Stock Market
Fear – "What me worry?"
Patrick Harvey, April 23, 2003
It has been said that "the general ‘investor’ reacts in accordance
with his/her latest experience". Given this fact, it is easy to see why
after a multi-year economic downturn and subsequent market performance, that
the masses look at the market as a plague to be avoided. Now content to earn
2% on CD’s, perhaps 4% on Bonds, the masses have over the past two years,
having seen their "very smart" portfolios value decrease by 50%
or more – now locking in their losses and move into "safe"
investments.
Some quick comments:
• Considering inflation, CD’s are break even at best.
• Bonds are fully priced – with the current interest rates at
historic lows, there is only one reasonable next long term trend and this
is UP. Granted, utilizing a well-constructed ladder of bonds for predictable
retirement or operating income remains a sage "financial" strategy
– but not an investment strategy.
• Real Estate is either fully priced or even over priced.
The smart default ‘investment’ then has to be equities –
which covers the range of being bargain priced, fairly priced, or overpriced.
An important note here: The stock market is not a zero-sum game (as compared
to say the futures/commodities market where all positions are "settled"
each day) – however it remains a truth that if you are selling for a
reason, someone is willing to buy for a reason. The buyer/seller may be an
individual investor - individual traders - hedge funds and institutional traders
- mutual funds needing to invest or liquidate positions due to their own decision
or forced to, (to satisfy redemptions) – an investment bank or underwriter
unloading their inventory, other market makers and participants national or
international.
We repeat again as we have so many times in the past – the investment
du-jour of the masses of is literally always wrong. "Stupid money, buys
on strength and sells on weakness. Smart money does just the opposite".
Recently, we have been aggressively accumulating the stocks of superior companies
(which are bargain or fairly priced) – adding some situational high-yielding
investments which should continue this performance for a period and taking
advantage of specific opportunities as they come to our attention.
The purpose of this letter is to "publish" a current model portfolio
– it’s a real portfolio with our real money in it. The goal of
this portfolio is total return, with reasonable but low risk. We are offering
it free on the web for one year – after which it will become a subscription
web/email newsletter.
Disclaimer: This is a real portfolio – we own positions in these companies and we will publish it immediately after purchase. These are not obscure companies where heavy manipulation by traders and insiders seeking to make a profit by selling as you are buying. We buy, hold for a period until we feel the we’ve realized a reasonable return, then sell it to find another ‘bargain’. Once we start the subscription service, we’ll include our expectations and our strategy or rationale behind the selection.
Other portfolios are coming as well – suited to different types of investors
depending on your goals and your risk tolerance. Do your own due diligence,
record, observe, and even send your comments. So check out the Model Portfolio
and let us know what you think.
Alternatives:
There are many investment alternatives besides stocks and bonds – if
you are a ‘qualified investor’ – meeting SEC requirements
for net worth or income – many more opportunities are open to you whether
or not you are "stock market" averse.
Here is another idea: Tholius PIC Fund I, LLC.
One of our businesses here at Tholius involves arranging capital for existing
businesses. Generally, businesses come to us when they have a need for cash
from $50,000 to $1,000,000; but we do not arrange loans. Rather, we provide
an instrument which enables investors to purchase a percentage of the business
gross revenues for a set period of time. Since investor payments are a percentage
of gross, the business treats them as an expense item; and in lean months,
the payments are smaller (unlike loan payments, which are the same each month).
Investors get a check every month, and generally can earn about 20% annually
on their investment over a 5-7 year period.
Tholius PIC Fund I LLC is being formed to provide funding for carefully selected
businesses looking for expansion capital. Most businesses involved with us
are funded privately, but there is often an opportunity to participate. The
goal of the PIC Fund I LLC is to carefully select a diversified set of these
investments (PIC’s), realize monthly income and distribute this income
to our limited partners.
If you own a business and are looking for expansion funding, or if you are
a qualified investor and would like more information, please contact us.
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