Tuesday, December 18, 2018

Dumb December Decisions (DDD)

Things are getting pretty ridiculous. The inexperience of professional money managers is showing now. Sadly, I suppose that the money managers who are older than me are starting to retire and younger ones are filling their shoes. Well, something happened along the way. These younger money managers do not know what they are doing apparently. They get scared easy.

Sell. Sell. Sell. This must be the new mantra of young money managers. A few short months ago, they were all claiming that stocks were overvalued. Now, they are undervalued yet, they continue to sell. They are making the classic investing mistake of overselling.

The problem with selling stocks is that this raises cash and that cash needs to be put back to work at some point. When is that? When is the bottom in the stock market? When is the right time to go back in? Most money managers have no clue. They are just guessing. However, when they sell, at least it makes them feel better like they have done something to protect client assets. Odds are that they will sell at an inopportune time and buy back in at another inopportune time.

It is usually good to sell if you plan to make a sector replacement. Like sell Technology and buy Utiliities, for example.

Well, you may be asking, "What did you do Mr. Smarty Pants?" On November 28th, I sold out of Sovereign Bonds, half of my Intermediate Corporate Bonds positions and all of my Technology positions and raised about 18 - 20% in cash . The bonds have come back some since then, but trust me, they will roll back over to the downside starting tomorrow most likely after the Fed raises interest rates. Technology is off about 7% since I sold it. Of course, nobody will ever give me credit for that decision.

I have some other thoughts on putting the 18 - 20% cash back to work, but with these young, inexperienced money managers making dumb December decisions (DDD), I think I might wait until January. I'm pretty sure that these young money managers will get all their selling done before year end. They are pretty predictable in their ignorance. 👍

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