Too much risk, lessons not learned

[Uccmal]

The collective doesn't learn anything.  They just shift from asset to asset.  Panic and exit stocks in 2008.  Then pile into the safety of treasuries,  now commodities because: dont you know the world is running out of everything - obviously explains why nat. gas hasn't budged in years.  By its very definition an overvalued situation is created by too many people thinking a particular asset is going to always go up.  That is usually the point of capitulation.  Commodities may be heading there but stocks sure aren't, yet.

 

Of all things, the one that people haven't learned at all, is that you cannot predict the future in economics or business.  We all search for the person with the divining rod be it Buffett, Watsa, Klarman, Munger, Grantham, or whomever.  Not only can none of them predict the future but they dont even agree with one another most of the time. 

 

All we can do is indentify undervalued or overvalued situations and exploit the possible potentials that may exist.  This is a daily conundrum for me.  I have 30 some odd stocks and all but three or four are hitting new interim highs.  Do I stay in them or sell?  The best balance I have found is to lighten up positions that seem to be getting overvalued without selling out, expecially if they are raising their dividends.

[Junto]

 

And as of today, I am now 98-99% cash.

 

So, again my question: Have we learned the lessons of 2008/2009 and the Crash?

 

Appears to be overly dramatic at nearly 100% cash yielding near zero rates. The market is not that crazy...

 

I don't find the market overly cheap, but I also don't see it wildly overvalued. 2008/2009 are terrible comparisons for the current marketplace. You have to go a lot further back in history to find a similar situation to what the market is developing today.

 

I understand the pessimism given the recent market advances but as I said, probably over dramatic. The economy is rebounding. As a commercial lender, my manufacturing and clients servicing the manufacturing sector are seeing material pick ups in sales since 2008 and 2009 in 2010. Projections for 2011 are positive even with my most conservative clients. The real estate market in the Midwest appears to continue to be at a stand still although national builders are acquiring inventory and a REIT in our area recently purchased land for speculative Industrial Development. As the economy rebounds, you will see market advances like you are seeing here. The economy has a long ways to go before it is completely stabilized and I don't think the employment levels of 2005-2007 are sustainable or likely to come back in the near future; however, I do see lots of positive changes in the economy around me to make me confident the advance is not ill founded.

 

The key risks I see are the government budget issues, taxes, Mid-East unrest, and the unknown unknown macro events that could change the playing field.

[SharperDingaan]

 

"I agree with you on most of the rest. Also what large companies / industries are switching to IFRS?"

- Every publicly listed company in Canada was required to move to IFRS accounting commencing January 01, 2011. With most Cdn miners, foresty, oil/gas, tech, & manufacturing plants having material P&E (or equivalent); what do you think is likely to occurr when most of Corporate Canada reports an opening equity adjustment (assume its negative) - at the same time ?

 

"SD I think you are dead wrong on Wisconsin".

Agreed there is a political element; but very large numbers are going to see reduced work-weeks &/or lay-offs unless they agree to changes, & are states/municipalities really in a position to foreclose on property owners (& make it worse) - just because they didn't pay their taxes that were increased by 10%? Public sector 'austerity' cuts in the UK, Ireland, Spain, etc have beeen in the 10-20% range, & workers get paid in cash - not IOU's. Politicians trying to get re-elected are going to try to be seen doing whatever they can, & as early as they can.   

 

Lots of nice companies out there - but when the above happens. most would think that they are going to be on sale

 

SD

[Myth465]

 

"I agree with you on most of the rest. Also what large companies / industries are switching to IFRS?"

- Every publicly listed company in Canada was required to move to IFRS accounting commencing January 01, 2011. With most Cdn miners, foresty, oil/gas, tech, & manufacturing plants having material P&E (or equivalent); what do you think is likely to occurr when most of Corporate Canada reports an opening equity adjustment (assume its negative) - at the same time ?

 

"SD I think you are dead wrong on Wisconsin".

Agreed there is a political element; but very large numbers are going to see reduced work-weeks &/or lay-offs unless they agree to changes, & are states/municipalities really in a position to foreclose on property owners (& make it worse) - just because they didn't pay their taxes that were increased by 10%? Public sector 'austerity' cuts in the UK, Ireland, Spain, etc have beeen in the 10-20% range, & workers get paid in cash - not IOU's. Politicians trying to get re-elected are going to try to be seen doing whatever they can, & as early as they can.   

 

Lots of nice companies out there - but when the above happens. most would think that they are going to be on sale

 

SD

 

Aw yes, I forgot the board was dominated by Canuks. You guys have been quite busy with IFRS conversions. If you are correct and its negative then everything will drop to compensate is my guess.

 

My issue with Wisconsin is they have already agreed to all the budgetary demands. They are protesting pretty much solely union busting at this point. With that said you are correct. I was talking to a teacher friend and told her I thought 2011 was going to be something special. She said alot of her friends were being laid off. I was like who - teachers, police, fire, state employees. Its weird. They are going thru their 2008 now. They were sitting pretty though in 2008 and 2009.

 

Finally I agree with you on oil. I think it will break the back of whatever is going on. Its practically embedded in the price of everything produced and sold.

[Guest Bronco]

In NJ it is all the young, cheaper teachers that can't get jobs or are laid off.

 

So to save money - the governments have no access to the less expensive, more dynamic employees. 

 

Can you imagine a public company, lets say Microsoft, that wasn't allowed to hire new young talent?  That something like tenure would preclude you from doing this.  Stock would go to single digits. 

 

Now that I think about it, does Steve Ballmer have tenure? 

 

F these unions.  They have gone too far, and punish taxpayers and their own people.  There is no reason these hardworking people can't play by the same rules as everyone else. 

 

Please note that when I say F the unions, it does not mean F the fire fighters and teachers and police.  But retirement at 40 is a joke.  Lifetime health benefits?  How about teachers, with 4 months vacation.  Seriously?  A decent wage with average health care and average retirement benefits is not too much to ask.  Not at all.  That is what should be considered fair.  When your asking taxpayers, and not the free market, to pay for it - there should be more reasonablness. 

 

 

[Myth465]

That link I sent had an interview with a pretty smart guy.

 

He said Teachers want to be treated like professionals, but the Union wants to be treated like steel workers. They have to make a choice. If I was head of the Union. I would purge the ranks of Pedophiles and tired old ladies who add little value, and would "DEMAND" more pay for realistic performance goals which are controllable by teachers.

 

I would say we are a skilled and professional workforce and I will be the first one to call for the firing of an ineffective or uncommitted teacher.

 

After everyone clapped I would leave the stage and spend 90% of my time developing and creating actually metrics which add value, arent totally test driven, and are realistically controllable by a teacher.

 

---

 

Unions are run for employees and are part of the problem in regards to our school situation. But they arent the problem. Parents and Society are, I dont like making them out to be the great Satan standing between balanced budgets and academic dominance.

[twacowfca]

That link I sent had an interview with a pretty smart guy.

 

He said Teachers want to be treated like professionals, but the Union wants to be treated like steel workers. They have to make a choice. If I was head of the Union. I would purge the ranks of Pedophiles and tired old ladies who add little value, and would "DEMAND" more pay for realistic performance goals which are controllable by teachers.

 

I would say we are a skilled and professional workforce and I will be the first one to call for the firing of an ineffective or uncommitted teacher.

 

After everyone clapped I would leave the stage and spend 90% of my time developing and creating actually metrics which add value, arent totally test driven, and are realistically controllable by a teacher.

 

---

 

Unions are run for employees and are part of the problem in regards to our school situation. But they arent the problem. Parents and Society are, I dont like making them out to be the great Satan standing between balanced budgets and academic dominance.

 

 

Myth, you might get my vote if you were running for public office, but I doubt you would get more than 1% of the vote on that platform, running for office in a union.  Unions are mainly about getting higher pay, better benefits and, especially in our affluent society, increased job and retirement security.

 

Most of my relatives are or have been teachers or other educators.  I'm the oddball, but my business is also educational.  Most teachers would be appalled at the media image presented by the union activists in Wisconsin, but they would understand their desire to protect existing benefits because teachers have often been the first to suffer cuts when states attempt to balance their budgets.

[Myth465]

twacowfca thats true and a very good point. Someone needs to get to the top, then fall on their sword, but I guess thats asking alot.