Parsad Posted March 8, 2011 Share Posted March 8, 2011 As James Montier showed in his slides, money manager sentiment is flowing in the wrong direction, and small investors are piling in slowly according to this article. Cheers! http://finance.yahoo.com/news/2-years-after-market-low-the-apf-2492075628.html?x=0&sec=topStories&pos=main&asset=&ccode= Link to comment Share on other sites More sharing options...
Guest Posted March 8, 2011 Share Posted March 8, 2011 "Among professional money managers, the shift back into stocks has been more dramatic. A February survey by Bank of America-Merrill Lynch of 270 top investment managers found them more bullish about stocks than at any time in the past decade." Nice. Link to comment Share on other sites More sharing options...
Smazz Posted March 8, 2011 Share Posted March 8, 2011 There are more salesmen than money managers out there- and here is proof. Link to comment Share on other sites More sharing options...
Uccmal Posted March 8, 2011 Share Posted March 8, 2011 Quite funny in a pathetic sort of way. In sum, I have been very slowly selling since the New Year, virtually every day. From what other board members have been indicating many have been doing the same. I am not rushing out of the market but would like to be positioned safely for any pull backs. In addition I have almost cleared my exposure to long options - dont have any short exposure, either, unless you count FFH. I am not nervous but would rather wait for cash to build up and opportunities to arise as they will. Link to comment Share on other sites More sharing options...
Myth465 Posted March 8, 2011 Share Posted March 8, 2011 Quite funny in a pathetic sort of way. Bulls make money, bears make money, sheep get fleeced. The rally may have some legs though - :) These inflows have to go somewhere. Link to comment Share on other sites More sharing options...
enoch01 Posted March 8, 2011 Share Posted March 8, 2011 I know I shouldn't be amazed, but I am. Link to comment Share on other sites More sharing options...
Mungerville Posted March 8, 2011 Share Posted March 8, 2011 I'm not participating on the upside anymore. Haven't been since about a few months before Watsa hedged his portfolio. Am fully hedged and intend to profit when opportunities arise. I can't wait till the day where I feel comfortable investing without hedging, when the excesses are finally flushed out of this dysfunctional system. Link to comment Share on other sites More sharing options...
Zorrofan Posted March 8, 2011 Share Posted March 8, 2011 I'm not participating on the upside anymore. Haven't been since about a few months before Watsa hedged his portfolio. Am fully hedged and intend to profit when opportunities arise. I can't wait till the day where I feel comfortable investing without hedging, when the excesses are finally flushed out of this dysfunctional system. As Myth said, that may be a while. It seems that the small retail investor is always last in and ends up being hurt the most in any correction. If you don't mind my asking, what are you using to hedge? General puts on the S & P? cheers Zorro Link to comment Share on other sites More sharing options...
DCG Posted March 8, 2011 Share Posted March 8, 2011 I've sold a bit recently, although I'm still optimistic for the next year or so and the long term. I'm having a hard time finding anything to consider buying right now though. Link to comment Share on other sites More sharing options...
twacowfca Posted March 8, 2011 Share Posted March 8, 2011 Quite funny in a pathetic sort of way. Bulls make money, bears make money, sheep get fleeced. The rally may have some legs though - :) These inflows have to go somewhere. Agreed. The pedal is to the metal on the money supply. Market is up, but doesn't look like a bubble. . . . . . . Yet :) Link to comment Share on other sites More sharing options...
Guest Dazel Posted March 8, 2011 Share Posted March 8, 2011 I said before on the board before I have bought puts on a few companies...I mentioned Netflix. does anyone have any other hedging strategies? I do not know how comfortable i am with the Fairfax put of cpi index... Dazel Link to comment Share on other sites More sharing options...
DCG Posted March 8, 2011 Share Posted March 8, 2011 Quite funny in a pathetic sort of way. Bulls make money, bears make money, sheep get fleeced. The rally may have some legs though - :) These inflows have to go somewhere. Agreed. The pedal is to the metal on the money supply. Market is up, but doesn't look like a bubble. . . . . . . Yet :) There's a pretty big bubble going on right now in private markets, but stocks as a whole don't look that overvalued yet. Link to comment Share on other sites More sharing options...
Parsad Posted March 8, 2011 Author Share Posted March 8, 2011 Hey Guys, be careful on the hedges! It's one thing for Fairfax to be buying swaps on the CPI, but it's another thing for all of us. These hedges have real frictional costs, especially if you are wrong...take a look at Fairfax's equity hedges over the last six months. The best strategy to protect investment capital is knowing one's own limitations and circle of competence. That will save you more money than any hedge. Cheers! Link to comment Share on other sites More sharing options...
sdev Posted March 8, 2011 Share Posted March 8, 2011 Carrying cash ain't a bad hedge! It's cheap too! ;) Link to comment Share on other sites More sharing options...
finetrader Posted March 8, 2011 Share Posted March 8, 2011 does anyone have any other hedging strategies? I was thinking about it.. What about having calls or leaps on a company. ex:SSW and to hedge by selling calls on an index ex:S&P500 ? Link to comment Share on other sites More sharing options...
rmitz Posted March 8, 2011 Share Posted March 8, 2011 Carrying cash ain't a bad hedge! It's cheap too! ;) Yeah, I just upped my cash on my retirement account where I can only choose amongst index funds. Had already marked inflows to go to cash a couple months ago. I'm still more aggressive in my taxable portfolio, but I'm watching closely for when I can take positions off the table... Link to comment Share on other sites More sharing options...
alertmeipp Posted March 9, 2011 Share Posted March 9, 2011 Did we see the last spike of the bull market yet? Link to comment Share on other sites More sharing options...
beerbaron Posted March 9, 2011 Share Posted March 9, 2011 There is a nice insurer that seems to offer some downside protection, it looks like a good time to buy. BeerBaron Link to comment Share on other sites More sharing options...
Eric50 Posted March 9, 2011 Share Posted March 9, 2011 FFH seems to be a nice hedge. I'm currently re-increasing my position. Also, long puts on CRM, LULU, OPEN and NFLX. Why sell calls on S&P when there are individual businesses that are way more overvalued? Link to comment Share on other sites More sharing options...
txlaw Posted March 9, 2011 Share Posted March 9, 2011 Carrying cash ain't a bad hedge! It's cheap too! ;) Yeah, I just upped my cash on my retirement account where I can only choose amongst index funds. Had already marked inflows to go to cash a couple months ago. I'm still more aggressive in my taxable portfolio, but I'm watching closely for when I can take positions off the table... Word. I'm at 16% cash. As Myth would say, my peashooter is reloaded! Link to comment Share on other sites More sharing options...
twacowfca Posted March 9, 2011 Share Posted March 9, 2011 does anyone have any other hedging strategies? I was thinking about it.. What about having calls or leaps on a company. ex:SSW and to hedge by selling calls on an index ex:S&P500 ? Here's how we hedge with a barbell strategy. We have long term core holdings that are goosed with non-recourse, long term total return or mostly total return derivatives that require no MTM collateral. These are equivalent to owning the underlying securities with a long term low interest rate loan that doesn't have to be repaid if the market value declines. This gives the upside of owning certain stocks, but limits the downside to about one third to half the notional value. This frees up cash that averages more than half the amount that would be required if we owned these stocks with no leverage. The cash is ours no matter what happens to the market or model value of the derivatives on the stocks. This is our margin of safety, and we usually keep this in fairly liquid investments such as near cash, workouts, arbitrage or other situations like deep values with a catalyst that are not very correlated with the stock market. I would not recommend this strategy unless the derrivatives are very long term, and the underlying companies very likely could and would return substantial value to shareholders during and after a market meltdown. However, if that is the case, I think this strategy will have less volatility and greater upside than being fully invested in equities. That has been our experience as we survived the 08 - 09 unpleasantness in the markets in very good shape and had cash available to pick up bargains at the market bottom. :) Link to comment Share on other sites More sharing options...
scorpioncapital Posted March 9, 2011 Share Posted March 9, 2011 hedges are for gardeners. The best hedge is time and intelligence. Link to comment Share on other sites More sharing options...
Myth465 Posted March 9, 2011 Share Posted March 9, 2011 hedges are for gardeners. The best hedge is time and intelligence. And cash. Link to comment Share on other sites More sharing options...
claphands22 Posted March 9, 2011 Share Posted March 9, 2011 Here's how we hedge with a barbell strategy. We have long term core holdings that are goosed with non-recourse, long term total return or mostly total return derivatives that require no MTM collateral. These are equivalent to owning the underlying securities with a long term low interest rate loan that doesn't have to be repaid if the market value declines. This gives the upside of owning certain stocks, but limits the downside to about one third to half the notional value. How do you get derivatives like these? My knowledge of derivatives equates my knowledge of plumbing. I take it this isn't just a two year call option. Link to comment Share on other sites More sharing options...
claphands22 Posted March 9, 2011 Share Posted March 9, 2011 hedges are for gardeners. The best hedge is time and intelligence. I'm not sure I'd dismiss hedging so easily. Fairfax use of equity hedging has been beneficial for them. I know some people believe they hedge their portfolio because they are an insurance company and hedges may proffer better credit ratings, but I also think they do it because they believe their returns will be better in the long run. I've attached a picture of a page from their 2010 Annual AGM slide where they show an additional gain of 4% percentage points in a fifteen year time frame with their equity hedges. Maybe I'm deluding myself, but intelligent hedging based on valuation might not only help to relax portfolio volatility but also increase overall returns. link to the 2010 Annual Report: page 23 http://www.fairfax.ca/Assets/Downloads/2010_AGM_Slide_Presentation.pdf Link to comment Share on other sites More sharing options...
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