I have been on a trip and have only been able to skim the SOH postings for the past few days, but I have been reviewing my past trades recently to try and learn from my mistakes and better manage my successful positions,in order to prepare for what may lie ahead.
I was quite bearish the past several years and I imagined that I would get an opportunity to buy stocks and bonds at prices that my generation had never seen. My thesis was a rally after the plunge and a retest or break much lower. I was not, and will not be surprised to see the S&P 500 break well below 500, but the printing press may have rendered that idea mere wishful thinking – at least for the time being. At some point, via time and price, my bearish thesis will be foolhardy to maintain as it will have been fully realized, and I will have missed a great opportunity, in maintaining that view. Have I missed that opportunity?
The point of this is to try and be prepared for that opportunity and recognize that I may have real captured value, and it is safe to hold onto the position long term. How long is the question, and for many of you this exercise may not pertain, as your methods and time frames do not mesh with my own. However, one should not be too quick to trade away a great position.
Last year I remembered scrambling around trying to find some decent bonds or convertibles as they were in a death plunge and I perceived that deep value could be found. I called several brokers asking if they had a good bond desk or trader that could help me identify potential investments. One Financial Advisor thought I was taking on too much risk looking to buy lower quality bonds after they had plunged to record spreads vs investment grade bonds. I am certain that they would have thought that buying the same bonds was a prudent decision when they were at all time highs.
I bought HYG, but I wound up buying some Freeport McMoRan Pref. M shares. When I bought these there was so much going on during the implosion of our financial system, I did not have time to really think through any long positions I might take,other than the idea of buying them for a bounce and letting the dust settle. I then planned to buy stocks and bonds long term when the S&P 500 came into the 500 range. I needed to be a little less bearish and look at some charts.
After I bought these shares, I was worried about the Phelps Dodge acquisition and the possibility of too much debt. I was bearish on copper as I believed the excess of the worldwide building boom would take its toll on demand. It is embarrassing to admit that I bought these on Dec. 5th 2008, at just over 33 and sold them a month later in the low 40's. FCX stock was getting crushed and it seemed like bankruptcy was our national fate. I got spooked and sold them with the idea that I would buy them lower. Here is a chart for your amusement.
I had been using Aberdeen Asia Pacific Income Fund (FAX) to augment the low yield in my money market funds. I noticed it plunged twice in 2008 and quickly recovered. I bought a fair amount at 3.30's during the crash and sold 75% of it around 5. I really like the idea of cashing dividends when my entry is low risk. I will be buying FAX starting at the mid 4's and more lower should that opportunity present itself again.
I love buying death but need to be more objective about tempering my bearishness and sitting tight in something other than gold and silver when I have bought it at the right price. I hope to see comments on what some of you are looking at to prepare for a more bullish time period and what are your vehicles and prices that you would be wanting to buy them at. Here is a 2 year look at FAX.
Next week, I plan on doing a post on the one that did not get away , as well as an interview with a gold broker that Bill Fleckenstein has suggested his readers may want to use for physical metal acquisitions. She is a very sharp gal and has a birds eye view on the physical gold and silver markets that I think readers may find helpful no matter which side of the metal battle you may be involved with. She has agreed to log onto SOH and answer any questions after the post, and I am looking forward to this, as she has been most helpful in cleansing my view in that market.