December 21st, 2018 – 1pm –
I am the last one to make light of equity declines. Despite how much cash one may have on the sidelines, it is never fun to lose money. This is not a piece to discuss the challenges facing the economy or the market because, by now, you know exactly what that is. I believe we’ve done a very good job discussing what we observed were the headwinds that are now coming to fruition. No, what I desire to discuss at this very moment is just how dramatically the opinions have changed within this marketplace and how quickly the pendulum can swing in the other direction.
Consider for a moment, it was just a few short months ago that everyone was riding the Apple train. We had sold our shares earlier in the year in the 180 range and folks were clamoring to buy the stock north of $220.00. It was discovered that even he, the Oracle of Omaha, Mr. Buffett himself, made Apple his largest holding. This gave an excuse to every fund manager, under the sun, to hop aboard. There was no stopping the meteoric rise. However, this isn’t a piece about how we stayed away and didn’t get sucked into the hype; but, rather, how it never ceases to amaze me that, despite the euphoria of Apple over $220, the stock has now fallen below $160 and not a soul wants to touch the name. Isn’t that amazing? You can now buy Warren Buffet’s largest holding, his most beloved, at a price far below his average basis; yet, not a single person wants to venture in and join him.
Apple’s decline of 30% in a few weeks is indicative of the general market, which has quickly turned from the economic golden goose to the redheaded stepchild, once again demonstrates how fickle the investment community can be.
Barring a complete stock market crash, it is my opinion that these panic sellers seem to be going much too far. You see, when everyone is busy throwing out stocks and worrying about the end days, we’ve begun using some of our preserved cash to venture slowly, and very cautiously, back in. With a levelhead and cool hand we’re slowly looking to pick up some of the bargains being thrown out with the panic. To remain diversified, we’re using ETFs and to keep costs at basement levels using index only exposure.
Just a couple weeks ago I wrote “close but not yet” and have watched as markets careened lower. I believe stock prices have now gone too far and, as Wall Street always does, the market is giving those who’ve been patient a good opportunity to slowly step back in.
Despite what I view as a much better value than just a few weeks ago, we will not use all of our sidelined capital but rather wait until we believe our opinion is proven correct and take it one day at a time.
May you have a very Merry Christmas and a Happy New Year!
Until next time