If we aren’t in the process of bottoming I do not care, better, since it will give more time to keep on adding if you have a cash hoard.
I do feel comfortable already adding to my principal positions: Berkshire Hathaway and Wells Fargo. I was a good part of this week busy studying about house builders like NVR, TOL and DHI just to realize that one of my biggest holdings under my nose: Wells Fargo, was comparatively a better risk/reward than house builders. So great news, since I always prefer to add to what I know and already have than to venture in new acquisitions, and besides I am already substantially exposed to the new housing construction sector via USG (United States Gypsum). When I realized that Wells Fargo had an EPS as big as several years ago but with a much lower stock price and that it could generate the current EPS under much worse conditions I realized that its share price recovery under better conditions was even safer than investing in home builders like NVR who are already substantially priced for recovery and whose management is under legal process due to high unjustified salaries. I also do not feel comfortable with house builders like DHT or TOL who have written off billions and where I still cannot be sure of the quality of the land and houses under their inventory and therefore cannot satisfactorily estimate if they will be further written down or not.
Given those facts I just decided to keep on adding to my good old holdings, too much of a good thing can be great! Thanks to the European banking problems and the Bank of America situation several good banks are paying the consequences and are providing a good stock price to add or buy.
I also bought Berkshire and Wells Fargo for my mother in law. So she now is a proud owner of those great american icons.
I closed the VXX (volatility) puts that I had sold less than 2 weeks ago, they are now basically worthless, it was a good and fast profit, there is now no need to run the risk to hold them for a very small potential additional profit and I leave the door open to sell more if the volatility should suddenly fall.
Cheers!
jrv
PD:
Transactions log:
BOT 25 WFC Stock 24.05 USD SMART AUG 26 10:50:55 1.00
BOT 5 BRK B Stock 68.05 USD ISLAND AUG 26 11:00:12 1.00
BOT 1 VXX SEP 16 ’11 30 Put Option 0.12 USD NASDAQOM AUG 26 11:21:06 0.64
BOT 1 VXX SEP 16 ’11 30 Put Option 0.11 USD BOX AUG 26 11:25:26 0.97
BOT 1 VXX SEP 16 ’11 30 Put Option 0.10 USD NASDAQOM AUG 26 11:26:55 0.64
BOT 1 VXX SEP 16 ’11 30 Put Option 0.09 USD NASDAQOM AUG 26 11:29:39 0.64
BOT 25 WFC Stock 24.27 USD ISLAND AUG 26 10:59:22 1.00
BOT 10 BRK B Stock 68.03 USD ISLAND AUG 26 11:08:09 1.00
Careful out there jrv! I read your bio and I would hate to see a very decent man like you loose a lot of money. I know you know your stuff and that you are smarter than I am (and WAY more successful and accomplished too), but we are headed toward a deflationary depression (yes, the big D) here in the US and for that matter the world. I am a macro type of guy and what I’m seeing on the price charts is not just scary, but apocalyptic!! – we are talking different financial market cycles that have proven correct for at least half a century converging all at once.
The US equity market has been in a silent crash (in constant dollars) since 2000. The euro currency is on the verge of collapse (think PIIGS – look at the credit spreads and the fact that a ban on short selling for European bank stocks was enacted in France and Belgium recently), gold prices are in record-high territory, short-term yields are basically negative (now why would smart money settle for “less” unless they knew that the purchasing power of their money was about to explode), I’m getting credit card offers in the mail with zero percent interest for the next 21 months (!!!) -again, what do those banksters know that we don’t -, people here in the US and businesses don’t have faith on the president or congress (Why do you think corporate balance sheets look so good? Why are they hording so much cash, not hiring anyone or not making significant capital investments?) etc. etc.
Listen, I know you are not a techie but a fundie. However, why would you want to front run the financials (XLF, KBE), home builders (XHB) and China (FXI) when their charts are all heading down and they are the canary in the coal mine. Hey, just to prove my point, I was looking at them when I caught the bottom of the US equities market back in March 2009 – yeah, EVERYBODY thought that I was crazy too!! Remember cash is king in a deflationary environment, and the good news is that according to some of the best market forecasters out there, everything should get sorted out in less than half a year. Do you realize that they are calling for the Dow to drop to 2000 (yes 2000!!!) by the fall of next year? Of course, you will know that the fan has turned brown way before that.
So think about it jrv, what’s six month parked on cash for a guy like you anyway? That’s just an American football/hockey season!! If people like me prove delusional, then you don’t make a little bit of money over the next few months – no big deal. But if we are right, you will lose it ALL and you will never be able to bounce back from that one!! Clearly, if you conduct an honest cost-benefit analysis of the situation, neither the risk/reward ratio nor probability is on your side this time around. So why do it jrv? Why stand in front of a massive freight train coming toward you? Just think about it….
Thanks for your comment Mauricio. I guess I am not fully convinced of investing in the stock market since way more than half of my net worth is plain cash and a lot is real state. So I could lose a lot of the stocks I have if the market collapses but that would still be a small percentage of the total. I’m keeping most of it liquid and in different currencies so if a real collapse comes I could use it. On the other hand I have my doubts about deflation due to the huge amount of debt and currency printing that has been going on. So I also don’t like the idea of being fully cash, specially on dollars and seeing the dollar inflated and a big part of that cash evaporated in order to be able to bail out the trillions of american debt. Therefore part of the net worth is diversified on stocks of different types/countries and with income coming outside of the USA in case the deflation scenario does not play out and in case it does and the market collapses I have enough cash to deploy it.
Indeed these are times to be specially aware, it always is in a sense specially when you live on this, you cant afford to not be careful.