I remember the morning he'd 'thrown in the towel.' It was at the Pool, not a block or so from where we all live in Tiburon, California. It was June or July 2007, one of those days when the market was up a zillion points, then down a zillion, in the span of an hour or so.
This had been going on for several weeks. TK, heading into the sauna from the outdoor pool, said to no one in particular, "That's it. I'm selling it all. This is ridiculous!"
At the time, I thought, but did not say, that TK was being hasty. I figured - and still do -- that so-called 'volatility' in markets is good, healthy. It demonstrates diversity, breadth of opinions and the old give-and-take that makes a sound marketplace. I also believed at the time -- and still do -- that the crazy swings in prices are great for buying more of whatever I believe in. Bargain basement ghetto thinking on my part.
As it turns out, TK was absolutely CORRECT. A hedge fund pal of mine pointed out sometime in November, months later, that the fortunate stocks investors are the ones who sold three months ago, or three weeks or, or three days ago. Even three hours ago. The buyers, he said that day, were all waiting a week for prices to get cheaper. The following week, they were holding out for 'even cheaper,' and the week after that and week after that and ... .
The same holds now, I suppose I can say. The funds and the individuals are all waiting for next week, when stocks will get even cheaper. The best returns in 2007 (not counting complex derivative transactions and commodity funds) came from the hedge funds and others who sold more or less everything in the summer and put the rest in cash. And/or short-sold the small-cap and mid-cap stocks.
So TK was right. And if he continues to be right, well, stocks will keep falling in price. It is at this point that I remind myself once again that I am not a trader, and that I am still searching for ideas that work (besides gold, which we own in several forms). That's because I'm a believer in companies/products/specific managers/new market opportunities.
Sunday mornings are the only day I spend a half-hour or so browsing the newspapers, online and the two newspapers my wife pays to have thrown onto the lawn, which this past week has been soaked with torrential Northern California rains. The rest of the time, I don't bother. Too much good stuff out there to read without wasting bandwidth on (mostly) mediocre journalism.
I ran across one idea that I include in the ThomInAtor Bullets, which has become the usual way I conclude this column. Thus:
- Pequot Capital's Byron Wien, who is an economist for those who think economists are mostly full of beeswax, which of course they are, likes cotton and cotton futures. This is an idea that interests me. Wien's take is that warm-weather economies are doing well, and the folks in those countries, such as Brazil, want creative lightweight cotton fabrics. Also, cotton fields are being turned into soybean fields and parking lots. I am not a futures investor. But as I said, I like the idea. I used to own an Argentine cattle ranch for the beef -- I mean stock in an Argentine ranch. That worked out well. If you know of an ETF or an equity vehicle with positions in cotton, I'd love to hear them. Please email me at thom.calandra (at) gmail (dot) com.
- More of what I believe in, which is a euphemism for what I have been buying for three or four years that continues to fall, fall, fall in price, includes drug discovery companies, especially cancer; a neurobiological stroke treatment developer; WiMAX equipment makers; a DVD distributor. What has worked (for me) these past four years includes genomic tools, Hong Kong vitual networks and generic drugs. And of course, gold.
- A few ideas that came across my lap in the hot tub: generic penicillin, ultra-long and ultra-short ETFs on U.S. stocks, diagnostic medical tool developers.
And that, my Voldy morts, is it! Ci vediamo dopo (see ya later) on ThomCalandra.com and here!
-- Your friendly Thom in Tiburon
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