# Sold Out



## tygrus (Mar 13, 2012)

Today, I sold out of all my equity positions, mostly in Canadian REITs.

Like I posted before, the broader market is giving me the heebie jeebies. Most companies have reported now and some positive earnings in there, but many industries still struggling and layoffs abound like microsoft turfing 18,000 people. And US equities are clearly overvalued.

I am going to make a prediction and we will see if it holds. The market experiences some real turmoil this fall and wall street goes into fed watching mode for September. The fed announcement will be one of the most followed in a while because the broader market indicates QE taper needs to slow. If they stop tapering, wall street will cheer but that is misplaced optimism because it means a double dip is forming. 

Since this is slowest recovery in like forever, the chances of it stumbling and falling back down are very high.

On the sidelines.


----------



## RBull (Jan 20, 2013)

Weren't you recently mocking some folks for choosing GIC's vs. big dividend payers like REIT's?


----------



## tygrus (Mar 13, 2012)

Absolutely, still do, but GICs don't run like stocks and aren't tied to anything do so there's no decisions to be made about them. 

On equities, I think there is likely a lower re-entry point coming.


----------



## PuckiTwo (Oct 26, 2011)

tygrus said:


> Today, I sold out of all my equity positions, mostly in Canadian REITs.


Do you have to pay capital gains on the proceeds or were all your equity positions you sold in TFSAs?


----------



## MrMatt (Dec 21, 2011)

tygrus said:


> On equities, I think there is likely a lower re-entry point coming.


Market timing.

You're just guessing and betting that you're smarter than everyone else, not a winning game IMO.


----------



## PatInTheHat (May 7, 2012)

MrMatt is absolutely correct. If you succeed with this plan it will be blind luck.

You are much better off waiting for at least some form of confirmation before deciding to make a move such as this. Your thesis is also flawed as companies that have reported so far, over 65% have beaten expectations. While I do agree US markets are overvalued it is marginally so. They have run far past current valuations before and as long as interest rates remain low I suspect the markets will not flatter more then 5-10%. I foresee another 1-5 years of a run to come and while you might get lucky here with a large correction, it is far more likely you will be left behind wondering when and if you should buy back in higher. GL.


----------



## cainvest (May 1, 2013)

Pretty bold to sell out today, might have been better waiting for longer term moving average to be crossed first. Of course things can happen fast, a fair bit of turmoil going on these days ... who knows what will escalate and what won't.


----------



## the-royal-mail (Dec 11, 2009)

One thing that's absent from this post is the personal circumstances of the OP. Those should be considered before deciding if the strategy was a good one for them. I would appreciate a little context.


----------



## My Own Advisor (Sep 24, 2012)

Excellent point RM.

As for tygrus, you are obviously betting that equities will correct sooner than later. Have you thought about the gains you might miss if things go up from here?

Why not just hold everything, save some money/put cash aside and if/when you see your predicted correction, you buy equities?

In the end, sounds more like trading vs. investing. I'm a crappy trader though. Good luck!


----------



## RBull (Jan 20, 2013)

tygrus said:


> Absolutely, still do, but GICs don't run like stocks and aren't tied to anything do so there's no decisions to be made about them.
> 
> On equities, I think there is likely a lower re-entry point coming.


I guess it struck me as odd. Telling people to get into big dividend payers (like your reits) and then jumping out yourself a few weeks later..... 

Your sell makes me better understand your advice - GICs= risk adverse ; market timer = risk taker
Your outlook is just much different. 

Will be interesting to see if you can make market timing beneficial. I believe the TSX closed at 15457 on your sell date July 28. Doesn't represent your exact positions but is somewhat of a reference.


----------



## cannew (Jun 19, 2011)

Each to their own strategy, but if one buys for yield than they may have reason to worry and probably should be looking for exit points. Personally I have settled on long-term investing. Buying solid, stable, long term dividend payers with a long history of increasing the dividend. I don't care if the market corrects or soars as long as the dividend is safe and they continue as they have in the past.

Always interesting on how others react to market conditions.


----------



## tygrus (Mar 13, 2012)

RBull said:


> I guess it struck me as odd. Telling people to get into big dividend payers (like your reits) and then jumping out yourself a few weeks later.....


Yes, I should have explained my situation. I run a business (farm) so risk is something I face every day. My investment horizon is approximately 1 year because my business cycle is 1 year. I hold about $150-200k long term in some LIRAs that I cant touch for 10 years.

After harvest, I get all my product in my bins and decide when to sell it. I used to sell it through out the year trying to time the peaks in the commodity markets. Thats really tough and you can wait up to as long as a year to get your price. It also meant sometimes risking spoiled product or trying to move product in -40C in January. Not fun.

So for the last few years, I have employed a different approach, selling everything as soon as it comes off the field if the prices are reasonable and then investing the money in dividend payers until the next harvest. At the same time, my crop expenses aren`t due until next spring. So I have my entire gross income in my hands and invested for about 6 months, the net stays invested for about 9-12.

By employing this strategy, I can increase the overall return on my business by a few percent while at the same time the regular dividends smooth out the commodity marketing risk for me.


----------



## RBull (Jan 20, 2013)

tygrus said:


> Yes, I should have explained my situation. I run a business (farm) so risk is something I face every day. My investment horizon is approximately 1 year because my business cycle is 1 year. I hold about $150-200k long term in some LIRAs that I cant touch for 10 years.
> 
> After harvest, I get all my product in my bins and decide when to sell it. I used to sell it through out the year trying to time the peaks in the commodity markets. Thats really tough and you can wait up to as long as a year to get your price. It also meant sometimes risking spoiled product or trying to move product in -40C in January. Not fun.
> 
> ...



Got it, thanks. 
G/L


----------



## Nemo2 (Mar 1, 2012)

cannew said:


> Personally I have settled on long-term investing. Buying solid, stable, long term dividend payers with a long history of increasing the dividend. I don't care if the market corrects or soars as long as the dividend is safe and they continue as they have in the past.


We are similar...except we _do_ care if the market goes up or down.....happy with the first, not so much the second.


----------



## Pluto (Sep 12, 2013)

I think tygrus is going to end up happy he did this, and the key isn't really market timing, its value. BAck in 2009 xre, for example was compelling value and I bought a whack of units for 7.5. In 2013 I sold them after the peak in xre near 18. It was always my plan to sell if and when the yield got near 5% as xre typically tops out at that yield, and these are not growth stocks. Once they hit 5% yield, there is essentially no more upside for this cycle. 
Critics say, what about the distributions? you are missing the distributions. To mitigate that I put the proceeds in short bonds. I was getting about 10% yield on 7.5, and then I get 2.7% on more than 2x's the capital. 10% of 100 is 10. 2.7% of 220 is 5.94, so the icmoe goes down, but the capital is preserved, as xre is in a gradual down trend that will likely accelerate at the end of the cycle. That will give me the opportunity to buy back at attractive prices. Its basically a preservation of capital move. It isn't market timing. It's about value. xre yielding 5 to 6% is not great value. xre yielding 10% was fine value. Its buying value, and selling when the value is poor: its letting someone else take the risk. 

I think tygrus will end up with an opportunity to buy back at much lower prices. It is quite possible it could take long enough for good value to appear to really try one's patience.


----------



## Ihatetaxes (May 5, 2010)

Watching the markets this morning you should be feeling better about your decision. Hopefully we are finally getting a well overdue correction...


----------



## jcgd (Oct 30, 2011)

I don't know if that would be good for Tygrus. He could interpret his dumb luck for skill.


----------



## cainvest (May 1, 2013)

Ihatetaxes said:


> Watching the markets this morning you should be feeling better about your decision. Hopefully we are finally getting a well overdue correction...


No kidding ... maybe tygrus isn't telling us something.


----------



## tygrus (Mar 13, 2012)

I am not expert on any of this stuff and perhaps a little more reckless than I should be, but the kicker for me was the gopro ipo a month ago and how that company with a single product gained more value than some of the biggest oil companies and utilities. Remember, its a camera you wear on your head and the markets were gushing about it. That was the year 2000 all over to me again.

Now what I think will happen, is the market goes into some volatility for the next 6-8 weeks and then wall street starts crying to the fed to slow the taper by the Sept or Oct meeting just so they can get into the xmas cycle but by Q1 2015, they better know that QE is done and whatever economy is left after that will have to stand on its own feet.

You have to understand that wall street became a spoiled child after 2008 and they will need the rod now to bring them back in line.

Other thing I look at is corporate profits. How much more can these companies earn. They aren`t making more money by selling more to tapped out consumers, so they are cutting costs and making efficiency improvements to meet their eps guidance. Otherwise there will have to be a strong M&A cycle as they are forced to buy growth. IMHO


----------



## HaroldCrump (Jun 10, 2009)

tygrus said:


> I am not expert on any of this stuff and perhaps a little more reckless than I should be, but the kicker for me was the gopro ipo a month ago and how that company with a single product gained more value than some of the biggest oil companies and utilities. Remember, its a camera you wear on your head and the markets were gushing about it. That was the year 2000 all over to me again.


That was evidence of gross misallocation of capital.
When completely useless, unproductive businesses like Facebook, Twitter, GoPro, etc. are worth more than manufacturing, energy, telecom, information technology and other real asset businesses, those are usually signs of a market top.
These days, the stock market is awash with misallocation of capital.

I think you made a good call, and you had sound reasons for it.
No one can predict where the market will go from here - it could easily go up another 20% during the rest of the year.
But IMHO your market timing is not unreasonable.


----------



## humble_pie (Jun 7, 2009)

tygrus isn't doing value, he's doing timing, just as hard as when he used to time his intermittent crop sales to commodity peaks.

the only difference is that he's newer to investing so i for one wonder whether he understands stock market cycles as well as he understands his own farm business.

it's true that stock markets tend to rise in the fall/winter season & fall in the spring, sometimes not until the summer. This is more or less the cycle tygrus has been catching for the past few years. It's worked out perfectly. For only the past five (5) years.

the strategy would have destroyed all farm profits in 2008. Depending on how leveraged tyg's farm operation itself is, the 2008/09 market collapse could have damaged his farm business.

please don't get me wrong. I think it's been an excellent strategy for the recent few years when dividend stocks have been strong without a break, with dividends & share prices increasing in most 6 or 9-month periods. Going forward long-term, i think it's a good strategy only for someone who's willing to hover on top of his market timing just as hard as he ever did hover on top of his commodity timing.


----------



## HaroldCrump (Jun 10, 2009)

I can't speak to the farm & commodity timing business, but by many measures the stock market appears over-valued.
Often it takes a seemingly external, isolated event to trigger a full blown crash, such as the Countrywide Financial bankruptcy in 2007.

I have had a suspicion for some time now that the Fed tapering since this spring may actually be in preparation of a bigger stimulus in 2015.
They may be tapering into a recession.


----------



## humble_pie (Jun 7, 2009)

i haven't bought anything in the longest time, which is about all the concession i'll ever make to the risk of an oncoming market "collapse."

but if you're right HC - & you're usually right - then all we're going to have now is just a teensy short-lived little correction? & then in no time at all - in 2015 - only a few months away - the Fed will be engineering a major stimulus?


----------



## el oro (Jun 16, 2009)

A more elegant solution, especially for long-term investors that don't want to trigger capital gains by liquidating their holdings, would be to buy mid to long-term puts. It will act as insurance so that if the crash that you expect does occur, you will find yourself flush with cash.

The expected return for north american indices (based on current earnings and conservative assumptions for future growth and p/e) is in the mid to upper-mid single digits.

If you maintain puts as insurance for a cost of 1% per year (as Lephturn did), you'll be covered in a downturn, participate on the upside, and won't trigger capital gains. Also, puts are cheap when the markets keep floating higher with low volatility.


----------



## HaroldCrump (Jun 10, 2009)

It is hard/impossible to make predictions around the timing of crashes, or Fed actions in response to that.
The Fed & Treasury refused to bail out Lehman Brothers yet exactly 2 months later bailed out Citigroup, Merill Lynch, Bank of America, etc.
Bernanke talked about tapering as early as spring 2013, yet did not take any action until nearly 10 months later.

Equity valuations cannot simply keep increasing in the absence of organic growth.
All we have now in the G7 countries is nominal GDP growth of less than 2% on average (with Eurozone contributing less than 0.50%).

I don't know if there will be a significant stock market crash (i.e. > 33%) for the Fed to resume stimulus, or merely mild indicators of a recession will be enough.
I also believe that resuming stimulus may end up having the opposite effect (i.e. stock market correction) this time around.

IMHO, tygrus' position is understandable.
Anyone not able (or willing) to follow & understand all the intricacies of the market, and not able to take action quickly when needed can be excused if he/she decides to take some profits at this point, and sit back on a cash position.
I agree that selling out _everything_ is a little extreme.


----------



## humble_pie (Jun 7, 2009)

i'd previously thought that crimea & concomitant ukraine would be the spark that would fell world markets, but t'weren't so.

the wild card might be china? it's not turning out the lights as many were saying 5-6 months ago? recently they're saying there will be life in all those built ghost cities? factories are still running?

global resource stocks & dry bulk shipping have stabilized ...


----------

