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Everyone else can invest in this market, I'll wait for a real economy to Invest in...

Apr. 01, 2011 1:17 PM ET
Greg Herman profile picture
Greg Herman's Blog
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Seeking Alpha Analyst Since 2010

Age: 22 Home Residence: Mount Holly, North Carolina Investing Philosophy: Extreme Distress Earnings Plays During Multi-Year Market Bottoms; I could care less about stocks that are 10%, 20%, or even 50% undervalued. I will wait an entire decade for the oppurtunity to buy 10, 20, and even 50 baggers through direct equity exposure or LEAPS at market bottoms. Once Mr. Market begins to turn into a "manic depressant" as Benjamin Graham would put it, I am even open to shorting the hyper-valuation stocks. Portfolio: $100,000 Family Fund; Sole Decision Maker for fund; First $50,000 was granted in April 2010 and invested into Noble Corp. (NE) at the end of May and beginning of June (current position); Second $50,000 granted in September, currently in cash ($53,000 roughly). Update (3/31/2011): Sold 90% of Noble Corp. (NE) stake at just over 50% gain, which was held for roughly 10 months. Very cautious right now, 20% portfolio in Wal-Mart (WMT), 10% in Johnson and Johnson (JNJ), and 8% in Noble Corp. (NE). Rest is in cash (62%). Portfolio value roughly $125,000. Update (4/6/2011): Sold rest of Noble Corp. (NE) Update (4/26/2011): Sold Johnson and Johnson (JNJ) for profit. Great company, but valuation is decent, nothing special, 20% WMT, 80% cash. Update (11/15/2011): Been in cash for some time now... but feel great about this because of how artificial the whole charade is right now... Update (11/25/2011): Valuations in some cyclical companies set up for 2X and 3X gains, but I'm greedy when it comes to desiring outlier-like returns and incredible margin of safety (for you Ben Graham haha... Enjoying watching with tons of dry powder) Mr. Market Rating: IRRATIONAL EXUBERANCE (Update, overdue, 11/25/2011) Mr. Market Rating: Valuations starting to become reasonable, especially in coal, other cyclical sectors Investing Events Attended: 2010 - Berkshire Hathaway Annual Meeting (May), Second Annual Value Investing Panel at Creighton University (May), Pabrai Funds Chicago Meeting (September)

The current valuations coupled with the massive government intervention make the current market siuation quite dangerous. People keep buying stocks because there are no attractive alternatives. However, few people are willing to sit on cash because they are too worried about missing the next move up. They are approaching the situation the wrong way; They should be much more worried about losing tons of principle instead of capturing a few more percent of upside. With cheap dollars sloshing around, the government can claim growth or whatever it wants. Once QE2 ends, we shall see what this market is truly made of. When interest rates, which they inevitably must do, there will be much better buying oppurtunities out there. Though some may see holding cash as a hinderance, it is absolutely necessary during times when investment choices are terrible. Everyone should always remember, Rule #1: Never Lose Money. Most people won't follow this rule and will chase gains, only to be let down when prices begin to reflect the true state of the non-manipulated economy.

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