A participant in the morning Working Capital Model (WCM) investment workshop observed: I've noticed that my account balances are returning to their (June 2007) levels. People are talking down the economy and the dollar. Is there any preemptive action I need to take?
An
afternoon workshop attendee spoke of a similar predicament, but cautioned that
(with new high market value levels approaching) a repeat of the June 2007
through early March 2009 correction must be avoided--- a portfolio protection
plan is essential!
What
are they missing?
These
investors are taking pretty much for granted the fact that their investment
portfolios had more than merely survived the most severe correction in
financial market history. They had recouped all of their market value, and
maintained their cash flow to boot. The market averages remain 40% below their
2007 highs.
Their
preemptive portfolio protection plan was already in place --- and it worked
amazingly well, as it certainly should for anyone who follows the general
principles and disciplined strategies of the WCM.
But
instead of patting themselves on the back for their proper preparation and
positioning, here they were, lamenting the possibility of the next dip in
securities' prices. Corrections, big and small, are a simple fact of investment
life whose origination point, unfortunately, can only be identified using rear
view mirrors.
Investors
constantly focus on the event instead of the opportunity that the event
represents. Being retrospective instead of hindsightful helps us learn from our
experiences. The length, depth, and scope of the financial crisis correction
were unknowns in mid-2007. The parameters of the current advance are just as much
of a mystery--- today.
The
WCM forces us to prepare for cyclical oscillations by requiring: (a) that we
take reasonable profits quickly whenever they are available, (b) that we
maintain our "cost-based" asset allocation formula using long-term
(like retirement, Bunky) goals, and that we slowly move into new opportunities
only after downturns that the "conventional wisdom" identifies as
correction level--- i. e., twenty percent.
So,
a better question, concern, or observation during a rally (Yes, Virginia, seven
consecutive months to the upside is a rally.), given the extraordinary
performance scenario that these investors acknowledge, would be: What can I do
to take advantage of the market cycle even more effectively--- the next time?
The
answer is as practically simple as it is emotionally difficult. You need to add
to portfolios during precipitous or long term market downturns to take
advantage of lower prices--- just as you would do in every other aspect of your
life. You need first to establish new positions, and then to add to old ones
that continue to live up to WCM quality standards.
You
need to maintain your asset allocation by adding to income positions properly,
and monitor cost based diversification levels closely. You need to apply
cyclical patience and understanding to your thinking and hang on to the safety
bar until the climb back up the hill makes you smile. Repeat the process.
Repeat the process. Repeat the process.
The
retrospective?
The
WCM was nearly fifteen years old when the robust 1987 rally became the dreaded
"Black Monday", (computer loop?) correction on October 19th.
Sudden and sharp, that 50% or so correction proved the applicability of a
methodology that had fared well in earlier minor downturns.
According
to WCM guidelines, portfolio "smart cash" was building through
August; new buying overtook profit taking early in September, and continued
well into 1988.
Ten
years later, there was a slightly less disastrous correction, followed by clear
sailing until 9/11. There was one major difference: the government didn't kill
any companies or undo market safeguards that had been in place since the Great
Depression.
Dot-Com
Bubble! What dot-com bubble?
Working
Capital Model buying rules prohibit the type of rampant speculation that became
Wall Street vogue during that era. The WCM credo after the bursting was:
"no NASDAQ, no Mutual Funds, no IPOs, no problem." Investment Grade
Value Stocks (IGVSI stocks) regained their luster as the no-value-no-profits
securities slip-slided away into the Hudson.
Embarrassed
Wall Street investment firms used their influence to ban the
"Brainwashing" book and sent the authorities in to stifle the free
speech of WCM users--- just a rumor, really.
Here
we are once again. For the sixth time in the thirty-five years since its
development, Working Capital Model operating systems are proving themselves to
be an outstanding market cycle management methodology.
And
what was it that the workshop participants didn't realize they had--- a
preemptive portfolio protection strategy for the entire market cycle. One that
even a caveman can learn to use effectively.
Steve
Selengut
sanserve
(at) aol.com
http://www.kiawahgolfinvestmentseminars.com
Author
of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment
Strategy"
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asset
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value
Investment Retrospective – A Preemptive Portfolio Protection Strategy
Investment Portfolio Protection Strategy
These
investors are taking pretty much for granted the fact that their investment
portfolios had more than merely survived the most severe correction in
financial market history. They had recouped all of their market value, and
maintained their cash flow to boot. The market averages remain 40% below their
2007 highs.
A participant in the morning Working Capital Model investment workshop observed: I've noticed that my account balances are returning to their (June 2007) levels. People are talking down the economy and the dollar. Is there any preemptive action I need to take?
Working
Capital Model buying rules prohibit the type of rampant speculation that became
Wall Street vogue during that era. The WCM credo following the bursting was:
"no NASDAQ, no Mutual Funds, no IPOs, no problem."
The
WCM was nearly ten years old when the robust 1987 rally became the dreaded
"Black Monday", (computer loop?) correction on October 19th.
Sudden and sharp, that 50% or so correction proved the applicability of a
methodology that had fared well in earlier minor downturns.
http://www.sancoservices.com/50CurrentInvestmentArticles.htm