Josh Brown’s take :
"My feeling is that today things have changed and entered a new phase. Indiscriminate selling. Last week and the week before there seemed to have been some rhyme or reason for what was going down, and how much. Today is the first day of this thing, in my best guess, that professionals are selling things just to be able to show their investors that they’re doing something. It’s a new phase, we hadn’t quite had the time to get to this phase during the October thrust lower or the January correction for that matter.
And so you get the Nasdaq down 3%, the Dow and S&P 500 down 2%, Russell 2000 down etc. People who report to investors need to show that they’d anticipated at least some of this. Today they’re taking that step to allow themselves to do so. This sort of thing feeds on itself because money managers are herd animals when it comes to career preservation, even if they fancy themselves to be “contrarians” when it comes to selecting stocks or weighting portfolios. The one thing it’s impossible to be contrarian about is the fact that you’ll be fired for sitting still if that’s not the expectation you’ve sold to a client. No one wants the other side of that trade." :
What I learned in the dot-com bust and later during the financial bust is the need of a sturdy portfolio, shares of companies that won’t go broke because those don’t bounce back. Also not betting on buying calls and selling puts, those are closer to gambling than investing.
Bear markets have two phases, the first is when, like Wile E. Coyote running of a cliff, investors discover there is not enough valuation to support prices. That leads to profit taking and prices dropping. Depending on how deeply prices fall, phase two will kick in. Funds have to sell, like it or not, to cover withdrawals. Some hedge funds have “limited withdrawal” clauses to prevent this. Eventually a chain reaction sets in driven by leverage. Investors are forced to sell to meet margin calls and other covenant clauses driving prices further down. Some call this phase “capitulation.”
If you are leveraged or scared you get to sell at the worst possible time. If you have cash you can use the opportunity of “blood on the streets” to bulk up. Buffett is a master, having rescued GE and some BIG Wall St. banks with great profits for Berkshire-Hathaway investors. In any case, when the bear is visible enough, the best thing is to hibernate, go to sleep until the bottom is in place.
In any case, when the bear is visible enough, the best thing is to hibernate, go to sleep until the bottom is in place.
How to predict bottom? Is’nt it better to simply deploy cash in stages?
Josh Brown is the definition of an empty suit that gets put on TV because he has a popular blog. You might as well call up Merrill Lynch and talk to them.
Even a broken clock is right twice a day, et al.
Bear markets have two phases, the first is when, like Wile E. Coyote running of a cliff, investors discover there is not enough valuation to support prices.
Correct, in phase 1 Wile E. Coyote suddenly falls to the “ground.”
But all is not lost he stands up, a bit dazed and looks to be fine.
Phase 2 is when he turns around and suddenly sees a freight train ready to hit him.
How to predict bottom?
Don’t predict. Wait for the bounce and a double or triple bottom.
Is’nt it better to simply deploy cash in stages?
That’s one way to do it.