Investors raise cash for all kinds of reasons.
In anticipation of some big personal expenditure. To protect a portfolio against risk in a volatile market.
To have the firepower to take advantage of a future buying opportunity.
That last reason is why I’ve decided to raise some cash over the next few weeks and perhaps longer.
At some point the bear market in Chinese stocks will drive prices of Chinese stocks so low that I will want to buy. At some point the repeated interest rate increases in Brazil and India will drive prices so low in those markets that I will want to buy. At some point the fear of a slowdown in global growth will drive prices of commodity stocks so low that I will want to buy shares in that sector.
And I’ll want to have some cash on hand to take advantage of what are shaping up as really juicy buying opportunities.
Which, of course, leaves me with just two tiny questions to answer: What do I want to sell to raise cash? When do I want to buy?
I’m not going to reverse any of my recent buying decisions. I think adding U.S. stocks to gain exposure to what is likely to be the world’s best performing stock market (perhaps not a very tough bar to beat, I admit) over the next six months is still a good move. Especially if you concentrate on stocks such as Cisco Systems (CSCO), Cummins (CMI), and Microsoft (MSFT) where the company’s sales and earnings will get a boost from customers who have put off buying and are now resuming purchasing to catch up with deferred demand and changes in technology.
So I’m going to sort through Jubak’s Picks looking for safe stocks that have hit their target price because investors are looking for safe havens—I’ll take my profits there. I’m going to look for commodity plays that are likely to be dead money for the next six months or more—I’ll take my losses there. I’m going to look for growth stories that haven’t played out—and take my modest profits or losses there.
I’m not going to do any panic selling. Remember this isn’t selling to protect a portfolio from some kind of crash—I don’t see that as likely in any of the world’s markets. Instead I’m trying to move money from slow or no gain stocks to the sidelines so that I can redeploy it later in the year.
When? Not yet, that’s for sure.
The several crises that are driving stocks lower in many of the world’s markets haven’t yet run their course. The euro and the Euro Zone are still in for more pain, for example.
The trends toward higher interest rates and other inflation-fighting, anti-speculation measures that are pushing down prices in Brazil, China, and India still have months to go before they’ve played out.
But investors should be able to see when those crises and those trends are nearing an end. The euro will be nearer to $1.10. Brazil’s central bank will have raised rates three times instead of just once. China will have recorded a quarter of worryingly low GDP growth—you know, worryingly low like just 8%.
I don’t think I’ll be able to call the bottom, but with the trends that far advanced I’ll be willing to bet that the bottom is near and I’ll start putting some of my cash to work.
In the meantime the job is to execute the best “sells” possible, sit on the cash, and make lists of stocks that you want to buy when the time looks right.
I looked at S&P chart. I think it may has chance to get close to the first two peaks in the past 10 years.
Ed
Now that you’re sold, please post all of your new buys with dates and share prices ahead of time so we can all jump on board and share the wealth. You are indeed the most magnificent investor of all time….better than Buffet.
Sometimes we buy a good stock at the wrong time. I bought TC a month ago at 12, they posted a disappointing quarterly report, and I closed my position today with a disappointing loss. While I believe it will be above 12 in a year’s time, there’ll probably be a better entry price down the road; plus, I’ll be able to sleep better by taking some risk off the table. I’d like to hear Jim talk about shorting some stocks, like ANF or HOT. I even closed my MCD position today b/c the weak euro won’t translate well when reporting earnings going forward.
Ed:
I guess you meant the charts on businessinsider “scary”. It’s scary…but I have not figured out its credibility and believability….Anyone has, please explaine.
organicbob:
I don’t think Jim sold RIG. It may be on his sell list soon.
BTW, a bill to raise drillers liability was “blocked” today.
Tom,
Your post seems to imply that when JJ initiates a buy, he must have timed it so that the stock should travel in a straight line to his target price. Can it work that way? Sure, but chances are it won’t. JJ has stated countless times that like most, he’s never been good at picking tops/bottoms…which btw, has very little bearing on overall returns.
It sounds like the problem is not JJ playing on both sides of the fence, but rather you lacking patience or just ignoring the all-important time frame next to each and every one of his picks.
Ed:
What did you mean “scary”? Do you have quite positions in Chinese equity? Or do you know something that the rest of us don’t? What’s scary about China’s GDP to 8%? I think 8 or 9 % is fine.
Tom,
Jim’s post did not say raise cash by selling CSCO or CMI. He infact is saying that we should hold onto them, but raise cash from stuff that is not working….
Any suggestions what to do with POT and AGU? These two are now hurting my portfolio!
Tom:
I absolutely have no desire to either criticize or lecture anyone. Here is just my take of this post:
Jim said pretty clear that he did not change his mind about CMI, CSCO, MSFT and other recent “buys” which means he’ll not sell these. He is NOT raising cash in panic, because he doesn’t see crash coming at this moment. He’ll sell (a) some winners; (2) some nonperformers (=dead money); (3) some modest winners or losers. The purpose of his sells are to RAISE CASH for new buying opportunities in emerging market and commodities that he thinks coming some time this year.
Jim:
I hope I got it right.
To be honest, today’s drop made me quite excited (about new buying opportunities.)
Has anyone seen a follow up to RIG that Jim said he would post after their recent Quarterly report?…he was going to listen in on their earnings broadcast and let us know his findings..from what I can tell, he still owns RIG.
Jim,
What are your thoughts on the Ag sector? I know you like POT have you any opinion on AGU?
Marathon man:
Wayyyyttt a minute… Some guy digs up historical charts and they happen to look similar when graphed in various *different* scales and suddenly ‘the sky will be falling’? For me, some techcnical analysis is common sense and some is just descriptive stats with very meager predictive value. That’s what I see in your link. I’m not saying it won’t happen or what to do, but I’m saying this is not enough ‘why?’
Tom: …sounds like you only run with one investing strategy at a time… If that’s your style, so be it. It’s not Jim’s style. Note the various sectors, volatilities, and risk exposures of his picks. It is always the case that some trades will be working while other ideas that seemed like strong possibilities are out of synch with the market. Change is the constant. Maybe you’d be happier with 100% allocation in some ginormous mutual fund.
Jim,
Question for you and others on the board who are raising cash. What % of your portfolio are you going into cash at this time?
If BYDDF falls below 7.00, BUY. This company is a leading battery maker, one of the top Chinese car companies that produces the best electric car, and a future solar panel manufacturer. There will be many opportunities to buy, one is approaching.
This is a decision based on what’s happening now with no long term plan. Totally reactionary. You can’t say buy CMI, CSCO, AMT, etc., and then one week later say, “time to raise cash”. More and more I’m finding these posts full of double-speak. Can’t be wrong if you play both sides of the fence. I’ll probably be attacked for being critical of Jubak, but this is the same crap coming out of our government…say one thing, do another.
well my teva sold off today with a 6% gain. Better then before, knowing when to fold them. I’ll buy teva back, may look for market to clear up or another 5% drop.
Or another good Jubak pick
I predict a bad update for tc or maxwell
In a crash (China), I think dollars AND gold will rise.
Wow, those are some scary charts.
Sell RIG. By now I think even RIG is suing RIG. Not looking good.
Thanks Ed… will do some looking into TZA and BGZ. Agree on gold, just want to be ready to pounce when it’s time.
Run26.2,
DZZ. I do worry about holding onto that in this situation though. If the markets have a major crash, there could be a run on gold. On the other hand, if there’s a mass exodus into dollars, gold could drop too.
Ed… what are you using to short gold, GLL?
Jim – 2 great posts today on China’s situation! Count me in as waiting for China bargains later in the year. Will be tuning in for your ‘green light’ call.
Run26.2,
I’m sold! That is too scary!
I added some TZA and BGZ before the close today. I’m going to look at some other short plays before the market opens tomorrow.
Agreed Jim… I’ve been trying to lock in profits from some of my winners the last week or 2.
lock and loaded!
Another reason to raise cash… quickly. A crash in 2 days to 2 weeks:
http://www.businessinsider.com/global-macros-raoul-pal-heres-why-a-crash-is-coming-in-two-days-to-two-weeks-2010-5
Jim:
Please don’t forget review GLW and JOYG also. Time to buy back?
Ready! I have been selling on every bump. And some buying on every dip.
Jim
I’m anxious to see that buy list….