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Long only, dividend investing, dividend growth investing, market outlook
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Summary

  • On Friday, July 25th I sold the vast majority of my stocks.
  • Friday Morning I drafted an article for my Instablog.
  • SeekingAlpha was kind enough to publish it and there are now over 540 comments.

Thank you all who have commented on my article, "The Day I Sold Everything." I am humbled, bemused, overwhelmed and impressed by you all.

I appreciate the comments, both pro, con and critical! I've read them all and I truly appreciate everyone's thoughts. So many of them really got me thinking, and I'd love to respond to each and every one.

A couple of comments jump out to me, so let me address some key questions:

1. villiam, I appreciate your honesty. As I understand the word "Troll" I am not one. Not that I would turn down the work, but no one has asked. (My retirement plan does include living under a bridge in Florida, so maybe I'll qualify when that event takes place!) MAYHAWK, I agree with you, the comments are better than the article.

2. Yes, I did in fact, sell everything as described in the article. I apologize to the reader who thought the title was misleading. I will defend it. (If you include the Telecaster, then no, i didn't sell everything.) To clarify what I wrote, I did not sell all my Southern Company (NYSE:SO) or all the AT&T (NYSE:T), but everything else is sold. (One position for which I had an order in, did not hit. Drat!) And as I said, there are some tiny holdings that linger.

Also note, I manage seven portfolios, each with owners in different states of their financial experience and phases of life. "I," as I used it meant the accounts belonging to my wife and I. The other accounts are managed according to what I perceive as their needs. So far so good.

3. A very important point is that these are all IRA accounts.

4. I am not trying to passive/aggressively call the top. Nor am I trying to have it both ways, writing something that makes me right no matter what happens. (If I could figure out that one I could patent it and get rich selling to every husband.) I think the article made my feelings about the ultimate top clear. The only thing I'd really claim to be right about is that we don't have a clear historical precedent for this market, at least that I know about.

5. Yes, I did sell on an emotional basis. However, I believe that every decision we make is ultimately emotional. For me, I hung in with these positions in this market as long as my limited courage would allow.

Some of us do better than others at gathering data and performing due diligence, and letting that be a guide for emotions. I performed my DD by reading extensively, researching what I could and studying the charts. I appreciate wiseinvestorsdaily for understanding that my calculated analysis is just my way to try and manage my emotions. This is a huge and fascinating topic. Maybe there is a book in it. (You should hear my arguments for getting a new Mercedes E350 Bluetec.)

Also, let's be fair about a re-entry point. There are essentially two that I have used in the past. First is a decline that puts in what I feel is a bottom of some type. Second would be the establishment of a zone of what I interpret as accumulation, regardless of level. If I get a clarity of direction I may re-enter. I won't bore anyone with the tedium of further explanation.

6. Charlie Ponzi asked, "Do you really even understand what technical analysis is?" A fair question. My answer, "Probably not as well as you." But I do know that when I look at the long term DOW 30, S&P 500, Russell 1000, and NASDAQ I see markets that have had a strong run up.

In my opinion this is one of the most unique bull markets in history, due to the Fed involvement in the banking industry and specifically the QE silliness. Not to mention the quadzillion dollar Federal debt, and the infi-quadzillion dollars in derivatives floating about the globe. Has anything like this environment ever existed in the history of man?

It does not take W.D. Gann to see the cyclicality in the DOW since the big 1987 crash. To me that chart screams, "TOP!" But when I read individual stock fundamentals, so many seem very sound it makes this a hard market to make predictions about.

Since I am writing as we close in on what I think may be the top, getting liquid has a certain logic. If, after history unfolds, this market proves to be analogous to 1929, it would take would take many years to get back to "zero."

7. Kevinconway made a great and valid comment about Coke (NYSE:KO). My counter is that I just used that as an example because it had a fun little break out above 41 to the 42.5 area, then gapped back down to the 41ish zone illustrating that the five week climb up was reversed in a blink. The market gives and takes. My implied point was that Ms. Market takes more quickly than she gives. (Let's ignore the longer term double top-like KO formation.)

8. drking said, "THIS IS WHY THERE ARE TRAILING STOPS." To a large extent, I agree, but I calculated out the loss from current levels and made a choice. I'm not saying it was the most sophisticated choice ever. Just the choice I felt was best on that day.

9. The tax question deserves a comment. In my opinion this would be a good decision, for me, even in a taxable account. Protect capital, and all that.

SteadyOptions agrees, I think. "If you have to pay tax, that's a good thing - it means you made a profit." Better than trying to figure out what to do with a tax loss. As I said above this was in IRA accounts, but one day the taxman will get his due. Just not today.

10. The one comment that made me stop and think the most was by Buyandhold 2012. "The way that you invest is almost the direct opposite of the way that I invest. "

I wish I had the wisdom to have invested in DGI stocks when I was young, when I was fortunate to make better than average money for a short while. I did not invest in the right things. I invested in what I thought were conservative limited partnerships, but most went the way of the dodo. (A bird which I do identify with.) The middle years proved to be less profitable. Recently, there has been more discretionary income. But I find that my acquisitions are largely bought too late into the bull market to feel secure in the event of a significant decline. I only tell this in order to frame the decision around the idea that capital preservation matters a lot.

Had I built a portfolio over your time frame I'd be much more inclined to hold on. The way it stands I think I have to be a little more defensive, and I consider the move to cash to be the best conservative move I know. (I am not smart enough to finagle options. If there is a clear trend I might risk the VIX, DXD or otherwise bet on the short side. But only in a small way.)

My preference leans toward the biggest and best companies paying dividends. (My rule is to consider a full position for these companies to be 5% of assets.)

10. While I appreciate the horror expressed by Ptstanford, I feel ok about this decision. P said, "Terrible mistake and churned my stomach just reading about it. What a terrible waste."

A bit dramatic, perhaps? Or are my steely nerves overpowered by the lead in my head? After all, my basic ability to feed and house myself remains unimpaired. I remain free of the welfare state. I will not end up in debtors prison nor must I sell myself into indentured servitude. And I closed out all positions combined with a decent net profit.

An old race horse breeder added a great saying to my aphorism collection, which I applied on Friday, "It is better to have sold and be sorry, than to have not sold and be sorry."

11. RicardoAliFernandez expressed the concern of replacing the dividend income. A good and valid point, but for me I am not yet living on the divi income, so while I enjoy reinvesting it, I don't need it to pay the bills. And I'd add that my profit margin on the whole portfolio is over twice what the dividend yield for a year would be. So I can live with that.

12. matratra - "It appears you to be a client of GS." I wish. GS wouldn't touch me with a ten foot pole.

13. Shikes said, "...little evidence or reason is given for the sell-off other than "The markets have had a big run up"...This isn't evidence, its at best a gut feeling..... just one investor saying he looked at the run up charts and just couldn't take it anymore."

Exactly right. More than a little due diligence was involved, but at the end of the day I knew it was a quick and hasty gut decision. And that was the whole point of writing it out for my Instablog intended post.

14. 1stsignal - Good one! MY CORRECTION: I did sell the AAPL position in my wife's account. I apologize for that omission. For what it's worth, it was up 19.5% in a short period of time. Arguably, it was good to grab that profit regardless.

Imagine my shock when SA offered to publish my article sitewide. It's like that dream we all have sometimes where we are sitting in church in our underwear. Yikes!

I didn't write this with the accounting detail of a 10K because I really wrote it for more personal consumption, so there are minor inaccuracies and some ideas are imperfectly explained. Suddenly what was essentially a diary post of my decision has 543 comments! Every one of which is by someone smarter than me!

WHAT HAPPENS NEXT?

I'll watch the markets. I think of the markets as more exciting than the World Cup. Buy low and sell high isn't the only point of view, but I like it!

Buy high and sell higher is the Investor's Business Daily point of view, and perhaps that will be the next strategy. But there is a world filled with risk and opportunity to explore. "There is always a bull market somewhere."

If there is a modest or major correction maybe I'll come out well, and I'll probably seek to get back into my favorite companies.

If not, and if nothing better comes along, I would like to think I am grown up enough to do the radical thing; admit I was wrong and correct the mistake.

Thank you all for your comments.

Source: The Day I Sold Everything: Questions Answered

Additional disclosure: The BP trade didn't go off. I'll revisit that sale Monday.