Investing 102

[GregWeld]

Originally Posted by SSLance

Apparently Mr Market enjoyed KMI's earnings call yesterday.

KMI has been a hard one to own for sure! I'm in it 25,000 shares -- and it's down huge (66% one year)... and the 75% cut in the dividend certainly didn't help -- although will help the company long term (which I'm okay with). An almost 20% bounce up today just shows you how fast things can go "the other way" if there's favorable news (thus the reason I won't sell and guarantee myself the loss!). It's a good - well run entity - that is collateral damage in the Saudi oil "war".

CNBC had a lady on today that owned a "hardware store" in the oil patch somewhere in Texas (sorry - didn't pay any attention to the details)... and she said that business was off 90% - and that they can't continue much longer at that rate. This is the kind of thing that I look at (bigger picture) which lead me to post the "low oil might not be so hot" sentiment. It'll take a lot of consumerism to make up for entire business's going out of business!

The cut in dividend on KMI alone - chopped my dividend from $50K a year to $12,500 ---- not a personal "biggie" for me --- but that dividend is paid to lots and lots of people - and it might be a biggie for many. Cuts like that far surpass the little bit their saving on a tank of gas!

[68Cuda]

Originally Posted by GregWeld

CNBC had a lady on today that owned a "hardware store" in the oil patch somewhere in Texas (sorry - didn't pay any attention to the details)... and she said that business was off 90% - and that they can't continue much longer at that rate.

So, before the rapid expansion of fracking and the Eagle Ford field exploration and $100 per barrel oil what was the business model of the "hardware store"? Texas has gone through wild swings since oil was first drilled here. One year they are millionaires driving around in overalls in 1 ton pickups trying to figure out how to spend all the money the next year they are all broke and telling the hard luck stories. Meanwhile the rest of us here just work our regular boring jobs and somehow get by. Fortunately since the big bust of the 80s Texas has diversified and the oil lows do not hammer the whole state. When I was interviewing when I went to college the first time (BSME), I avoided the oil companies for that reason. And again, 8 years later, when I went back again (MSME) I was actively aggressively recruited by a few oil companies and oil tool manufacturers and did not interview with a single one.

What does this have to do with "102". Be careful pursuing the latest hot trend, there is almost always a correction looming on the horizon. Many of my peers that went into that field are now doing something else in a different field.

In my industry (semiconductor) the environment of the past few years has been surprisingly hot and the vendors are struggling to keep pace. But, they have been burned so badly in the past that they are wary about increasing capacity and cost. I know - I used to work at one of the capitol equipment manufacturers and our plant was shut down in 2003. In a way I think it is a good thing that they limit their growth. They are artificially throttling the growth and thus reduce the swings. Now semiconductor has its swings also, but it is a bit more stable and forgiving.

[fearlessmark]

I've been going through this thread, but at 500+ pages, it may take a while...

I do have a question that may have been answered before. I currently have investments in a company 401k and a personal account invested in dividend stocks working toward compound interest. The question is, Is there ever a time when you should just liquidate everything to turn it into cash? The last downturn did a number on my investments, so I'm wondering if there is a threshold on this.

Again, sorry if this has been asked before.

-Mark

[WSSix]

Originally Posted by fearlessmark

I've been going through this thread, but at 500+ pages, it may take a while...

I do have a question that may have been answered before. I currently have investments in a company 401k and a personal account invested in dividend stocks working toward compound interest. The question is, Is there ever a time when you should just liquidate everything to turn it into cash? The last downturn did a number on my investments, so I'm wondering if there is a threshold on this.

Again, sorry if this has been asked before.

-Mark

Not if you want to continued to be called fearless

Seriously though, I'd have to say it's way too personal of a decision to give a general answer to. What I can tell you is a lot of people like Greg and others that have been doing this a long time said they held on for the ride and made out well in the end because they didn't sell when it got rough. I think it's going to depend on what company you're invested in and just how well their business will survive whatever obstacle its facing. This is why you diversify. To me, this is also why you invest in very solid, read boring, companies that aren't going to make you rich overnight.

[SSLance]

Originally Posted by fearlessmark

The question is, Is there ever a time when you should just liquidate everything to turn it into cash? The last downturn did a number on my investments, so I'm wondering if there is a threshold on this.

I've been on all sides of this decision, started investing in the late 90s and have seen 3 major market busts during that time. I've been all in, done real well at times...and went to 100% cash back in 2011...completely fed up with the market.

With the help of this thread, I've been tip toeing back into the market since early 2014...only this time in a different way than ever before. I'm still less than 50% invested and still averaging in, but I will say this downturn has felt completely different for me than any other. I'm still sleeping soundly at night and waiting for chances to trickle more back into my core holdings.

Nobody can tell you what to do, you have to pick your comfort level yourself. Being an informed investor and understanding the companies you own helps tremendously with the comfort levels. Good luck...

[glassman]

Well said Lance.

[WSSix]

I went through the oil industry from 10-14 mainly in the Granite Wash which is Texas panhandle and western Oklahoma. There are a lot of people hurting right now. Those parts of the country don't have a lot to offer by way of careers. People did whatever they could to make ends meet and take advantage of the boom. A lot of people moved to the area to work. Unemployment in the area was very low. Plenty of money was made by all involved but it's not a life time career in my opinion. Then again, I got out for a reason.

[GregWeld]

Originally Posted by WSSix

I went through the oil industry from 10-14 mainly in the Granite Wash which is Texas panhandle and western Oklahoma. There are a lot of people hurting right now. Those parts of the country don't have a lot to offer by way of careers. People did whatever they could to make ends meet and take advantage of the boom. A lot of people moved to the area to work. Unemployment in the area was very low. Plenty of money was made by all involved but it's not a life time career in my opinion. Then again, I got out for a reason.

Totally agree with this Trey.... it's like investing in the "home builders" -- that entire industry lives in a boom/bust cycle. This is why I've chosen to invest in the transport/storage/supply pipes etc (such as KMI and ETP) -- but that certainly has only been a "proxy" for what's gone on in the oil patch. I didn't expect it to get hit so hard and be so linked (as no matter the price of the oil/gas - you still need to move it somewhere...).