinary times call for more drastic action.
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