(08-20-2015, 08:10 PM)hendi_alex Wrote: If one believes in $75-$85 crude over the next couple of years, then current prices reflect a no brainer. If on the other hand $35-$45 or lower crude is the reality for the next few years, then perhaps not. I'm maintaining my current 10%-11% weighting, but the 'no brainer' aspect is not nearly as clear to me. The recovery in the stocks could extend years into the future. Many like COP and CVX could have to cut their dividends. There is just no telling how long this will take to play out. According to one article I read, it has only been 17 years since crude was selling at $12 per barrel. The authors says, "and while full-cycle costs have been estimated at ~$40/boe, the marginal cost of bringing one barrel of oil equivalent to the surface is less than $14 today." There is still a lot of cheap production on line, and with the world economy in contraction or perhaps even in collapse, these low prices could persist for some time.

IMO we will soon see widespread business failure in the higher levered higher production cost companies. These failures will affect the backers and could cause destabilization in the banking industry. At the same time China is unraveling in a bad way, Europe is teetering, and the U.S. is stalling as well. I can't predict whether equities tumble 10% or 40% or more, but am flush with cash because I think that momentum is building to the downside with energy continuing to least the way at least through mid to late fall.

(08-22-2015, 06:53 AM)hendi_alex Wrote: Yep. This week showed some the difference between cliche and fact. So many income investors like to brag, [I only care about the income stream, fluctuations in the NAV don't matter.] It is my guess that many espouse such but based upon weak resolve, and they end up being the retailers who when they finally do capitulate, lose the most. They also stay out the longest, therefore don't recover their losses.

A person needs to know his/her real tolerance for loss of principal and have a plan in place. We all expect our portfolio value to gradually increase. I can't believe that many at all would be willing to watch a million dollars turn into $400,000 without taking some kind of action. That kind of dramatic drop is possible, especially from current lofty levels, and the plan really needs to be in place, so that defensive actions are not directed by emotion and panic. The market is probably not in a bubble, but IMO it is bubble like, fueled by prolonged fed rates which have exaggerated corporate earnings. Also most corporate earnings have been fueled by cost cutting rather than through business expansion. How will profits get boosted during the next part of the cycle? This is looking more and more like the stage is being set for a 1-2 punch similar to that following 1929.

Most here are very diversified. That is good. Many here are just starting out, that is good, as lots of cost averaging can take place after a major drop. Many who have more mature accounts, don't seem to really be prepared for the dramatic drop in principal which is possible, IMO is very likely. Cliques won't work! It is getting late to develop a realistic plan for when and if the portfolio value moves into free fall.

(08-24-2015, 06:59 AM)hendi_alex Wrote: If XOM was a 'no brainer' last week, then it will reallllly be a no brainer today!