Finally, I found the chip on my shoulder!

Below are excerpts from a post by Doug Kass. If you don’t know Kass, you should. After dealing with the public asking me questions like what they should buy if they should ‘buy and hold’ – as if that was a particular type of thing not a strategy, Kass spells it out. As for the study by Dr. Pastor, all Jeremy Siegle had to say was that Pastor’s work was ‘outside’ the normal statistical techniques. All I have to say is that normal statistical techniques bring you data like 1987 should not happen and CDO’s are safe 99% of the time. Have fun reading.

The Death of Buy and Hold?
3/30/2009 7:50 AM EDT

“If investors have cash on the sidelines, they should not wait too long to put it to use. There are good values out there in equities — especially in financial stocks — and you will be rewarded in the long run if you start dollar cost-averaging now.”

— Dr. Jeremy Siegel in an interview with TheStreet.com’s Gregg Greenberg in August 2007

With all due respect to Dr. Jeremy Siegel (and though we are both out of Wharton!), I am now firmly in the camp that believes that the buy/hold strategy, which was almost universally accepted by the investment and academic community over the past several decades, is no longer the sole investment strategy to be employed in order to deliver superior investment returns.

In the main, long-term (i.e., buy-and-hold) investors view opportunistic traders/investors as second-class citizens, at best, and as an expletive, at worst. This comes despite some of the most successful hedge-hoggers such as SAC’s Stevie Cohen, Michael Steinhardt and George Soros having made billions of dollars by way of commodity, stock and futures trades.

Recent academic studies, such as Dr. Lubos Pastor (University of Chicago) and Dr. Robert Stambaugh’s (Wharton) “Are Stocks Really Less Volatile in the Long Run?” raise questions about the uncertainty of long-term stock market returns and how risky long-term investing might be in the future.

A more violent and uneven corporate profit outlook, higher futures-implied market volatility and the instantaneous dissemination of news are changing the investment landscape and portfolio strategies.

Market and economic conditions change, and the keys to prospering and delivering superior investment returns are, as always, based on the ability of a money manager to perceive transformative secular and cyclical developments in companies and industries as well as changes in the broader markets and economy.

More leverage equates to uneven profit growth and greater share price volatility. A more leveraged financial system, by definition, provides an increasingly volatile stream of corporate profits; it seems more likely that an era of higher implied market volatility is here to stay. It holds that change will be more rapid in the future than in the past and that those who adapt to that change most quickly will do better than those whose investment holding period is “forever” — as Berkshire Hathaway’s (BRK.A) Warren Buffett has learned from the flooded moats that he believed would protect the business franchises of depreciated stocks such as American Express (AXP), Wells Fargo (WFC) and U.S. Bancorp (USB).

An instantaneous dissemination of information spells trading opportunity. The delivery of news and information has also changed the market landscape. When I was a kid on Long Island, back when there was no business news on television, I purchased the New York Post’s late edition to get stock prices. Today, Bloomberg, CNBC and Internet sites like this one provide instant information (news and stock prices) to market participants. In an instant-gratification world populated by more instant-gratification investors (both individual and institutional), a premium is put on quick reaction time. Not only are individual stock moves rapid as news is swiftly disseminated but so is industry share movement. Anticipating sector rotation has become a more important determinant of portfolio performance in recent years and will continue for some time to come.

The depth of the market and economic slump in the past 12 months has undressed many money managers who, similar to the Wizard of Oz, have hidden behind the curtain of a buy-and-hold strategy as they have failed to recognize the swift impact on many of the company franchises they admired. In many cases, their analysis was wrong, circumstances changed too quickly for them to react, or they were paralyzed by inertia — and they paid the price in large unrealized losses.

A buy-and-hold strategy may not be dead, but a thoughtful balance between long-term investing and gaming short- to intermediate-term trades is likely the recipe for investment success in the years ahead.

Investors, we are not in Kansas anymore.

Pres. Obama: Counterfeiter-in-Chief?

Lee Eugene Munson and Patrick Kirts comment on the U.S. currency. Published on Seeking Alpha

I don’t quite remember when, sometime in the past year, I first began hearing average people say that the government ultimately has the power to fix the economy, because it can just ‘print money,’ but, in a few short months, the sentiment has become commonplace. It boggles the mind, but it now seems to be a truth commonly accepted by just about everyone–politicians, journalists, investors–even the man in the street. At Portfolio Asset Management this change in sentiment has altered part of our investing strategy. Gold is now back on the menu along with shorting treasuries. Alternative assets have gone to the top of our list of potential funds and the bond funds we hold are under tremendous scrutiny. The bottom line is that we are under fire–not by the market itself, but by the government policy of debasing the currency. Few are vigilant and the delay in the market reacting to the changes may take time. Meaning, some sound strategies may not work even though a rational investor would say otherwise.
Read the full article here.

Lee Munson comments on current market conditions on CNBC’s “Closing Bell”

First Entry

So, my first blog entry on my new site!!!
This is an opportunity to express ideas and thoughts without the restrictions of an outside website or publication. Mostly, I will be talking about what I see in the market, and how I am taking action on it. Right now I need to think about the action today. I was expecting a few marks up days, as funds want to show good numbers for the quarter. On the other hand, we won’t know for a while what effect further hedge fund redemptions will have. My main goal right now is to make through the end of the quarter, just another 24 hours and reassess. I will ask myself a few questions on every position. Why do I own it? How much do I want in it? Do I have enough cash or too much? Do I think the market is going to fade in April and offer a retracement that will allow me to buy stocks cheap? Why do I want to be long going into the summer?
I think you get the picture that there are more questions to ask than time in the day. So, I will start with the big ones. This way I don’t get stuck like a deer in headlights. Stay tuned, you will be able to follow my progress and see how my year progresses in close to real time.