Investing 102

[GregWeld]

Year end is coming up and coming up FAST….


I see several things coming together here to cause the market some angst…


Portfolio rebalancing is something everyone does at the end of the year… what that means is - the big holders will take some gains off the table - they don't sell out -- but they may take some off the top of their biggest winners…

Conversely - they'll balance that "tax wise" by selling some losers… that way you come in at neutral as far as gains and losses are concerned.

So what? Well -- everyone is "into" the same big winners -- so when you have some big holders selling --- then that takes the prices down… and if they're also selling the losers - that makes your losers go down even more. It's somewhat self fulfilling scenario.

NOW --- if you have RISING interest rates -- then the old saying - "when interest rates are high stocks will die" comes into play. IF interest rates are rising - or are seen to be in a rising mode - then the big holders will start to trim interest rate sensitive stocks -- and suddenly your 3% dividend payer doesn't look so hot -- which it was when rates were at 1 or less percent -- and now you can buy a 10 year treasury (tax free) that's paying 3%…. So you have that going on….


So the bad news COULD BE that we have a declining market through the year end… but much of that depends on the economy coming in with some good numbers -- which is GOOD for the stock market because EARNINGS are the real drivers of stock prices…

What's that all mean to us?? Not a hell of a lot. BIG TRADERS or BIG HOLDERS do things differently than you and I. We don't have customers that are demanding we "beat the market" -- we're just investors. Long term investors… we're not on the hot seat to produce on December 31st…. we're looking at December 31st - 15 or 20 or even 30 years down the road.

Yes -- I have sold some shares with losses and I've added some shares with that cash -- and yes I try to be somewhat tax neutral IF -- BIG IF -- I think I have some stocks that just need to be gone or whatever (I actually held too much "Oil" patch stocks -- with CVX - BPT - NTI - KMP -- so have trimmed a couple). My typical positions approach or exceed 1MM per holding -- so when you add them up -- it's worth it for me to balance out a bit. But most aren't in this position ---- and there's no point in selling a holding if you have less than 10K in it! What you want to see is that 10K doubling over the next 10 years to 20K --- ya can't do that if you're scooping off every time you have a "gain".

Look to ADD to your positions -- not sell them out -- if the fundamentals of the company are the same as when you bought it. Put that bonus check to work so that the $1500 becomes 3000…. or piss away $500 of it and save the grand or whatever.

Don't get distracted by all the "noise". If you get nervous -- go back and look at those longer term charts… Sometimes you just have to have faith. Faith in history - faith in the company - faith in the dividend and the compounding.