The best advice I ever got was from an old trader. When they trashed his stocks, he took a long walk. But, first shut down his quote machine. “Selling down to the sleeping level is crap,” he said. “You either like your stock on its facts or you don’t. Just a piece of paper.”
Money managers must deal with nasty macros, too. Wars, famines, a hell bent FRB, the craziness of the Nifty Fifty growth stock fad. Then there was being blindsided by the Twin Towers literally turned to dust. Focus on the stupidity of major banks making mortgages on phantom asset coverage in 2009.
Jack Kennedy negotiated us out of the Cuban missile crisis, but it could’ve gone the other way. If an odd lot investor, you could bang out your goods without a ripple. But, what can a Buffett do but sit tight and pray for a miracle.
My only way to deal with a pricey market is selling down to no more than 50% at risk, I’m pretty close to that mark today. My biggest position, half of assets is in 2-year Treasuries yielding 5%. Before nodding your head, keep in mind my small loss in this bond position.
When I look at the trillions upon trillions run by asset managers, in a traditional pie chart mix of 60% equities, 40% fixed income, they’ve underperformed their benchmarks by several percentage points. Doing what’s considered conservative rather than racy can still cost you serious money.
An old favorite of mine, Boeing, just flopped on news they found some screws loose on it’s 737’s. This is not supposed to happen to a quality metal bendor. But, I remember Douglas Aircraft going out of business because they couldn’t assemble their DC9s and show a profit.
How to say “goodbye” to an investment you’ve lived with a long time? Polaroid, Xerox, and IBM were easy decisions. Their earnings collapsed and the competition in their sectors was making a solid end-run around them. Canon and Nikon won.
My history with Boeing dates back to early sixties when they spawned the jet age with their 707 model. It flew transcontinental and transocean. Prejet age, Honolulu was a backwater town. I coulda bought half of Bishop Street for a song, but I wasn’t smart enough to do so.
I did go to the moon with the convertible debentures of Boeing, United Aircraft, Eastern Airlines, and United Airlines. Money brokers financed me for 10 points down, marked-to-market on daily closing quotes. The islands were never fully prepared for natural disasters and the insurance carriers stood undercapitalized.
My initial Boeing management contact was head of the commercial aircraft division. He issued me a bicycle and told me I was free to pedal anywhere the Renton’s plant and talk with the mechanics assembling aircraft on the floor.
I learned a lot. Boeing was the first to use titanium fasteners in its aircraft. Helicoil was its supplier, a small operator listed on the American Stock Exchange. I bought it and bought it and made a bigger killing than for my Boeing paper.
I miss such wild years. Sam Zell then did my tax shelters, and I bought raw land on Maui. Everything turned up roses. These days I eschew Meta Platforms, Alphabet et al because I can’t model their income statements for the next couple of years. I could do this with Boeing.
Berkshire Hathaway rises or falls on the trajectory of its Apple investment. Plus, it’s energy plays like Occidental Petroleum. I could boot out both of them without a second thought. I’ve invested no intellectual capital here-in.
What is to do after stocks get trashed? How do you find your way back into the game? The Great Humbler, day after Boeing's sinkage, decided it was too drastic and Boeing made up half its droppage. I had sold out half my positions with no regrets. It’s still an overweight. Bought more Apple and Microsoft to use some cash on hand.
High valuation and high volatility are Siamese twins. One week after its downdraft, Boeing had mostly recovered from its sinking spell.