Investment Strategies / Mechanical Investing
No. of Recommendations: 2
Jim (and others of course): One thing you said is vividly in my mind: "3 months after the end of a secular bull the indexes are down only 10% => You have a lot of time to get out".
(I hope this resembles what you said, as I don´t intend to put words in your mouth you might have never said.)
I think that time has come. The hype is gone. Since at least 1/2 year the Mag 7 are not magnicifent any longer (Exception: Google) and - rotation - the boring stuff is holding up far better (Johnson&Johnson, Berkshire, Markel, White Mountains, Dollar Tree/General, Hershey...).
I am not interested in "getting out", as I AM out since 1 year, having then even reduced my Berkshire holdings 1/3. My mentality is that of a skeptic, doubting everything. That led me to miss this many years long bull run --- and to an affinity for shorting. That worked well with Berkshire 2024/25 --- and ended badly before with T... (the stock with the unspeakable name) and SaaS.
Lesson: I might be correct regarding direction, but my timing is shitty. Too early in, too early out, missing the best. So because of my affinity to shorting my heretic question is about timing that (doubly heretic: Shorting+Timing).
Jim (and others), let´s assume for a moment you´d have so much conviction that "it´s over" and reversion to the mean (or rather below) is coming, that you´d intend to use that with puts, BIG (Gambling, the 3rd heresy).
Since 2-3 months I am short Palantir+Nvidia, but not in a big way. WHEN would you go in big with puts (Yes, I know: "Never!!!" --- try to see it hypothetical; I am responsible for bad outcomes of my actions, not you). With a good part of the Mag 7 already 20-30% down from their highs (Meta, Amazon, Microsoft, Palantir): Is it already too late?
2nd part: With WHAT would you go in big? Puts on what (Mag 7 only seems too risky)?
No. of Recommendations: 23
It's not an unfair summary of a comment I made.
But the lesson from it that I intended by the observation was: don't try to call the top. It's hard, and there is no hurry, so don't try. Tops tend to be rounded (though jagged), not spikey, if you know what I mean. So one can usually (this is a statistical thing) just wait till there has been no new high for 3-5 months and THEN sell, without having given up much. It is exceedingly rare to see a drop in prices shortly after a recent market high that is both meaningful and lasting. (if a bull market has been the norm lately, people have been conditioned to buy every dip, so any big dip shortly after a recent top tends to see a strong rebound--1987, 2020, whatever)
Right now we seem to be in an ongoing bull market, whether it makes sense or not. The broad US market hit a fresh recent high only 11 trading days ago. Consequently I don't expect a bear market to be imminent, despite nosebleed valuations in so many places. (again, speaking statistically: anything can happen with prices, but it seems unlikely)
Comments above relate to the broad US market, not individual equities around the world. And of course the comments have nothing to do with valuation levels. Different games, different rules of thumb.
Jim
No. of Recommendations: 3
No. of Recommendations: 7
On Bear markets, Ken Fisher says " They are characterized by a slow, rolling start, often delivering roughly one-third of the total decline in the first two-thirds of the time. "
and "Corrections vs. Bears: He differentiates between quick, sentiment-driven "corrections" (usually -10% to -20%) and full "bear markets," advising investors not to treat every decline as a major crisis."
That's why you have plenty of time to get out.
The average bear market lasts about 14 months. For a 30% decline you've got 4 1/2 months to get out for only the 10% loss, to sidestep the other 20% loss.
When I ran a timing backtest using a 43 week (10 month) SMA on the S&P500 the best result was not selling until 4 consecutive weeks of the close below the SMA. Being more hasty had worse results.
The problem [some] people have is they sell out when they see a hiccup and are out when the market recovers from the pothole shortly thereafter.
let´s assume for a moment you´d have so much conviction that "it´s over"
The S&P 500 is currently down only -2.1% from its all-time high.
as of 2/11/2026 it is +7.1% above the 43 week SMA.
"The Magnificent Seven account for 34.3% of the S&P 500 as of Feb. 2, 2026." That's a large weighting and the S&P is *still* doing ok.
As The Hitchhiker's Guide to the Galaxy says, "DON'T PANIC" in large friendly letters.
No. of Recommendations: 35
The single greatest benefit to being a long investor is it prevents you from making decisions. Decisions that almost surely will be wrong more often than right. I am a firm believer of two things.....
1. Placing your money in top quality companies and letting it ride. The key is identifying those companies and of course conquering psychology where human impulse likes to take over.
2. I'm not that smart! I'm more confident in this dictum than the first one. I've seen first hand the mistakes I make when I start to think I have some novel idea- investing in Intel with the belief chips were going to be manufactured in the US overnight, Investing in a packaging company called West Rock thinking they had their market cornered, selling Berkshire at $424 because it had run up too much. I could go on and on. Let's just say my net worth benefits when I don't make decisions.
No. of Recommendations: 6
Shorting is crap. If you get it wrong your position gets bigger as time passes, which can create a world of hurt. When you're long, bad positions automatically become smaller over time. This is with futures, but I imagine puts must have an equivalent disadvantage.
SA
No. of Recommendations: 8
It took me a while to realize it is better to invest in quality and generally let it ride even when it seems to be overvalued. This is especially true for taxable accounts.
Rich
No. of Recommendations: 3
It took me a while to realize it is better to invest in quality and generally let it ride even when it seems to be overvalued.
Certainly a fine way to go. But not the ONLY way.
e.g., Berkshire's stock is almost precisely flat year to date. In that time I'm up on my sundry Berkshire options about the value of half a share.
Jim
No. of Recommendations: 19
The single greatest benefit to being a long investor is it prevents you from making decisions.
It's such a simple and beautiful thing. I've mostly done that, buying a mix of good companies and holding them, with mind-boggling success. The early TMF had it right with their strong, quirky embrace of LTBH, playing a leadership role, and they really blew it when they followed the herd pursuing every investing option (no pun intended) under the sun. For me, TMF provided the company choices to investors through their services. I added a steadfast LTBH personality trait. I ignore most of it, don't fear the next thing around the corner, certainly don't try to time the market, and you could not pay me to look through financial documents. Or be tied to a computer screen.
It's really that simple, it's not that hard, people just make it so. I'm still holding 1997 AMZN shares (I've NEVER seen ANYONE on cnbc or TMF (except DG) with 1997 AMZN shares), 2008 AAPL, 2010 GOOG, 2010 BKNG, 2009 COST, 2009 SBUX, 2011 BRK.b, 2008 IPGP, 2011 WM, 2012 NFLX, 2013 ISRG, 2010 EXEL, 2012 CMG, 2008 UNH and many others that have done just fine, albeit more normal returns. I've also helped family and friends do the same. It's a shame that TMF did not stay the course with LTBH.
conifer
No. of Recommendations: 20
It's a shame that TMF did not stay the course with LTBH.
There’s very little profit in LTBH if you’re selling a newsletter on which stocks to buy or programming a TV network about investing or running a brokerage. You’ll get some business from time to time, sure, as people accumulate enough to add to what they’ve already got, but velocity and action, that’s where you get people signing up, tuning in, trading positions.
How many times does someone need to hear “Costco is a good company with good prospects” or “Berkshire offers stability” or whatever?
Indeed, I think most of the people on these boards, even if LTBH are anomalies; we want to hear the latest and greatest, but we also want to hear our LTBH validated. I don’t think most people are like that.
No. of Recommendations: 6
TMF went full Animal Farm and became what they used to excoriate.
No. of Recommendations: 27
TMF went full Animal Farm and became what they used to excoriate.
Yeah, but they make payroll now. Incentives are powerful.
Imagine what happened to me when, as a portfolio manager, I put a large chunk of somebody's money into Berkshire shares? Pretty obviously (and entirely rationally) they withdrew the money, explicitly noting "I can do that myself".
I suppose it would have been rational to advocate a fancier investment strategy, but instead I gave back my asset management license.
Jim
No. of Recommendations: 3
I suppose it would have been rational to advocate a fancier investment strategy, but instead I gave back my asset management license.
I am surprised, you seem to have a lot of fairly sophisticated ideas that a lot of people would pay to have access to.
+ Bottom detector
+ Options strategies
+ Falling knives ideas
tecmo
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No. of Recommendations: 4
that’s where you get people signing up,tuning in, trading positions.
Totally get that. It's not a good business model to recommend buys and then do nothing for years and years...but the push for new sign-ups strategy also goes against just about everything they use to rail against with the financial industry. So, in effect, they sold out for money. A bad look, in my view.
How many times does someone need to hear “Costco is a good company with good prospects” or “Berkshire offers stability” or whatever?
Exactly. Which is sorta the point. They don't. Which so often leads to not making bad decisions (sell or trim) based on short term information. That's very hard for humans to accept and practice. They think they need the information, but actually they don't to be really successful at investing. Which is sorta where TMF started out.
conifer
No. of Recommendations: 0
I suppose it would have been rational to advocate a fancier investment strategy
To say what´s obvious anyway: ´Rational´ if your only objective and criterion simply was to make the greatest possible profit, no matter what, which nobody here would believe it was.
you seem to have a lot of fairly sophisticated ideas that a lot of people would pay to have access to.
It´s a matter of age. Is it Hindu or Chinese who differentiate between 3 stages in Life and the according roles you play, with the middle one centered around family/house and as a necessity coming with that being the earner, and with the last stage being a teacher?
See Zee (MI board) who is in that stage of life. His goal is to educate, and that he is charging for his teachings is to make sure to get motivated students, as unfortunately in a capitalistic society something you give "away" (that word already says it) for free is quickly associated with "must be worthless".
Once at the end of a Yoga teacher training a girl asked Richard Freeman "What do you think of teaching classes for free if one has another job and can afford that?". The answer was "We made the experience this doesn´t work because it´s seen as having no value".
No. of Recommendations: 15
I am surprised, you seem to have a lot of fairly sophisticated ideas that a lot of people would pay to have access to.
+ Bottom detector
+ Options strategies
+ Falling knives ideas
Money management is a terrible way to make a living. If you aren't a sociopath, it's very stressful worrying about your clients' money. The regulatory nonsense burden is beyond description, so you need to be BIG. It suits those able to raise money, not those good at investing, And, of course, it's very difficult. Perhaps my experience is coloured a bit by having started just before the credit crunch : )
My greatest contribution to the industry, in my view, was my fee structure. 12% of any profits after all costs, but any loss I pay the client 2% of losses. No cap and a personal guarantee. It focuses the mind wonderfully. The biggest client, 8 figures for a public company, got double digits after fees in both 2008 and 2009 while fully hedged, so I call that a passable success. (at least I didn't have to give them money). One of my hedge fund clients had a sizeable percentage loss, redeeming during an admittedly bad NAV drawdown. One of my clients overrode my advice and sold WFC at $7.50, probably to Charlie Munger! He still did OK that year overall.
Jim
