Thursday, January 24, 2013

The World Is Not Flat

Jack Be Nimble
Below is an older video from Phil Town's blog .  The arrow on the chart beneath it shows us the point in time at which Phil was suggesting people should get out of the market.  When we see the fund managers getting out, we can out-run them because it takes them weeks to adjust their holdings, and us, as little as a day.

"Going Down!"
Being "old school", Manny Schiffres doesn't know how to determine what a bottom looks like, so doesn't want to take the chance of getting back in at the wrong time.  To Manny, quality is "king".  The trouble is, and as the graph shows, everything goes lower in a time of crisis.  Even Maria is convinced taking the long view is the correct approach.  I doubt that today, even after what happened, she will have changed her mind.    The same can be said of most of the people who lost everything in the tech wreck at the beginning of the 2000's.

Phil Town on CNBC's Closing Bell with Maria Bartiromo from Phil Town on Vimeo.

Click To Enlarge
Save Your Money
Yes, the market has come back, but just imagine if you knew how to time the market like Phil, and had practically all of your cash after the market stopped dropping!  Think about how much money got left on the table by riding the market down and not getting out.

Investing and/or Marketing
The surge in world stock markets over the past couple of decades has been caused, primarily, by the spending of the Baby Boomers.  To think that is going to be the case for the next couple of decades is to have your head in the sand.  Demographics are showing us that the Baby Boomer spending peaked (perhaps, not coincidentally) in 2007.  Buy and Hold is, and always has been, a marketing strategy, not an investing strategy.  We need to understand the difference.

"You Trader, You!"
I love how Maria calls Phil a Trader (as opposed to an Investor), as if being a Trader was something bad!  We need to educate people that being a good trader is smart, not bad.  It took a while to get the academics of the day to believe the Earth is not, actually, flat.  There are a few who still believe it, today. I can only hope it doesn't take so long to convince people to learn how to avoid market disasters like the last two we went through because the next one will come soon enough.

If people can learn to be good traders, does that mean they are merely lucky?  How many people do you know who, despite working very hard, others would say they were very lucky in life?  What do you think?

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