I personally have huge holdings in "oil and oil related" companies... anyone that has these types of holdings is getting killed right now. This morning has them down hard once again. I call this action the "death of a 1000 cuts". Every day they go down. Here's the reason for writing this morning - because it's the end of the year - and people should be assessing where they are and where to put new money etc.
"Never try to catch a falling knife" is a very good statement that has been around far longer than we have been.
Many times I "average down" in an investment that I think has long term potential to either provide me with current income (making the cuts acceptable) or that I think is being oversold for a temporary issue. I've made great money on the snap backs - I've also had my ass handed to me - so in a nutshell - these are risky ways to play.
Now - back to the "never try to catch a falling knife". I always have cash waiting to be invested. Unlike most - I don't have to put money to work all the time. I'm lucky and can hold pretty healthy positions in cash and not have it affect my future or current income. So I'm ALWAYS on the prowl to get this wasted money off the sidelines and into something. BUT -- ALWAYS THE BIG BUTT IN THE ROOM -- I've learned to be patient! When something is falling -- you don't want to just rush in and be a buyer.... In the market we need to learn that. Be patient and watch and wait - it's better to wait for a bottom to be put in the stock - have a stabilizing period - and then maybe even wait for it to start to go back up. While you might not get the absolute lowest price of the decade -- you'll also not suffer the unknown "death of a 1000 cuts" which is really more important to your mental health than your pocketbook (if you're a long term investor). One or two names going down hard can affect your return for the year. Oil has definitely hurt my percentages this year.... where last year they were leading the charge higher.
Now --- if you are trying to adjust your portfolio -- and or you have new money to go into the market -- it's also paid off for me to buy the sectors or names that are DOWN over the ones that are up big. It's more painful and is far harder mentally to do -- but if it's the right sector/names they often do have nice outsized gains when (and if) they come back to more normal levels. They also pay nicer PERCENTAGE of dividends while you're waiting for that to happen. Remember as the share price falls - the percentage of yield rises... which is what generally builds a floor for the share price.
Think about this like rental real estate... as the price of the house falls - if it can collect the same amount of rent - that rent is a better ROI (return on investment) as a percentage. If it keeps going down (the price) eventually you might have to lower the rent --- but that's the part we don't know and have to "okay" with. What we do know is that it won't stay this way forever and we will be made whole again down the road.
Anyone in here still playing with BITCOIN?? I see today it's down to $364 USD.... that's a long hard downward slope from people talking about it being $1000 plus per coin.
My point here.... Most of you had already forgotten the name of the thing... and had I not brought it up here - you would have. OUT OF THE NEWS -- The Talking Heads on CNBC quit mentioning it... the clerk at the store quit talking about it. DONE. GONE. Bubble popped.
Not the kind of "investment" where I want to put my money. Lucky for me - I've lived long enough to have seen many of these kinds of "investments" come and go. My job is to have you guys (and gals) all watch this and learn from it. Better to learn from the sidelines rather than the far harder lesson of losing your money.
Oh sure - there's money to be made "while it lasts" - on the way up - and the mania that ensues.... just like people made money flipping houses. The problem is they lose it all because people don't get out at the top. Most likely they finally got IN at the top...
Brian Hobaugh SCCA National Tour June 2014
First Hemi 'Cuda Convertible Ever Built
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