Not Buy and Hold Not TA

[dogcom]

This discussion is not about market timing Belguy repellent or his first love Buy and Hold but about the why factor.

It is about why something should work now, going forward or why it should not when buying a stock or sector. There are of course many arguments going both ways as to why one shouldn't buy today, wait a little or not buy at all. Of course nothing goes as planned so things change and one would have to see this for what it is and take their losses.

It is also a thought thread to throw out what you are thinking and why. The use of this is to have somewhere for us all to see what others are thinking and collectively have many thinkers instead of just your mind at work on different stocks and sectors. So even if what you are thinking may sound stupid, by putting it here someone can tell you why it may be stupid and if you agree with that.

As an example I bought HND on speculation that it would rise because it was very oversold and has been the place to be in the last few years against Nat Gas. It seems like an easy money maker doesn't it, but it didn't turn out that way. I saw that summer forecast was for hot weather meaning air conditioners were going to be on and companies will have to start to buy and store gas and also if it continues they will have to look to add for winter. Companies have been shutting in gas because the money isn't there so at this time oversold or not the risk to HND looks to be down. Seeing this early on I sold it luckily for a small profit and have since moved on.

RIM looks to be going nowhere and I can't see any reason to buy except for a bounce which seems likely at this time. To me RIM is a good stock with loads of volume to trade but not to buy and hold. They have hung their hat on BB10 if it comes out and that is it. I don't think however the CEO is stupid and must have something up his sleeve that could come out as a shock at some point and good money could be made on that news as he primes the company to be sold.

SU a favorite here has been on the skids and looks like a bounce buy that has already just happened but not a hold at this time in my opinion. This is not a favorable season for oil and it is probably best to look for the opportunity to buy in October if conditions present themselves. I am hearing a talk of oversupply and oil finds and of recession in the future so for now it doesn't sound like a place I want to be at this time.

[Cal]

This may not help your thread, but it is applicable to the thoery of your thread. Alot of us, don't do what works now or today....some of us simply make an investing goal or strategy and stick to it. Through the ups and downs of how the market may affect that particular plan or strategy.

[dogcom]

Your right Cal it isn't just about the now or today but of what we see going forward in the next day to a year and what we are thinking about that. We may buy and hold and stick to it but what are you thinking what theories do you have at this time as you look to buy, add to or sell a position. I am sure stuff is always going through your mind like what effect Europe will have will the Fed ease or something you notice like I did about HND even though that was not a buy and hold position. Or what I said about SU could have a big effect on it over the next month to year or more if oversupply and recession hits it.

[fatcat]

dog, what do you think of the issue of correlation in equities ? ... i keep reading that everything is now so tightly correlated that brokers are throwing up their hands ... i wonder if investing has come down to the ever present news cycle and the fed and other central banks ... can you even pick stocks anymore ? ... i try to do as little trading as possible ... i'd like a portfolio that i could set and never look at again (people like tom connolly talk about buying dividend stocks and holding them for years)

as far as sectors go, it seems like i read almost every week about a new huge gas find so that is an area that requires nerves of steel ... oil seems also to be kind of precarious due to slackening demand and increasing supply

i also wonder about the solidity of the telecoms: rogers, bell, telus and shaw, they all pay great dividends but their business model is getting hammered from all sides

if the bric's are stumbling where will the growth come from ? ... the boomers have a lot of money but they aren't spending it because they can't make anything on it so they are saving instead

i feel pretty bearish and yet i know this is when money can be made

[dogcom]

Good post fatcat, there is a lot we need to think about these days as investors and buy and hold and forget certain stocks or sectors could get your head handed to you. I still believe we are in a secular bear market from to much debt and credit from individuals to the countries themselves that makes picking stocks very hard to do. The very currencies and bonds of the west are in trouble causing the correlation you mentioned which is not normal. Without the Fed or Europe's QE attempts we would well on our way to purging the debt through defaults which would be very painful. Of course this makes it very hard for an investor because either the Fed QE screws those in cash missing the rally or you get nailed if they don't do QE and you are in stocks.

This of course gives you both worlds of bear and bull to look at. So one must pay attention to what is going on so you are not on the wrong side of the boat leading to large losses. Many might not pay attention thinking it is not necessary but I think it is if the very foundation of everything which is your countries bonds or currency crashing down.

On Nat Gas I do believe there is money to be made on being bearish but not right now because of the conditions I mentioned above.

[Belguy]

More and more, I am beginning to come around to the idea that, given the deteriorating world economic climate today, that 'buy and hold' as a valid investment theory may have died two years ago.

That is a big admission for me to take given my earlier faith in the 'buy and hold' philosophy.

Do any of you still believe in 'buy and hold'?

[kcowan]

I think there is money to be made in trading but it takes a lot of time and skill to make it. Also some luck as with all investments.

I also think that the old Buffett strategy is still reliable. Study companies and find ones that have solid foundations and good dividends and then buy and hold. I believe that this approach will beat couch potato approaches hands down BUT it take lots of work, good judgement and luck. Also you have to ignore common wisdom and some bigots like belguy. While it might be easy to ignore belguy, it is harder to ignore common wisdom!

Finally as it relates to commodity super cycles, I think it is very difficult to pick companies that are playing that space. Take NG as your example. It should make out just fine because it is carbon friendly and good for heating, generating electricity, and powering vehicles. Yet it has not. It is possible for it to stay low longer than most investors can wait. The LNG terminal in Prince Rupert should help but when?

How about solar? Remember Solyndra? Again the future should be good but how to avoid investing too soon and being sucked into various promotions? So when and how to invest is the black art.

Gold has shown itself to be cyclical. Silver has been a crap shoot. Uranium has been a big disappointment largely due to Japan.

[Belguy]

Being called a bigot reflects more negatively on the name caller than it does on the person on the receiving end.

I am of the opinion that people can be civil in their disagreement without resorting to the name calling which must be against forum rules to begin with.

Call me what you may but don't expect me to get down in the gutter with you!!

[dogcom]

Kcowan the funny thing is I was looking at HND this morning on TMX and figured a bounce was certain so I went into my account about about 20 minutes ago and when I seen the real time quote I had already missed the boat. Even though I believe Nat Gas can stay strong here this was just one of those times I just knew a fast buck was just there. Anyway you are correct the days of Nat Gas are coming but we are still a ways off before the demand really does start to suck in all that supply. The demise of Uranium you mentioned also bodes well in the future for Nat Gas. Then you can add the cost and unreliability problems of wind and solar as mentioned as another push to Nat Gas in the future.

Gold I believe because of the correction we have already seen is a good buy here but short term there could still be another shakeout. Gold has one of the greatest possibilities for manipulation because of the COMEX and all the shorts out there willing to shake out any weak positions they can find making it that much harder to invest in and hold.

[Sampson]

More and more, I am beginning to come around to the idea that, given the deteriorating world economic climate today, that 'buy and hold' as a valid investment theory may have died two years ago

Evidence?!?

A common problem some people have when ranking these strategies is due to cherry picking dates to look for returns. Of course if you look at 2008-2012 returns the 'buy and hold strategy' performed poorly. If you judged only by this time frame, one would have to conclude that investing 100% in bonds is the best way to go. There are plenty of studies comparing rolling periods that 'buy and hold' is viable. In fact, most studies looking at equity returns must assume a buy and hold strategy, otherwise turning over the portfolio would make analysis tricky or near impossible.