Crosspost: A Fool's Confession

Investment Analysis Clubs Saul’s Investing Discussions
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I have a confession to make.

But first, background: In the Great Recession, I rode it down… down… down. Then I finally sold as I realized the drop was going to continue a LONG WAY. What did I sell? A whole bunch of my positions. I ended up buying back in. To almost 100% stock again. Remarkably, I got back in almost at the very bottom. I don’t claim any special ability to have picked that point to buy back in. But that whole selling and buying back in process enabled me to retire early at 57.

How does THAT all work with the Fool doctrine of “buy and hold”? Well, I don’t think it does work with it very well. I think, instead, it’s more important to use one’s head and make one’s own decisions… guided by wise counsel. Yes, I consider the Fool to usually be wise counsel. But that doesn’t mean I don’t think.

Now…

Not long ago, I went to 99% cash. I got out VERY late, after my portfolio dropped about 37% from it’s peak (although I’m “only” down about 12% for the year). The largest part of that remaining 1% is AMZN. I figure it won’t drop a lot more. Why? They’re doing way too well to crater much more.

Why did I sell this time?

Fear?

No. Like in 2008, I sold due to what I’ll call logic. In today’s case, the logic is this: The economy is going to take a big hit with COVID and the world’s response to it and part of the related effect is that the market appears to have quite a way to drop yet. My #1 former holding (TTD) has dropped in half from the peak… and it’s dropped 25% from when I sold.

Am I ignoring the problem I created for myself? “What problem?” you say? Well, to sell out with the intention of buying back in later… you have to sell at a good point and buy back in later… at a lower price. How will I know when to buy back in?

That’s difficult to say. Part of the process will be buying back in after the market seems to stabilize. What’s the rest of the “buy back in process”? That’s complicated. I don’t think explaining it would be easy and I don’t think it would resonate with anyone. But I’ll probably mention it when I’m doing it if anyone is interested.

An important added point: Beware a sucker’s rally. That’s when the market pops up for a bit after a big market drop. It draws people back into investing too early when there is plenty of market drop left. We recently had a BIG one day market rise. Hopefully few people here were suckered into that.

Final thought: It’s possible we’ll see a V shaped market recovery. Could happen. But I see it as unlikely any time soon because the bad news is still coming. And I already have a margin of safety toward breakeven. Remember TTD? It’s down 25% from where I sold. That means it has to go up 33% to get back to that point. Will it turn out that my decision to sell was bad? It could happen. I’m not losing sleep over it though. The efforts of the whole world are currently working in my direction. :slight_smile:

Final Thought I: Folks! PLEASE don’t follow in my steps because of what I’ve done. The odds are already not as favorable for you as they were when I sold. And if you sell now, it is not certain you’ll get back in at an appropriate time… and into the appropriate companies with the appropriate allocations.

Final Thought II: As in the last big sell I made, I find it very “freeing” to be in cash. Why? Because I am able to review my choices for new positions with clearer eyes. You don’t think it works that way? You’d be surprised… :slight_smile:

The very best of good fortune to all of you, in life, in health, in your portfolio… and of those, money is the very least.

Rob
Rule Breaker / Market Pass / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Hi Rob,

I’m shocked I tell you, shocked!

I’m so disappointed. I stuck it out, myself. I only went to 75% cash :slight_smile: and kept a truckload of ZM. (pure luck!)

I think the thing you left out - just my opinion - is that maybe this time it really is different. It doesn’t take a masters in economics to imagine this whole train derailing. It may be short, but I think it will cause a lot of damage, even if temporary. (Everything is temporary, no?)

… and we are not alone

https://discussion.fool.com/Message.asp?mid=34438685
https://discussion.fool.com/the-view-from-the-top-rail-34440866…

Good call? Bad Call?

I don’t know, it really doesn’t matter. It was the call that at this time in my life, I needed to make. Not to mention, I may get the chance to make up for my past mistakes in selling some little companies like AMZN, BRK, GOOGL, maybe even SHOP. I still love the fast growers we’re into on this board, and I will be back in most or all again, to varying degrees. But I need to spend more time with things outside of investing so need a little stability to counter my riskier plays, ones that I don’t have to watch quite as closely.

At least I don’t have that “TMF” prefix to live down. Oh, Rob, you are so bad, bad, bad! :slight_smile:

Good luck all,

Dan

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I think the thing you left out - just my opinion - is that maybe this time it really is different. – Dan

This time? Nah…although I wouldn’t attempt to guess when the economy will start growing again (I figure it’s shrinking now…no great insight there!) But at some point in the future it really will be different. The happy talk from the Fool never thinks that could happen. It’ll be a mammoth surprise for sure.

I DID leave this out by mistake:

Over 90% of our portfolio is in tax sheltered accounts, so taxes are not a consideration in any buy/sell situation… although I’ve found over time that considering taxes in a buy/sell situation is often a big mistake. I learned that as I watched a 4-bagger in Commodore Computers turn into a “lesser bagger” while waiting for those long term gains instead of short term. LOL.

For the shares in my primary taxable account (AYX, MDB and PING), the first two were long term gains (big ones) and PING was a loss. So, I may owe Uncle Sam (and the great State of North Carolina) some money at tax time next year. No big deal in the overall scheme of things. That account is now 100% cash.

Also, if we get REALLY serious about cutting expenses… and I earn zero on the cash… we now have maybe 60 years worth of assets left to live on…if we don’t sell the house. And I’m the youngest in our marriage at 67. Our Social Security checks are fairly substantial (at least I think so) and we have a bit of cash now. If we DON’T cut back and don’t get back to investing, we’ll be broke within a decade. LOL… yes, we spend at an incredible rate that has been increasing…

Rob
Rule Breaker / Market Pass / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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This is quite ironic to me, as I happened to visit your profile earlier this very evening Rob to see what you held and it looked very sparse to me.

That isn’t to suggest that you did or did not make the right call.

I am somewhat on the look out for yet another bear market rally and may sell into one if it happens. There is supposedly an FDA-related press conference tomorrow (Thursday), if I am not mistaken. Perhaps there will be news there of some solid virus treatments.

-volfan84
(actually up considerably from mid-February, due to some successfully-executed trades with some short positions, but was down considerably as of early February due to one of those in particular)

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In today’s case, the logic is this: The economy is going to take a big hit with COVID and the world’s response to it and part of the related effect is that the market appears to have quite a way to drop yet.

Do you own the market or just a few stocks? While the economy will suffer and the market will drop, are there no businesses and stocks that you can identify that can benefit from the crisis?

My four coronavirus stocks:

EVBG - telenotification
TDOC - telemedicine
ZM - teleconferencing
DOCU - teledocuments

https://discussion.fool.com/i39ve-come-to-the-conclusion-nobody-…

3 month chart: https://softwaretimes.com/pics/evbg-03-19-2020.gif

What else might work? AMZN? NFLX?

Denny Schlesinger
down 2.5% YTD

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Do you own the market or just a few stocks? While the economy will suffer and the market will drop, are there no businesses and stocks that you can identify that can benefit from the crisis? – Denny

Three things:

  1. I typically run a concentrated portfolio. 15 is ideal for me but over time I tend to pick up tiny additional positions due to a lack of discipline.

  2. Yes. Some companies will prosper during this time. However, I would rather keep my mind clear and focus on overall my discipline to not buy too early. Therefore, I avoid trying to take advantage of outliers that may seem attractive but don’t necessarily fit my selection preferences. Sorta like a celebration of picking up dimes in front of a steam roller, especially as some of those dimes seem to be a bit stretched in terms of valuation.

  3. My subject is only marginally on topic with Saul’s board. I’d rather not be extending this thread. Thanks for your understanding.

Rob
Rule Breaker / Market Pass / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Hi Rob,

Today is an example why I can’t, and won’t, do what you did and sell out. My portfolio is currently up 8%, ON THE DAY. It’s up 20.4% from Monday’s close. China had no new cases yesterday in the whole country. The market is starting to realize that this won’t go on forever. The stocks you sold out of (except for TTD, which I sold out of too), are probably considerably up from when you sold. So what do you do? Do you get back in now and take your loss? Do you hope it is a sucker rally and stay out? But then what do you do if it continues on up tomorrow? Do you panic and buy on a short term peak? Or if it drops a few points from here, do you get back in or stay out? and then if it reverses course again?

I can’t deal with all that stress! I just can’t! And if I tried I’d get it wrong. So I stay in high confidence stocks.

Best

Saul

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Oops! While I was typing that my portfolio went from up 8.0% to up 9.5%, and I’m up 22.3% from Monday’s close. I haven’t a clue where it’s going from here and I’m a poor guesser, so I’m staying in.
Sual

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I can’t take it either.

That is why I sold out.

Also why I quit shorting.

I don’t need the bottom. I need clarity. Right now I am pretty sure we will beat this virus. My numbers tell me the USA and Europe are on about the same track as China. (I will know
more this weekend and reserve the right to change my mind)

What I do not know is how much damage this will
do to the economy.

This is unknown. Also, how long will it take to recover. Most importantly, will I have enough to buy boat?

Cheers
Qazulight (They say 70
percent alcohol kills the virus. Ever Clear is 70
percent alcohol. Coincidence? I think not!)

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China had no new cases yesterday in the whole country.

That is inaccurate. In Wuhan province, yes. But in China… 13 new cases yesterday, 34 new cases today.
https://www.worldometers.info/coronavirus/

🆁🅶🅱
For not in my bow do I trust, nor can my sword save me.

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China reported no new domestic cases today, but did report a handful of new cases contracted elsewhere.

https://www.npr.org/sections/coronavirus-live-updates/2020/0…

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Subject: Re: Re: Crosspost: A Fool’s Confession
Author: SaulR80683 | Date: 3/19/2020 1:53:43 PM | Number: 64648

Yes. The portfolio is up today a goodly amount.As it happens I added to TTD 2 or 3 times in the past month. Prices are too tempting and TTD is still a great story.
I also added to my highest conviction stocks many of which overlap those discussed extensively here.

I suspect some folks may have lightened up on TTD to free cash for purchases of such things as ZM,CRWD etc.
I might have done the same .However about 3-4 weeks ago I establish a quite large cash position from whence all my recent purchase have come. I’ve also been dabbling with some newer ideas.These are RB suggestions but nothing worth discussing here.

That is, I believe, the value of raising some cash in advance of an obviously impending storm. As for going to 100% cash I don’t believe I have that intestinal fortitude. And besides my wife wouldn’t let me do it.

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The World-O-Meters is a great site. Look at China’s graph. They are getting out of it. Others will too. I’m personally up 19% since Monday’s close. Have to stay invested. Investing is a decades long process.

https://www.worldometers.info/coronavirus/country/china/

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Saul: Today is an example why I can’t, and won’t, do what you did and sell out.

I was about to post almost the exact same thing, Saul.

When last I looked about 15 minutes ago, I had 12 positions that were up between 10-17% for the day, needless to say, I’m up double digits for the day, and have added a lot on the big down days, too, so up on a larger base. This is how the market can easily get away from someone that tries to time it. Things can change so quickly, just Mon, I posted that I was anxious because of the LARGE (GIANT, really) drop that day (and other big drops previously), but that I was staying the course, buying the companies I like with each leg down.

I’m not saying we hit the bottom yesterday, probably not, just because it would be quite a coincidence for that to happen and for us to be discussing it. I’m sure there will be other big down days, and lower lows, but what if our stocks have another, just decent day, tomorrow? I’ll be up over 20% from the low, in almost every position!

Again, Negative Nellies, don’t jump all over me, I’m NOT calling a bottom, and Market Timers (I’m in, I’m out, I’m in, I’m out), you do see how this could get away from you, right? I don’t recall the stat, but it’s something about a HUGE percentage of gains come from just the 10 best days in the market each year (or whatever period you’re looking at), I don’t want to miss those.

This is not an “I told you so, I’m right” post, because I’m sure you’ll be able to throw it right back in my face tomorrow or the next day when we may be back down to new lows, but, I’m just saying, you can’t time this stuff!

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If you sell out, you have to be right twice — when to sell and when to buy again. I am rarely right once.

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I was fortunate enough to get ahead of it all and went to 70% cash a couple of weeks ago. I knew that things were just getting started when the market started to fall. When everybody was saying that this virus was nothing to worry about - that the flu is worse, I knew we were in for a massive wake-up call. I’ve bought back in on the way down and now I am at 30% cash. My portfolio is actually up 2.1% for the year.

I also feel like there is another leg down. The US is not China. I’ve been reading some stories comparing the US reaction to S. Korea and we are not looking good. We are too individualistic to succeed with the mass mobilization of society that is needed to take care of something like this. It seems likely to me that next week in the US is going to be like this week in Italy.

I have my eyes on shares of DataDog, Alteryx, and Roku. They are already my top holdings, but I want more. My portfolio was up 7.8% today and it was uncomfortable watching the deals that were to be had in these names evaporate in the space of 7 hours. But I’m with Rob, trying to be disciplined and hold on to my cash for the next leg down. I don’t see how we get to Monday without panic getting turned up again.

But look at Roku!!! I remember a lot of people here saying, “It would look good at 100”. Well, now it’s at 73! Look at Alteryx! It’s at 100 again! A few weeks ago I was ready to buy more at 150. If these aren’t great bargains in the long term, I don’t know what is! I’m glad I have the cash to take advantage. Here’s to hoping I don’t get too greedy.

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"I can’t take it either.

That is why I sold out.

Also why I quit shorting."

For those of you on this board and in this thread that have elected to take the position that you have sold out of the market, I would like to personally thank you! I am not questioning your reasons for your decisions because at the end of the day, everyone needs to be able to live a low-stress life and put their heads on the pillow at night for a good night’s sleep.

However, every ying needs a yang and you have thankfully been the “ying” to my “yang”! You have been the “FEAR” to my “GREED” and I mean that in the nicest way. It is simply how the market remains efficient at troubled times like these.

Remember…

BE FEARFUL WHEN OTHERS ARE GREEDY AND GREEDY WHEN OTHERS ARE FEARFUL

Harley

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I have no doubt that Saul’s SaaS companies will weather this recession better than most but I’m very skeptical their stock prices will avoid floating away with the receding tide that leaves many naked swimmers behind. Growth will slow for nearly everyone besides Zoom because when worldwide GDP has a significant decline it’s all but inevitable.

Tourism and hospitality account for more than 10% of worldwide GDP and that is dead for 6 months at least and will face a long slow climb back to current numbers. Other industries are facing steep declines, too. 20%+ unemployment has been mentioned as a very real possibility by our Treasury Secretary.

I sincerely wish everyone the best but I plan on waiting until at least May before I start nibbling.

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Another reason I sold out 3+ weeks ago was I believed everyone in my family plus almost all my in-laws could soon be out of work given that Las Vegas appeared extremely vulnerable. That has come true unfortunately so I’m glad I’ve got a pile of cash and don’t have to be sweating big portfolio losses as well. Nothing would make me happier than to see this situation get swiftly resolved with minimal economic damage and loss of life. I don’t mind missing out on some or all of a bounce if that happens.

As of now my sister and her husband are still working from home since they do software. My wife, me, and one child are out of work, another is a flight attendant and surely soon to be laid off, and the last is a student in her last semester doing online classes since last Monday. Nearly all my in-laws (80-90%) are out of work and it’s a big family so that’s a couple dozen people. Las Vegas has been annihilated.

So my situation is a bit different from most. I’m normally a fully invested stick it out kind of guy (didn’t even flinch in the 2018 near-Bear) but I’m spooked and wanted to preserve cash for a while until I’ve got some visibility about where we’re going.

Again, I genuinely hope I get left in the dust by an epic and sustained stock market bounce back.

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Hang in there NevadaGolfer! You certainly did the honorable thing for your family. When I wrote my post on Fear & Greed, I was doing so to explain a practical axiom of investing with a twist of sarcasm. I should have been more understanding and sensitive enough to foresee that these unprecedented circumstances would be negatively impacting members of our board community. Please accept my apology for my “tone deaf” post. I wish you and your family health and strength as you all persevere.

Harley

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