2009 Stock Picks

Every year I provide six stocks for selection for each trust fund. Generally each trust fund selects 2 stocks, in amounts of $700 – $1000 depending on available cash (some cash accumulates from dividends and prior sales).

1) WMT – Wal-Mart. Retailer from US.
Wal-Mart benefited from the recession which drives a focus on price and value. WMT is tweaking their international strategy to produce better results and is a well run company. WMT also provides a dividend of 2.2% and is trading not too far off its 52 week low

2) TEVA – Teva Pharmaceutical Industries (ADR). Generic drug manufacturer from Israel (and ADR traded on US exchanges).
Teva is another well run company that could do well in most scenarios involving potential health care reform, as well. This stock also provides some international exposure. They have a 1.1% dividend yield.

3) SI – Siemens (ADR). A German industrial conglomerate, Siemens seems to have put much of the scandals behind them and is poised to grow as Europe comes out of a recession. Siemens is also very active in the green energy business. SI is often thought of as a European GE, for better or worse.

4) NUE – Nucor. A US steel manufacturer. Nucor is an extremely well run company that has thrived amongst a difficult environment for US steel manufacturers (pretty much everyone else state side went bankrupt over the years, killed by unions and a lack of investment). There is competition at home and abroad (Ross bought up most of the bankrupt company’s capacities and fashioned them into a new company). Nucor also has a 2.8% dividend yield.

5) SNP – China Petroleum and Chemical Corp (ADR) (also known as SINOPEC) – A massive Chinese oil and chemical company. China requires significant resource growth to power their growing economy. Chinese companies are also better able to work in some developing nations that have dodgy human rights records, where US and European countries would face legal difficulties. This stock is an ADR and has a 1.5% dividend yield

6) ADBE – Adobe Software – US software company. Adobe has a franchise with the PDF technology and graphical tools. Adobe has a strong software business with low debt and cash on hand. Adobe does not pay a dividend.

For the stock selections wanted to attempt to balance:

US vs. non-US stocks – much of the future growth will take place outside of the USA, so limiting the portfolio to US stocks seems foolish. In order to ease difficulties on investing, only foreign ADR’s (which is when the stock trades on US markets like NASDAQ and the NYSE, mimicking the home market) are put on the list
Limited / manageable debt load – many companies were burned when the thought that they could easily use the debt markets to refinance debt at reasonable rates, which turned out not to be the case in the latest recession. For the purposes of this trust fund I would like to stay away from companies with significant risk on debt; at various times I have sold stock because of looming debt maturities (CX)
Small and large company sizes – while none of these are “small” or even “mid-sized” companies, I wanted to give some selections that weren’t absolute giants. Different sectors of the market behave differently in times of crisis and during a market advance

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Analyzing Performance – Portfolio One

Background on Portfolio One

The first portfolio of my trust funds was set up right after the attack in September, 2001.  It seemed to be an inauspicious time to invest in stocks.  However, since these trust funds have a long time horizon (they start when the beneficiary is around 12 or so years in age) they should have a higher risk tolerance than a stock fund for someone later in life.

At the time I started the first fund, I was a confirmed “buy and hold” investor.  By this I meant that I intended to little or no “pruning” of the portfolio and intended to hold stocks until the fund’s control transferred over to the beneficiary.

While I still am generally of this temperament, over the years I did start selling some stocks when I believed they reached a “peak”  value and selling some stocks when I believed that they were at risk of dire consequences.

Investment into Portfolio One:

The first year (2001) began with an investment of $500 and then increased by $1500 for each year thereafter ($1000 from myself, the custodian, and $500 from the beneficiary).   There was also a special $1000 donation when the beneficiary graduated from high school.  Thus during the period 2001-9 (prior to this years’ investment round) the beneficiary has invested $3500 and the custodian has invested $8500, for a total of $12,000.

The investment typically involved purchasing 2 stocks / year, in amounts of approximately $700 / each (because brokerage commission fees and other investment fees also must be taken out of these funds).  In later years the investments got larger, because of re-investment of stock proceeds, dividends, and interest income.

The fund currently holds 13 stocks, whose market value varies between $436 on the low end to $1560 on the high end.  The average amount is approximately $900, for a total value of $12,265.  The fund also holds $1900 in cash; this cash position has increased due to volatility in the markets and the fact that the beneficiary is reaching an age where we might need access to some amount of cash and I’d rather have it “on hand” than have to liquidate a stock.

Overall Performance for Portfolio One:

Portfolio One overall has returned approximately 18% on the $12,000 invested over this 9 year period.  Until the recent market run up the return, overall, was slightly negative.  The fund is worth $2205 more than was invested.

This return is impressive given the overall poor returns in the equity markets from 2001-9.  Note that these investments were put in roughly equal installments during the period, so you can’t just compare it with a “lump” of money invested in 2001 against the return through 2009.  Also, this is a “real world” example so little items like commissions and fees need to be compared as well (this return wasn’t impacted by taxes because they were paid outside of this analysis if there were gains / losses in a given year).

Specific Analysis of Performance – Dividends:

During the analysis of this portfolio special effort was placed to track the performance of various components and their impacts on returns.  This analysis was done by creating a specific excel model which is included along with this post (at the bottom).

Dividends provided a total return of $1,135 during this period.  Dividend returns do matter during longer periods of analysis, and heavy dividend paying stocks provided much of this total.  AEP, a utility stock (which currently has a yield > 5%) provided $244 of dividends, Procter & Gamble, the consumer products company, provided $210 of dividends, and other dividend paying stocks made up the balance.  As of the time of this post, dividends made up approximately 50% of total returns, but this number varies significantly with the total portfolio gain – it was as low as 25% prior to last October’s market swoon.

Specific Analysis of Performance – Gains & Losses:

Gains and losses are the most complex component to analyze.  As you buy or sell a stock you incur fees, potential tax implications, and you change your portfolio performance depending on the characteristics of what you are buying and what you are selling.  For example, one of my earliest “sales” was Amazon, for a big gain (relative to the size of the portfolio, at least) and then I replaced it with Procter and Gamble.  Since Amazon paid no dividends and P&G does, this changed the character of my portfolio overall.

Here were the gains and losses by year:

– 2003 – Sold Amazon for gain of $1191

– 2005 – Sold Southwest Airlines for a loss of $3 and Tribune for a loss of $218

– 2007 – Sold Dell for a net loss of $132, Chuck E Cheese for a loss of $58, Sold Amazon for a gain of $1345, Sold China Mobile for a gain of $1276, sold ICICI bank for a gain of $541, and sold Netscout for a gain of $556.  None of those stocks with gains has approached the price where I sold it (their current prices are noted on the spreadsheet by stock).  Unfortunately, some of the reinvested stocks did poorly, as you can see in the 2007-8 purchases.  Generally I was trying to take advantage of a run-up if I thought stocks had hit a speculative peak

– 2008 – Sold GE for a loss of $589

– 2009 – Sold Cemex for a loss of $1235 (both GE and Cemex were stocks that I viewed as dangerous during the heat of the financial melt down since GE is mostly a finance company and Cemex is heavily indebted)

Specific Elements of Return – Fees:

This portfolio began in 2001.  At the time, fees for purchasing or selling a stock were a bit more than $20 / share.  These fees have declined over the years as pretty much everything has gone electronic and competition has increased.  Depending on your “total” package, some of the trades are less than $10 and some are free.  Over the life of the portfolio fees (plus a fee they used to levy on all accounts annually) total $667.

We track fees and commissions specifically even though they are often buried in the total cost (gain or loss) of a sale.  Brokerage firms don’t make a special effort to break out fees, usually, and you can probably guess why.

Given that the portfolio has had a decent amount of trades (26 purchases, 12 sales) this is a pretty low net amount of commissions, and reflects the declining cost / trade as mentioned above.  I believe that this rate is reasonable; if you put it in a typical mutual fund with around 1% / year expenses and had an average balance of $7000 (the midpoint of the current balance) with a life of 8 years you’d pay ($7000 * 1% or $70 / yr * 8 years = $560).  My point in this wasn’t to have the absolute lowest fees, but to work to minimize fees as a cost of the portfolio while not letting it impede trading where necessary.

Specific Elements of Performance – Interest Income:

Over the life of this fund (2001-9) interest rates generally have been very low.  In the beginning just enough cash was left to pay an occasional fee and commissions and to leave some “slack” in case the executed stock price was significantly different than the time when I put the order in.  Towards the end I started leaving more cash in the fund as the market gyrations became more and more significant – it seemed prudent.

Thus given that the balances don’t even average $1000 across the life of the fund in cash it makes sense that interest income was a relatively paltry $123 over 2001-9.  Current interest rates on money market accounts are minuscule… it is hard to imagine how important this portion of total return was during inflationary periods.  The return on your money market portion of your brokerage account is something to keep your eye on, but with such low rates the total return is very low regardless.

Summary:

I think that portfolio one did well, all things considered.  The fees and expenses were kept reasonably in line, we earned a decent amount of dividends, and sales at peak provided more money to reinvest into other stocks.

On the downside, many of the reinvested stocks performed poorly; not necessarily worse than the market as a whole, but certainly worse than just leaving the money in the money market account (which almost everyone would have done in perfect hindsight).

The current portfolio is relatively balanced across sectors, size of companies, by country, and has 13 stocks which means a swoon in a single stock may hurt a lot but it won’t kill the account.  The current portfolio is also leaving some more money in cash which is new, but seems reasonable in the current environment and considering all factors of the fund.

Setting Up A New Trust Fund Account

I have 2 nephews that are now of age where I am going to being investing on their behalf as part of a trust fund. The plan is:

– I put in $500 / year
– If they put in $500 / year
– Then I will match another $500 / year

Thus on a typical year we invest $1500 and this process starts when they are 11 or 12 and will go on until they are at least 18. For an account that means that the child will put in $500 * 7 or $3500, I will have put in $1000 * 7 = $7000, and then hopefully the market goes up by maybe $5000 over that time span, depending on performance.

The process of setting up a trust fund or UGMA / UTMA account (depending on which state that you reside) used to be kind of complex – but now it is very simple. You need to set up a brokerage account with yourself as a custodian and the child as the beneficiary. It is most practical to do this for a vendor where you already have brokerage accounts – someone like Schwab, Fidelity, or Vanguard.

The only information that you need is the child’s SSN, date of birth, and name (I assume you already know 2 of 3 of these, or they are having lonely birthday parties). In the past you had to fill out a lot of paper forms but now you can do it online and do an “electronic signature” which means that you don’t even have to sign the completed form and send it in (which can be a pain because there are a lot of pages and then they have to type in all the information and you have to re-check it to make sure it was set up properly). I was able to set up each of the 2 trust funds in about a half hour or so.

Every trust fund has 2 components – a money market account (where the cash initially goes in for investing, and where dividends are deposited and fees such as buys / sells are taken out of by the company), and a brokerage account where the stocks reside.

The trust fund can be connected to your own accounts with that same company (i.e. Fidelity or your own) so that you can electronically transfer funds into that account from your own money market account, for example. You can also set up the account so that you can transfer in funds from your bank, but this is more complex (you need bank routing information).

More information coming soon as we start to select stocks for the new 2009 investing round. I typically do this in mid-August before the kids go back to school – this gives them the summer to save up their share of the money through chores or working a summer job.

Regression to the Mean

A recent Wall Street Journal titled “Rebound of the Losers” from July 6, 2009 described how some specific actively managed mutual funds with large losses recently booked better performance. From the article

Ninety-four diversified U.S.- stock funds that finished 2008 in the bottom 10% of their peers are now performing in the upper 25% of their categories

The article then described their reasons why these specific managers were able to “rebound”. They included:

– purchased shares of better-performing foreign companies (the markets in China and Russia, for example, fell further and later rebounded better as a % than US markets)
– commodity markets improved, so stocks with a commodity footprint like energy benefited
– some managers described their own “guts”

“It’s funny how quickly things can change,” Mr. Soviero says, “but I’m glad I had the level of conviction and stuck with a concentrated strategy.”

– others used terms like “discipline” and said they were looking for companies with a “sustainable advantage”

But the journalist on the article missed the simplest, and most obvious answer –

REGRESSION TO THE MEAN

What this means, in practical terms, is that stocks or sectors that have the largest rise now are likely to fall later, and vice versa. One financial magazine I read had “Chicos”, the clothing store, as the “worst” performer over the last year, and the “best” performer over the prior decade, in back to back pages.

Something to watch for, especially when people describe their recovery in personal terms, rather than ascribing it to typical market “bounce”.

iBonds… You’ll Get Nothing, and Like it (or not)

From time to time I have posted about iBonds as an investments. iBonds are interest securities backed by the US Government that you can purchase online or at a bank (I guess, although I have never tried that). The general attraction to iBonds is that their interest rate goes up as inflation goes up – which provides protection in times of rising prices (hence the “i” in the name – I originally thought it was tied to the “dot com” era). Here is an in-depth analysis that I wrote about iBonds in December, 2008, noting that the government had reduced the total amount that you could buy each year from $30,000 / person to $5000 / person. Note that you can’t LOSE money on iBonds unless the US government defaults, in which case we all have some big problems.

In short – there are 2 components to your iBond return. The FIRST part is the “fixed” interest rate that the US Government offers you. I bonds have been issued for about 10 years, and the “fixed” rate used to be as high as 3.4% / year which dropped as low as 0.0% (yes, that’s zero) but recently were bumped up to a negligible 0.1% rate. What this means is that if you bought an iBond years ago and kept it, that is a better iBond than one that you are buying today since the rate today is near zero. I think that the iBonds that I purchased over a couple year period have a rate near 1%, give or take.

The SECOND part of your iBond return is the variable component. This component takes into account inflation. Thus if prices are going up (you have inflation), then the interest rate that you receive will go up, as well. For the decade or so the iBonds have been in existence, this rate has been positive (meaning rising prices), providing an interest rate of between 1% and 6% or so.

Thus since iBonds have been created, the return that you could have gotten (depending on when you purchased the underlying bond) your return would vary from a fixed component of between 0% and 3% and a variable component of between 1% and 6% meaning that the “real” range of interest is between 1% and 9% overall.

TODAY, however, the new iBond rate has been unveiled… and since we are in a deflationary period (prices are going DOWN), for the first time, the rate of return on iBonds is ZERO (the interest rate can never go negative). The decline in real prices is -2.78% for six months per the government calculations, which means that it annualizes to -5.56%, so no matter when you purchased your iBond your return is ZERO, because even the highest iBond rates were about 3% or so they are all dwarfed by the -5.56% annual rate.

OUCH. It is never good to have an investment with a return of zero, especially when you purchased it explicitly for interest income (and to ensure you didn’t LOSE any money). However, the inflation rate will be adjusted in six months, and if prices are going up then, the interest rate will reset upwards.

I wouldn’t invest in iBonds now if you haven’t already bought some, especially because you are just getting this anemic 0.1% return as a base level. Check again when they announce interest rates for the next six months, which will be on November 1, 2009. I wouldn’t sell what you have, however, because you’d just have to re-invest the money in something else, and savings and checking accounts are generally yielding almost nothing now, as well, along with money markets.

Note – for those of you that don’t get the reference (probably those younger than 21 or so… of course it is from Caddyshack).

Trust Funds and Taxes

As part of running a trust fund or being a beneficiary of a trust fund you need to have some understanding of taxes. As always, if taxes are not your specialty get professional help I am only writing from my own experience.

Every year I need to review the taxes for each of the trust funds that I run. Here are the elements of determining taxable items:

1. interest income – every brokerage account is attached to a money market account, which bears interest. When you put funds into the trust, it starts out in the money market account and earns interest until you make an investment, and as you earn dividends, the dividends also go into your money market account. You also may opt to NOT invest a portion of the cash that is in your money market fund, because you are waiting or are afraid of the market, so it will also earn interest until you invest it in stock. Generally, your interest income nowadays will be puny because rates are extremely low right now (less than 2%) on short term money market funds and unless you have large balances the amounts are trivial. For tax purposes, unless your money market account invests in tax-exempt (municipal) securities, you will pay taxes on this interest income, generally at the highest taxable rate

2. dividend income – many, but not all, stocks pay dividends. Dividends may be paid out quarterly, semi-annually, annually, or on special occasions. The “dividend yield” takes the current payout plan of the company divided by the stock price, to see what the stock would pay if it is the equivalent of an interest bearing bond or CD. Right now, for example, Procter and Gamble pays out a dividend with a 3% yield. When a stock price plunges, the yield can get very high, but that is a sign that the stock may reduce payouts – for example right now Nokia has a yield of 10%. Dividends are taxable when received, and they generally are eligible for a reduced taxable rate of 15% if they are “qualified” and US based.

3. capital gains and losses – when you buy or sell a stock, you earn capital gains or losses on the difference between the price you paid for the stock and the price you sold it for (including commissions). Thus if you bought a stock at $10 / share and bought 20 shares, and then you sold that stock for $15 / share, you’d have a capital gain of ($15 – $10) * 20 or $100. If your “holding period” of the stock was less than 12 months, it would be a short gain, and if your holding period was greater than 12 months, it would be a long term gain. Generally long term capital gains are eligible for favorable tax treatment. Note that all capital gains and losses are “netted” against each other, and you can roll-forward your losses. For practical purposes this means that the VAST majority of Americans won’t be paying capital gains taxes for years to come, since most of their existing stocks are trading for less than what they paid for it. Even if you want to sell a stock for a gain, it is easy to find something to sell for an equivalent loss to avoid paying taxes.

Portfolio one – $352 in dividends, $32 in interest, and a long-term loss of $590 on a sale of GE stock

Portfolio two – $188 in dividends, $22 in interest, and a short-term loss of $761 on a sale of ICICI (IBN) stock

Portfolio three – $21 in dividends, $11 in interest, and a short-term loss of $550 on a sale of ICICI (IBN) stock

FILING REQUIREMENTS

Filing requirements are complicated. For this purpose I am discussing whether or not you need to file a return on a given trust fund.

For 2008, if your “unearned” income (basically interest, dividends and gains / losses on sales) is less than $900, you don’t have to file. Based on the above items, they do not need to file. In prior years, we sold some stocks off for gains that pushed them beyond the filing thresholds and we did need to file.

There is an IRS publication 929 (they go by number) which attempts to explain all of this. I would recommend going to www.irs.gov and look for this publication (it is a PDF), download it, and read it. In another post I will explain some of the complexities the best I can.

What I’ve Learned About the Stock Market

Anyone who has a retirement fund or personal investments has an interest in the stock market.  I have an additional interest because I am the fiduciary in charge of trust funds and describe at this site.

When the stock market started cratering in 2008, I didn’t take immediate action, for the most part (I was going to say didn’t do anything “rash” like sell off, but in hindsight of course probably that would have been under the category of “smart”).  I did sell off financials (owned ICICI, an Indian bank, and GE, which is essentially a giant financial conglomerate with a few businesses stuck in there) immediately, and although my exposure to that sector was limited in those funds, those stocks had not done well.

Now I am trying to re-visit the stock market and do some research to consider what to do next.  I am starting out with what I’ve learned from this debacle.  As always, do your own research, this is just my 2 cents based on my experience and body of knowledge.

1.  Watch the level of debt, and the timing of debt – for many years there was an absence of a risk premium, which meant that newly emerging (risky) companies could raise debt very cheaply, such as only a couple of points above the treasury rate.  Today, it is unlikely that these types of companies can raise any money AT ALL, and if they did it would be at a rate perhaps 10 percentage points above Treasuries (i.e. if Treasuries are at 4%, they would pay 14% for financing).  Companies are moving into bankruptcy rather than try to refinance at these rates – companies like Charter Communications, for example.  Even if bankruptcy is avoided (or deferred) the company would have to be highly profitable to earn enough to cover that level of interest payments – and most companies can’t profit when their cost of capital is that high.  I won’t even comment on the 33-1 leverage used by investment banks because we all know how that turned out

2. Guessing the actions of the US Government is important – during the cold war, “Kremlinologists” attempted to divine what was occurring at the top levels of the Soviet government, since it had a direct bearing on our policies.  For example, the Feds let Lehman die and saved AIG, although in both cases their equity value evaporated to the point that a 100% equity loss and a 98% equity loss were a toss-up either way.  The subtle way in which by saving AIG they benefited Goldman Sachs (since AIG was a major counter-party to Goldman Sachs) would be something worth understanding, for example.  The Feds also didn’t bail out Fannie Mae and Freddie Mac preferred shares, which caused whole ranks of smaller institutions to fail.  In general, if you are investing in an industry that looks likely to need government help, you should get out now, because whether or not you have a few equity crumbs or go to zero is a Hobson’s choice you don’t want to face

3. Correlation between asset classes is higher than you expect – Basically unless you were 100% in gold or treasuries you were likely hurt badly in this market.  Foreign stocks, US stocks, many debt instruments, preferred stocks, real estates and most commodities (excluding gold) all dived together.  One of the “core” beliefs of “modern portfolio theory” is that if you spread your investments across classes with lower correlation to one another, you will do better over time.  Modern portfolio theory basically didn’t save anyone in the time frame we are talking about here

4. Liquidity can evaporate, and if you depend on liquid markets, you are in trouble – Not only did the risk premium (see #1 above) go up quickly, liquidity in the market evaporated, meaning that if you counted on liquid markets, you were in big trouble.  Illiquid markets mean that you can’t “roll over” debt and if you do have to sell, you will receive a distressed price for those assets (a big loss, in real terms).  One of the first items to fail were the “auctions” in the municipal area which were a sign of bad tidings to come

5. Real estate is no bulwark – For individuals, there was often an assumption that real estate is a “safe” investment, but real estate values have proven to be anything but.  Real estate losses for individuals were semi-spared because the government has set a very low rate for mortgages and nationalized Fannie and Freddie – without that floor mortgages would be illiquid and subject to #1 and #4 below.  Now, however, the mortgage market is basically subject to government fiat – see #2 above.  If the government decides that condominiums are too risky and pulls back on guaranteeing mortgages on half built condominiums, those investments will fail.  For real estate companies that specialize in building new homes, those stocks are basically dead, since demand won’t catch up with supply for years.  The government is definitely working to prop up the home market, with tax incentives for the new buyer (and likely no more talk about not making home interest deductible)

6. Complexity is dangerous – Another early warning sign was the fact that Citicorp and others had to bring in “off balance sheet” entities onto their balance sheet when liquidity failed (see #4 above).  Those companies were incredibly complex, and their financial statements were incomprehensible even to me, a financial professional.  These counter-parties, off balance sheet entities, and WAY too much leverage made a toxic stew.  In general, companies that have a very complex “story” will likely have a harder road to travel when trying to show their value to the equity community, since people have been burned by what they don’t understand

7. Dividends provide little shelter – over time a significant portion of the total “return” from stocks is driven by dividends paid to stockholders.  Many companies paid dividends at a steadily growing rate for decades, and constantly re-emphasized the importance of dividends to their strategy (giving investors confidence that these dividends would continue in the future).  However, virtually everyone gave up on their dividends, from the financial companies that are sliding to the edge of oblivion to GE (who really is a financial company anyways) to many other industrial companies.  There are exceptions to the rule (companies that are not facing dire straits) but the fact is that strong companies can pay dividends and weak companies cannot, so betting on a dividend independent of the underlying financial structure is a fools errand.  The dividend is nice to have (and starting from a solid one is better), but counting on it in the future has proved to be devastating

8. For the most part, no one (who talks) knows anything – yes you can point to the occasional seer who cried doom and certainly many, many smart and rich (and tight lipped people) made tons of money shorting the entire market all the way down, but for the most part the conventional wisdom was completely and utterly wrong.  There are people or firms that understand the market well and can profit in down times, but you aren’t getting their thoughts from Jim Cramer on CNBC or in the WSJ or Barron’s or anywhere else, much less the popular magazines like Time, Money or your local paper columnist.  Look at how their stock ratings performed, and generally it was terrible.  A lot of this is institutional bias because those magazines and paper can’t just tell you to short everything and get out of the market because those same companies buy advertising and those sorts of negative messages frankly sound un-American when explained out loud.

9. Timing IS important, as is re-investment risk – I resisted timing in favor of “buy and hold” for years but then I moved into selling stocks when I thought that they had peaked on the upside, or they had huge down side risk (financials).  Buy and hold really hasn’t done anything for anyone in the last decade or so except rack up huge losses.  That doesn’t mean that I have a better strategy, but it is a fact that the central issue is timing.  Tied to timing is re-investment risk – which basically hits you in that even though you sell at a gain, you have to re-invest in something else that has increased in price (due to strong correlation) and you don’t mitigate your risk that much by selling one overvalued stock for a gain and trading it for a new one.

10. If it seems too good to be true, it probably is – I am not a seer but I think that all these people piling into municipal bonds for the tax benefits and historically low default rates are in for a rude awakening when bad things start happening to the states.  I know that there are many ways to bail out a state including the Federal government but it just seems like the municipal financing is going to fall apart and I don’t want to be holding the bag.  This applies to “free lunches” everywhere…

Now with all these “lessons”, what is a forward looking investor to do?  The stock prices are down, and this could be an historic time to “buy in” to the market, rather than sitting on the sidelines licking your wounds.  I am trying to figure that one out now, but thought it made sense to take stock of what, if anything, I learned so far.

Cross posted at LITGM and Chicago Boyz