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by winston » Sat Sep 03, 2016 7:39 pm
Today, you need to prepare for poor returns and lower prices of financial assets.
It’s easy to figure out what to do about all this, but hard for most investors to do it: Avoid most stocks. Hold cash and gold. Don’t predict. Prepare.
by winston » Sun Sep 04, 2016 8:01 am
Now the best time to protect yourself in the face of a financial storm is when the markets are calm. So here are three ways you can do it:
1. Sell off a portion of your profitable positions as well as your unprofitable positions (for tax loss selling) to create a mound of cash for future buying opportunities.
2. Buy put options or sell covered calls (or both) to protect long stock positions that you don’t want to sell off.
3. Rebalance your portfolio out of growth positions and into defensive ones, such as utilities and dividend stocks.
And remember…
The best time to be prepared for anything in the stock market is when nothing is happening.
by winston » Sun Sep 11, 2016 6:34 am
by winston » Sat Sep 17, 2016 8:53 pm
Hiding in most portfolios is a big assumption about risk -- namely, that assets are uncorrelated (or at least less than highly correlated) to each other.
Correlations among assets have risen over the past two decades. But the bigger problem is that correlations tend to spike when markets are in turmoil.
In other words, assets do fall apart at the same time -- they just wait for the most inconvenient time to do it.
So rather than rely on correlations to bail them out during the next meltdown, investors should instead ask themselves one simple question: How much of my portfolio am I prepared to put in harm’s way? Then they should move the rest to more solid ground.
by winston » Tue Sep 20, 2016 6:44 am
by winston » Wed Sep 21, 2016 11:08 am
1. Make your asset allocation more conservative. How you divide your money up among stocks, bonds, real estate investment trusts and other assets is your single most important investment decision. You make your asset allocation more conservative by reducing your exposure to equities. Just how conservative to make it is a personal decision based on your age, temperament and risk tolerance. But Warren Buffett’s mentor Benjamin Graham had a good rule of thumb: An investor should never have more than 80% in stocks or less than 20%. So unless you have one foot in the grave and the other on a banana peel, don’t get more conservative than that.
2. Favor large-cap stocks over small-cap stocks. History shows that large-caps hold up better than small-caps in a market downturn. (Just as small-caps outperform large-caps early in an upturn.) If you want to be even safer, overweight mega-cap stocks. (Those are companies with a market cap of $100 billion or more.) A few examples are Wal-Mart (NYSE: WMT), Apple (Nasdaq: AAPL), Toyota (NYSE: TM) and BP (NYESE: BP).
3. Favor value stocks over growth stocks. Growth stocks are companies whose profits are growing much faster than average. Value stocks are companies that are cheaper than average based on price-to-sales, price-to-earnings and price-to-book value. Value stocks offer a higher margin of safety – and hold up better in a bear market.
4. Favor dividend-paying stocks over nondividend-paying stocks. Some companies are growing so fast that they need to use most or all of their cash flow to finance their growth, so they are unable to pay dividends. But companies that are mature, stable and profitable generally do pay dividends. Those yields will support them in a down market – and provide you with an income stream.
5. Tighten your stops. The Oxford Club’s policy is to use a 25% trailing stop on our longer-term positions and closer stops on our short-term trading positions. But feel free to run your stops tighter if you are older, have big gains or are concerned about the tone of the market. Just don’t run those stops too tight. You want to give your stocks room to breathe. You want to avoid stopping out when a stock is still in a confirmed uptrend. (That generally means it is trading above both its 50- and 200-day moving averages.)
by winston » Thu Oct 06, 2016 3:28 pm
by winston » Tue Oct 18, 2016 9:57 am
There are three cash metrics that can tell you an awful lot about the health of a company in a few minutes.
1. Free cash flow.
2. Cash conversion.
3. Cash balance.
by winston » Wed Nov 16, 2016 11:41 am
by winston » Sat Dec 24, 2016 10:45 am
The minute one part of the system shuts, all of the demand for liquidity moves to another part.
But it dries up. And that part of the system has to be shut that down, too.
Soon, the entire system is shut down because it’s all so deeply interconnected.
Remember, when the power’s out, nothing works. The ATMs don’t work. The gas stations don’t work, etc. It’s good to have some what we used to call in Philadelphia “walking around money.”
But you can’t withdraw too much from your bank because the government won’t let you.
That’s why I recommend you put some money into physical gold or silver, in a monster box. A monster box has 500 ounces of American silver eagles, one ounce each. They cost about $10,000 on the market.
I also recommend real estate as part of your portfolio. It’ll still be there if there’s a storm or a power outage or your bank’s shut down.
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