Anything I have to offer in the way of investment wisdom has come to me in the normal fashion: I’ve screwed up in the markets. Repeatedly. If there was ever a way to do it wrong, I mastered it. But screwing up is what got my attention in the first place. The pain I suffered will have been worth it if you can avoid the aggravation I went through and if I get a do-over.
I became a stockbroker in 1968, at the very height of the 60s mania. I lost thousands of dollars of clients’ money in the first six years. It might have been hundreds of thousands if I had been a better salesman. My firm’s research recommendations were terrible because the market was terrible.
The market bottomed in 1974, but the ensuing rallies faltered every few months, reinforcing the fear brought on from all those losses. I stayed alive as a broker because one of my clients showed me independent research on gold and, despite my firm’s reservations (they thought gold was bad for investor confidence), I bought gold stocks for many clients and that worked well for a few years.
The great bull market of the 80s-90s got underway in 1982. The atmosphere in the market place was extremely negative–just the opposite of what it had been back when I started. So, of course, it was hard to recommend stocks and even harder to get clients to buy.
Time passed and values went steadily up despite my skepticism. And, because of my disbelief, I was more than happy to take profits of 20-30% when I had them. It was the wrong thing to do. In a bull market you hold your positions. I’ve written about one of my more astute clients in http://rodroth.com//2011/08/22/the-bullbear-cycle/The Bull-Bear Cycle. He made two investments totalling $35,000 in about 1983, and sold them out in 1993 for $287,000. My record was nowhere near that good. I bought and held when enthusiasm was high and lost big time. I took quick profits during the bull market of a life time, and left tons of money on the table.
By the time I had enough seasoning to make decent decisions, the bull market was coming to an end. In the late 90s, my clients were starting to badger me to recommend dot com stocks. I’d seen this show before. I’d had enough. I was told, “If you can’t be bullish, leave the business.” I did.
The markets of the last ten years are a repeat of the 70s: Lots of enthusiasm and big swings that don’t make investors any money. I expect this to devolve to a complete wash-out over the next several years. If we stay in cash, we can start over with a sold-out market which no one will want to buy. No one, that is, that hasn’t been through the cycle before.
No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.