Saturday, September 19, 2015

One eyed king

You may ask why I haven’t posted any investment opinions lately. Well, the answer is simple: there is not much to do and one of the few things I have done is accumulating cash. So the summer doldrums’ correction has lingered on; oil prices have crashed and maybe prices of some stocks will become so cheap that I no longer can resist and buy some.  However, I have no idea whether we’re in a correction or whether things will get worse and if we’re going into a bear market.

It really doesn’t matter what will happen. The bull market may resume (my opinion) and if so, I’ll likely buy some more shares in companies I love to own at cheap prices or sell put options on them at depressed share prices. The options will either make cash when expiring worthless or I buy great companies at even cheaper prices. If there is a bear market, I will get stopped out of my riskiest investments and have a manageable loss since I have diversified and thus build yet more cash to buy stocks cheaper in the future.
Yes, my overall portfolio value may fall but so will portfolios of most investors – especially those who panic or are forced to sell at depressed valuations and who thus make their losses permanent.  So on a relative basis, I’ll be better off than most stock market investors around me while building up cash from dividends and rental properties that I haven’t sold.
As a minimum, I’ll have a lot of cash; the upside will be that I will be able to hold on to most of my investments and wait for their recovery PLUS the opportunity to invest my cash at rock bottom prices.
Over the long term markets tend to go up – that has been so since the dawn of time; although sometimes with very long waiting times. Yes, my performance may not be stellar but I will retain my assets and hopefully perform as good as or better than most. So doing nothing – or better virtually nothing - may be the best thing to do right now. When the dust settles, I may be a bit like the one eyed king in the land of the blind – with preserved assets and cash to fight another day.