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Check out this article:
http://www.telegraph.co.uk/finance/11805...ntrol.html
I'm really used to doomsday stories from countless sources that seem to call doomsday on the market every correction and love over-zelous doomsday stories.
But this one struck me as weird, I read the finance section of the Telegraph regularly and it's always spot on and sensible. Why publish this? Could it all be true?
My plan is to do as I always do, ignore and continue to invest in dividend stocks 
What's everyone else's take?
DD
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Like you, I plan on staying in the market. If the dollar collapses and Hyperinflation sets in then what good is cash anyways. 90 % of Americans are strapped for cash as it is now. What happens when the food Stampers get cut off and get hungry. It will be like the walking dead, only instead of zombies they will be stampers with guns coming for your cigarets and canned food.
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08-17-2015, 03:02 PM
(This post was last modified: 08-17-2015, 03:04 PM by hendi_alex.)
Well I don't anticipate doomsday, but it makes sense to me to have a variable cash weighting, and increase in that range depending upon the market and sentiment. My cash weighting is in the upper range at 27% after selling some trading shares of TNK today. It is not like my cash weighting is stagnant however, as those funds provide opportunity cash usually for quick profitable trades. For example, the 2000 TNK shares were bought on 8/12 for $6.58 and were sold today for $6.99 netting 6.1% in 5 days. I'm still holding a similar sized batch of TNK trading shares, but will wait for closer to $7.50 to sell. At any rate, I'll not let cash drop under 10%-15% unless the big crash does come, but hope to keep average cash weighting on the upper end somewhere between 20%-33%. So for now the cash is just sitting, waiting for opportunity, when there is a disconnect between share price and market/company fundamentals for some ticker of interest. The cash is also there for slowly feathering into depressed sectors, adding to existing positions on strongly down days that take the price to new lows or near to existing yearly lows.
Most recent accumulations were: EWZ ROOF MRO KBWY XOM KMF
Alex
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(08-17-2015, 02:14 PM)Jason Wrote: Like you, I plan on staying in the market. If the dollar collapses and Hyperinflation sets in then what good is cash anyways. 90 % of Americans are strapped for cash as it is now. What happens when the food Stampers get cut off and get hungry. It will be like the walking dead, only instead of zombies they will be stampers with guns coming for your cigarets and canned food.
Yet another reason not to smoke. Keep the tobacco stocks though.
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We lived through 2008-2011. I plan to just sit back and record my dividends. When the cash accumulates enough and I see an opportunity, I'll take it but, being fully invested, not sure I'll notice right now.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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I saw that article too and admit it gave me pause. But then I remembered the single most important thing about reading financial news: NOBODY HAS ANY F-ING IDEA WHAT IS COMING NEXT. Nobody. Everybody, and I mean everybody, who tells you what is going to happen next is full of shit. It is all a bunch of guesses. If somebody guesses right, we (stupidly) think they are smart and we pay more attention to their next guess. But we shouldn't -- the next guess is just as much of a guess as the last one.
The market could triple in the next few years, or global extinction could begin tomorrow. Neither of those is probably very likely, but we can't rule them out. So what do you do? You make a plan that you think makes sense given the likely range of scenarios, and you stick to it as best you can. I think that there are credible studies showing that staying fully invested is the smart thing to do, but I nonetheless keep lots of cash. It lets me sleep well at night, and I will be ready to pounce in the next "collapse." In any case, your plan should contemplate occasional sharp down periods in the market. If you are not constitutionally able to stick to your plan during those periods, then you need to reconsider your whole intention of being in the market.
I agree with Jason -- if things get so bad that the guns and gold preppers were right, then we're going to have a lot more to worry about than our dividends. In that case, it will not matter whether your wealth is in cash or shares -- it will be meaningless. I'm betting that society will continue to function, and am with the rest of you. I'm going to continue to accumulate shares as opportunities warrant. And if a big swoon comes along, it will likely just make those opportunities better.
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I agree with Kerim's point that nobody knows what going to happen and its one person's guess against another's. But all the points mentioned in the article are valid problems existing in the world today - its not a potential problem...its a problem now. True, that the macro economic trends cannot be controlled by anyone - even someone as big as The Fed. Try as much as they can by unleashing multiple QEs, hoping to stoke inflation -- things like China devaluing its currency is beyond the Fed's control and in a weird way, even China's hands are tied trying to save its own bacon.
Best we can do as retail investors is to stay conservative, hedge some of your bets and hold some cash waiting for upcoming opportunities.
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It sounds to me that "nobody knows what is going to happen" is a stronger argument for holding a moderate cash position or other hedge aimed toward the downside protection than it is for being 100% invested. Being 75% in for example is not like being out, running for the hills so to speak. At some point it makes sense to let cash accumulate, in order to be able to take better opportunity of the drop should it come. It is not like there is going to be some huge lost opportunity cost, as in the market all of a sudden blows through the top and taking a massive run. And even if that were to happen, there is the 75% or 85% or whatever long position that takes the portfolio for the ride.
I just don't usually view positions as all in or all out. Everything has a typical weighting range. With REITs for example, in boom times my portfolio may have 20% weighting, but in the face of major headwinds, may be only 5% weighting. I generally wouldn't totally exit the sector, as you say, nobody really knows what will happen. But one can let weightings float depending upon the signals that the economy and the market are giving. In the strongest part of this bull market, I was usually close to 100% invested the entire time. Now the signals said that raising some cash would be prudent, and so the cash weighting has moved to the upper end based upon those signals and also on my sentiment.
Alex
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It started yesterday?
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If this morning starts out down, which looks to be the case, we could have a very steep temporary drop as stop loss orders get taken out. I've got GTC limit orders in place for all of my long term positions. All are 10%-15% below yesterday's close. I don't expect any to hit and fill, but one never knows. It is certainly nice to have the cash available and the GTC orders in place, just in case!
Alex
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Your GTCs are to buy or to sell?
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Buying enough to keep the weighting in the desired range. I don't have any planned sells, though do have three somewhat transient positions that will not be accumulated and could be reduced at any time. Every long term position will be accumulated if the price drop is severe enough.
Alex
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