Sell Everything

[tech/a]

+1
Explod.

For me if you really MUST trade stock then
Day trade or very short term hit and run.

It been FTSE for me but even that is struggling
---when volatility goes so does a lot of he profit.

 

[willstor]

Let me see now, HIH, Lehman Bros, Enron, World Com, Freddie Mac, Fannie Mae, GMH. You would of course agree that these were all blue chip stocks once upon a time, wouldn't you?

I wasn't invested in any of t he above however if those stocks were 100% of your portfolio selling everything makes sense. Unlikely scenario though to be fair.

 

[notting]

Rio Tinto used to be over $120 per share, Macquarie Bank over a $100, Telstra $8, even NAB towards $50, dividends sure.
The days of just casually buying and holding blue chips are far gone.

Now that's a buy signal!

 

[willstor]

I only buy when everyone sells and vice versa. Feel free to sell your Westpac and an shares down 20% so I can buy them!

 

[Julia]

No it's not. If you hold a selection of stocks from various sectors in profitable companies paying dividends you don't need to sell everything. Ever. When I invest in shares I have an entry and and exit strategy, however if I bought a stock that underperformed I am more than happy to hold for as long as it takes to make money - if that means the grandchildren get the spoils then so be it.

That makes no sense. You should be investing/trading for yourself, not your grandchildren. Investigate the concept of opportunity cost.

To sell everything is to take a gamble that the market will fall heavily in every sector. If you can accurately predict that then, well...

Then, well, what?

To buy or hold is also a gamble. For those that are yet to realise this, unfolding events will make my meaning increasingly apparent.

As for end of days scenarios, there is simply no upside to selling if it's the end of human life on earth because you won't be alive to benifit from the salvaged capital! I believe that was what Julia was driving at when commenting on your earlier post.

Thank you, cynic. Exactly right on both counts.

Let me see now, HIH, Lehman Bros, Enron, World Com, Freddie Mac, Fannie Mae, GMH. You would of course agree that these were all blue chip stocks once upon a time, wouldn't you?

HIH was regarded once as a blue chip, its gone. And all the advisers were saying Great Southern Plantations, gone. Blue Scope Steel another, nearly gone.

Rio Tinto used to be over $120 per share, Macquarie Bank over a $100, Telstra $8, even NAB towards $50, dividends sure but when you have lost that much ? hey, and they will probably never return! whewh.

they were saying Fortesque Metals was one when hitting $14 per share (not long back either), look at them now.

The days of just casually buying and holding blue chips are far gone.

The world scene is very dodgy at the moment and in my view the wise will be sitting on the sidelines in cash and probably pick up some bargain blue chips off the cutters floor too.

Good examples. Agree absolutely.

 

[So_Cynical]

Buying and holding a blue chip stock is not a gamble at all.

As a blanket statement that's a silly and comprehensibly the wrong thing to say.

Buying stocks puts your money AT RISK, the future is not known, the future price of XYZ is not known therefore there is an element of risk, thus a gamble....the price you pay for XYZ matters A LOT...time can be your investment friend but it is a 2 way street.

 

[Julia]

Sure but the people who sold at the start are in the minority, im talking about the transfer of wealth that happened at the height of the panic, stocks selling for less than cash backing etc, liquidation at any price as an expression of fear and panic.

Certainly those people had left it too late. There was a general sense of the possibility of "losing everything".

I was very new to the scene back then and i thought that i was safe being mostly invested in gold stocks, big picture i was right and had picked the right trend to back but in the short term the gold stocks got smashed too, my portfolio value fell by about 45% and yet i held and continued to buy into the carnage.

I read this sort of statement all the time. If you "continued to buy into the carnage", for it to be meaningful you'd have had to have a considerable amount of cash sitting around for that purpose.

When you are actually generating a living from your investing, having no other source of income, that's when you'll find more people accepting that your principle of holding through a downturn is the best option.

I remember this time well. I was heavily invested in the big 4 banks. All of them did capital raisings that were well under the market price, I took the lot, as much as I could get. I had one friend who had some CBA and asked me what to do. I told him that I would buy as much as I could, he said he didn't have any money. I said to him ok, what you can do is sell CBA at todays price of $29 and buy back from the capital raising the same $$ amount at $26. He sold all of CBA at $29 and didn't buy back at $26. He was that panicked he made a bad decision. I don't need to tell anyone where CBA is today.

Using the same principle you're outlining here, you could have sold your CBA when the GFC began, then had all that additional capital available to buy it back in increased quantity (thus also increasing your dividend yield and franking credits) after the downturn was over.
And yes, of course few people are smart enough to sell at the exact top and buy at the exact bottom. That's a given.

 

[Ves]

Using the same principle you're outlining here, you could have sold your CBA when the GFC began, then had all that additional capital available to buy it back in increased quantity (thus also increasing your dividend yield and franking credits) after the downturn was over.
And yes, of course few people are smart enough to sell at the exact top and buy at the exact bottom. That's a given.

Can you run me through your sums for this comparison?

Is it fair to assume that the hypothetical person purchased at the end of 2003 for $30 (since the market started looking better at that point or so).

Should we assume that a normal person would have missed the CBA top by about 15% this scenario (is that too high or low for margin for error?). Let's say they purchased for around $30 on the way back up. (Should it be higher or lower?)

Including dividends, brokerage, taxes (assume 45% because we're all rich here - and 50% discount if applicable) how far does the market timing strategy come out in front of buy and hold for this period?

If my assumptions are different to your own what would they be? I'm curious to see how far the market timer comes out in front given realistic and achievable assumptions.

edit: I realise that Julia is not the only one advocating this approach, so anyone can feel free to answer, I am being lazy and quoting her as it is the most recent.

 

[explod]

http://bigcharts.marketwatch.com/ad...rsToggle=false&chartStyleToggle=false&state=9

The picture helps.

The top traders and investors on here would do something like this. First they follow the sentiment and that is reflected in a chart.

At the end of 2007 it was clear that something was wrong on the chart and in the discussions on ASF, so most of the savvy would have been out of CBA at or before $58.

Just a year later, Ben Benanke said we were saved and the markets looked oversold. It's clear too if we look at the chart so Savvy is back in around $28.

Towards the end of 2010 there were some doubts creeping back in and then right at the end of the year we have a huge reverse fomation, so ole Savvy is back out again at around $28.

Now from my observations on this forum and the arguments that we have had I think that ole savvy has been a bit uncertain ever since, there is no convincing move and there is a lot of vehement argument coming from all quarters.

Some sold to buy gold and silver, others have sat on cash and some have made a lot trading the volatility in the last year or so. Of late even that is looking a bit funny (See tech/A's post above) , and Savvy thinks we may be about to fall off the cliff.

We will see, but not with my hard earned we won't.

 

[Ves]

Explod - unfortuntely that doesn't help me, I'm well aware to bring up a chart.

I'll add an additional question to my previous post - what indicators are you using to make these assumptions of $28 and $58? Is this merely hindsight talking or is there more to it? I really can't tell from your post!

I will disclose that I bought at $44 and sold at $59 recently. No longer holding or wanting to hold.

 

[So_Cynical]

The picture helps.

The top traders and investors on here would do something like this. First they follow the sentiment and that is reflected in a chart.

At the end of 2007 it was clear that something was wrong on the chart and in the discussions on ASF, so most of the savvy would have been out of CBA at or before $58.

Just a year later, Ben Benanke said we were saved and the markets looked oversold. It's clear too if we look at the chart so Savvy is back in around $28.

With respect...i think your dreamin.

The Jan 2008 bottom trend line was $56 i imagine some support buyers mite of been interested at that level and the savvy had been stuffing their pockets with profits for the last 6 years and were keen to see it continue, most of the volume for 2008 happened at around the $43 mark..were these buyers savvy?

Savvy Back in at $28 some perhaps, someone was on the other side of all those cheap trades and it wasn't momentum followers....you make it all sound to easy explod..it certainly wasn't easy for me, i agonised over many decisions mostly due to my limited funds, i had to get bang for my bucks.

CBA has gone from 24 to 62, i bought ILU at 2.95 and sold at 12.30 i got bang for some of my bucks. a lot more bang than the bank buyers got.

https://www.aussiestockforums.com/forums/showthread.php?t=6067&page=3&p=421212&viewfull=1#post421212

 

[explod]

Explod - unfortuntely that doesn't help me, I'm well aware to bring up a chart.

I'll add an additional question to my previous post - what indicators are you using to make these assumptions of $28 and $58? Is this merely hindsight talking or is there more to it? I really can't tell from your post!

I will disclose that I bought at $44 and sold at $59 recently. No longer holding or wanting to hold.

The moves are based on what is now almost a science but to the newcomer unfortunately that is subjective.

Technical analysis is most certainly accurate if one follows exactly what the market is telling through the charts and we unemotionally stick to our set rules of stops and entry points combined with volume variations.

Fundamental analysis is traditionally what is going on with the Company and the Sector, movement of product etc.

A most important influence, perhaps the most if we look at 2007 through 2009 is what the overall mood of the market is on a world scale. This to me has involved my learning the basics of economics and then in particular its history and those matters that influence the cycles.

That last para., encompasses the most important as iterated and is the nearest to the topic (or intent in my view) of this thread. A good start to a clear understanding of overall market cycles are the writings of W. D. Gann. I have his text "How to Make Profits in Commodities" 1951. Gann traded the floors of the New York Rubber Exchange, the New Orleans Cotton Exchange and the Chicago Board of Exchange. Offers very good first hand takes on the market collapses from 1929 through the depression.

The other area is to understand the philosophy of Maynard Keynes as against Austrian Economics, and that most economist today, to their detriment in my view, only follow the Keynesian concept of stimulus.

It was interesting that Ben Benanke before a Senate Committee in NY, a year or so back, stated (with head bowed I might add) that gold is not money. In 1912, J. P. Morgan stated that "gold is the only money, everything else is just credit."

Good investing and trading is based on intuition. Intuition does work but it needs to be fed by all the leaning that you can do. A must book I have on that is called "The Intuitive Edge" by Phillip Goldberg.

There are no shortcuts when it comes to making the right decisions of protecting your hard earned but the trip has been a very interesting one for me and made me realise how little I know and why I lost a lot of money in the early days.

 

[explod]

With respect...i think your dreamin.

The Jan 2008 bottom trend line was $56 i imagine some support buyers mite of been interested at that level and the savvy had been stuffing their pockets with profits for the last 6 years and were keen to see it continue, most of the volume for 2008 happened at around the $43 mark..were these buyers savvy?

Savvy Back in at $28 some perhaps, someone was on the other side of all those cheap trades and it wasn't momentum followers....you make it all sound to easy explod..it certainly wasn't easy for me, i agonised over many decisions mostly due to my limited funds, i had to get bang for my bucks.

CBA has gone from 24 to 62, i bought ILU at 2.95 and sold at 12.30 i got bang for some of my bucks. a lot more bang than the bank buyers got.

https://www.aussiestockforums.com/forums/showthread.php?t=6067&page=3&p=421212&viewfull=1#post421212

Agree, a bit flippant but just using the stock as the example put up by Ves.

Did own them once from $8 near 20 years ago and cashed them at around $26 to put into some land at the time, horrified to see them a bit later at about $36.

Apologies as looking back without involvement in the stock was unfair.

 

[Julia]

Can you run me through your sums for this comparison?

No, Ves. You can do the sums for yourself.
Let's just look at the broad picture, taking the start of 2008 as our beginning. By this time, if you'd been following world events (much of this is referred to above by Explod), and formed the clear view that the global financial situation was unravelling from its artificially induced highs, let's say you sold here when CBA was around $60.
Then you sat out in cash and watched the market fall, and fall, until CBA reached $25.
It's pretty obvious, isn't it, that by at that stage (or close to it) you used your cash accumulated from selling at $60 to buy far more shares at $25 ish? And clearly, given the yield is expressed in so many cents per share, you would pretty obviously be pulling in a higher dividend yield and franking credits.

Is it fair to assume that the hypothetical person purchased at the end of 2003 for $30 (since the market started looking better at that point or so).

No idea and not especially relevant to the point I'm making which is that it was beneficial to sell at or close to the high for some years given the clear disaster on the way globally and, if you still regarded the stock as worth buying, then buy in at a much lower price.

You seem to want to complicate what is essentially a very simple proposition.

I wonder how much notice fundamental investors - whose premise is buying on the basis of the value they put on an individual company - include in their calculations global trends, political and financial. Imho, if you ignore these in your decisions you are incurring unnecessary risk.

 

[So_Cynical]

No, Ves. You can do the sums for yourself.
Let's just look at the broad picture, taking the start of 2008 as our beginning. By this time, if you'd been following world events (much of this is referred to above by Explod), and formed the clear view that the global financial situation was unravelling from its artificially induced highs, let's say you sold here when CBA was around $60.
Then you sat out in cash and watched the market fall, and fall, until CBA reached $25.
It's pretty obvious, isn't it, that by at that stage (or close to it) you used your cash accumulated from selling at $60 to buy far more shares at $25 ish? And clearly, given the yield is expressed in so many cents per share, you would pretty obviously be pulling in a higher dividend yield and franking credits.

I just had a look at the CBA annual report, a touch over 800000 shareholders..now how many do you think did the above or even close to it??

Seriously...its a fantasy that sort of perfect in out and in timing.

 

[Julia]

I just had a look at the CBA annual report, a touch over 800000 shareholders..now how many do you think did the above or even close to it??

Seriously...its a fantasy that sort of perfect in out and in timing.

I have made it clear that I wasn't suggesting many people are going to judge the absolute top or bottom. I certainly didn't. But I sold at $56.

The gap between $60 and $25 is pretty damn huge, isn't it?
You don't have to hit the exact top to sell to make a very decent profit.

The question is not how many did it, but rather that it can be done.
If you judge everything by what the masses do, you'd never get anywhere, fergawdsake!

 

[Ves]

Hey Canoz or Joe or another admin that sees this thread can I please request that my previous posts in this thread are deleted?

To Julia and Explod I am sorry to have started this discussion. I am inable to communicate what I really want to say. I get the concept of selling at the top of the peaks and buying at the bottom again (it's obvious that this is the ideal strategy). But the whipsawing, tax, transactional costs and everything else in between that make the market a zero-sum game convince me that this is much easier to pull off in hindsight.

I'm not arguing that it is impossible - I'm just saying it's much harder that people think it is - hence why not many people out-perform the market indices.

Maybe it's just the fact that I'm dumb.

 

[willstor]

Julia I'm totally with you on the selling at the top principal. What I was trying to say in a very non coherent way was that selling everything isn't the best thing unless something insane is going on. I made a few huge generalisations along the way too however!

 

[Bill M]

Hey Canoz or Joe or another admin that sees this thread can I please request that my previous posts in this thread are deleted?

To Julia and Explod I am sorry to have started this discussion. I am inable to communicate what I really want to say. I get the concept of selling at the top of the peaks and buying at the bottom again (it's obvious that this is the ideal strategy). But the whipsawing, tax, transactional costs and everything else in between that make the market a zero-sum game convince me that this is much easier to pull off in hindsight.

I'm not arguing that it is impossible - I'm just saying it's much harder that people think it is - hence why not many people out-perform the market indices.

Maybe it's just the fact that I'm dumb.

Nah, don't do that. It has been a fair thread with fair opinions and your argument is just as good as anybody else's. This is what I have gathered from the thread. Using CBA is a good example. There seems to be 6 types of people out there. From top, being the best and the bottom being the worst.

1.There are those that saw a top and decided that was it, it's coming down and I am out, it's over valued. Then in March 2009 they saw that it had reached bottom and they repurchased the lot, at rock bottom at $25. (Very few people would fall into this group)

2. Then there are those that saw the top in November 2007 and sold all, they are out and the money is in the bank. But due to on going problems in the world never repurchased. (Probably more people in this group than the first)

3. Then there are those that held CBA all the way through but they topped up on the way down down and then bought even more in the $26 range. They are long term investors looking for income and saw an opportunity to buy more very cheaply. (I am in this group, not the best and definitely not the worst)

4. There are those that had some CBA at the peak in 2007 and still hold them today, price is roughly the same. They did nothing, they did not sell or buy anymore, they just sat back and got paid their fully franked dividends.

5. Then there is the majority of the population who don't hold any CBA at all. This is the biggest group of all.

6. This group is the worst of all. They held CBA and then just watched it go down to $25 and then took bad advice from the guru clowns and sold everything at massive losses at the exact wrong time. These people lost the most. They never repurchased and are still blaming the rest of the world for their losses.

We are all just expressing opinions, it's all about which group you fall into. Unfortunately I can't make group 1 yet but I am happy where I am, I certainly can't pick the absolute highs or lows, cheers.

 

[tech/a]

I just had a look at the CBA annual report, a touch over 800000 shareholders..now how many do you think did the above or even close to it??

Seriously...its a fantasy that sort of perfect in out and in timing.

RUBBISH

In 2008 I had portfolio in high 6 figures.
It's logged here and on another forum that
I closed the lot a few months before the GFC.
Haven't bought back a portfolio either---yet.
Freeholded an Industrial property and collect
a 5 figure passive income into my super--

Take a look at the PEN thread a punter there was
Given the heads up when ( evidently ) he held over
2 million shares at 15 c ( average buy 3.6 cents )
That 12 c was a good place to liquidate and do EXACTLY
what Julia suggests.
Needless to say he didn't in fact he kept buying.
It's now 2.6 cents.

You don't need to be perfect either!.
You don't see any benefit in Julia's suggestion?

Oh I'm pretty sure she is speaking from experience.