JPMorgan Natural Resources -48% down but still hanging on

bowlhead99

TakeCareOfThePennies wrote: »

Be weary of people telling you to average down losses. As David Einhorn once said “What do you call a stock that’s down 90%? A stock that was down 80% and then got cut in half.”. In other words, only losers average losers.

Individual stocks can go down huge percentages. They can go down 100% and cease to exist in one year. Or they can go down 80% three years running and then still drop 50%. Piling in more money to buy more shares off other people who are looking for the door, does not make the company recover and get you out of a hole. You should be wary of all of that.

Industry sectors do not cease to exist. So while it is of course worth being aware how maths works, the metaphor is perhaps not directly applicable. Einhorn is always good for a soundbite, usually louder when trashing stocks he's shorting, and quieter when receiving one of the largest fines in the FSA's history for insider trading. I digress.

The trend is your friend

What this means is, wait until funds have already started going up, before you buy them, and wait until they have already started going down, before you sell them ; simply follow the herd for an inevitable sub par performance. But feel OK about it because you won't need balls of steel if you abandon long term ambitions to embrace short term fashions.

Best of luck in your future investing endeavours jabbahut40 !

Ah, we agree on something :rotfl:

masonic

TakeCareOfThePennies wrote: »

Be weary of people telling you to average down losses. As David Einhorn once said “What do you call a stock that’s down 90%? A stock that was down 80% and then got cut in half.”. In other words, only losers average losers. The trend is your friend.

Warren Buffet once said “be fearful when others are greedy and greedy when others are fearful”. People in the investment management industry make all sorts of contradictory statements regarding timing the market. The simple fact is that past performance is no guide to the future. People who try to time their entries and exits based on price trends will tend to do worse than those who come up with a sensible asset allocation and stick to their plan.

For those people who really want to try to engage in a bit of market timing, then they'd be much better off analysing the financials and prospects for the business/sector that they are interested in rather than short term movements in price. Another quote for you, this time from Benjamin Graham - "in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine."

TakeCareOfThePennies_2

bowlhead99,

I am still left with no desire to reply to your posts.

You may think you are clever and always going to be right by averaging down and looking at your using your portfolio as a subsidy mechanism, but that is more luck than good judgement !

What happens if three, four, five of your items go sour ... are you still going to sit there with your rose tinted spectacles and average down, or do nothing, just because your overall portfolio performance is still somehow in the black ?

You may think trends are for short term fashionistas. But you are wrong. Also you are deliberately misconstruing my words, when did I ever say use trends in isolation ?

People need to learn when to cut their losses, plain and simple. Running large losses is only for fools who will eventually get burnt by their own arrogance. Not if, but when !

Why did I ever bother coming back to acknowledge the OP's post ! :mad:

masonic

TakeCareOfThePennies wrote: »

Running large losses is only for fools who will eventually get burnt by their own arrogance. Not if, but when !

Well I don't know about other fools, but this fool has done rather well from adding to the investments in his portfolio that have fallen out of favour and avoiding topping up the ones that have ballooned.

bowlhead99

TakeCareOfThePennies wrote: »

What happens if three, four, five of your items go sour ... are you still going to sit there with your rose tinted spectacles and average down, or do nothing, just because your overall portfolio performance is still somehow in the black ?

Most portfolios are constructed to contain a variety of uncorrelated assets. If the assets are all well correlated there is not much point having a 'portfolio' at all.

So, there will usually always be one or more parts of the portfolio which is going down when others are going up, or at least, going up less strongly when others are going up strongly.

Sometimes there will be several parts of the portfolio doing badly or 'going sour' as you say, at once. Sometimes, it will be the majority of the portfolio. Which parts of the average person's portfolio from, say, mid 2007 to March 2009 were not going sour?

What was the optimal solution when reviewing the typical portfolio in mid Q1, 2009, to the fact that so many holdings were showing a loss? Was it to abandon 80% of your portfolio holdings and go and concentrate all your assets in the few things that had risen for a couple of years, because the trend is your friend? Was it to refocus on bonds instead of equities because they were only falling at 15% a year instead of 40%? Or, was it to sit tight, and maybe bring in some more money if you could, to add at low prices?

I guess you never had to deal with that situation because your stop loss told you to bail at -10% and invest in something else, and the other things you went to invest in, didn't lose any money. In that case, good for you. In the real world, it happens, and we deal with it.

You may think trends are for short term fashionistas. But you are wrong.

Yes, I'm sure I am wrong and the collected wisdom of investors around the world is "Follow the herd. Think short term not long term. Look at what is in fashion on the catwalks last season or this season rather than what may be resurge to be in fashion over the next decade". You never hear any companies or market commentators curse the market's short-termism do you, because everyone thinks that short-termism is the perfect platform for investment.

For the avoidance of doubt, the above paragraph should have been read with a sarcastic tone.

Clearly on a mathematical basis, if you knew what was going to be in fashion from season to season, you should and would use that knowledge.

You would not invest in a mixed portfolio of equities, bonds, real estate, commodities and cash. You would invest all in equities while that was the top thing, and all in bonds when that was the top thing, and all in real estate when that was the top thing, the only time you would hold any commodities would be when that was the top thing, and you would be all in cash when everything else was falling.

Unfortunately, as we don't know what will be the absolute top thing for the year ahead, we can't really use that trick.

It means accepting that there will always be some things in the portfolio doing worse than others. If one sector of the market is 2% of your portfolio and falls to an inconsequential 1% of your portfolio, you can either ignore it because it is now so small that it isn't doing any harm, or you can add to it because you think it has a future and should be a more meaningful part of the portfolio. Or you can decide that the sector has no future and you shouldn't even let it be a small part of your portfolio. But imho there are not many sectors that have no future.

Also you are deliberately misconstruing my words, when did I ever say use trends in isolation ?

Yes I'm sure what you meant to say instead of "only losers average losers, the trend is your friend" is that "sometimes, people average a losing position and lose more, while other times it works out very well, and sometimes, the trend can be your friend because circumstances continue on their existing path, but other times the trend can be your enemy because it causes you to shortsightedly follow the wrong path, and as such, please don't use the trends in isolation to determine the correct course of action."

It wouldn't have come across as a snappy put-down if you had given us the longer version, so I guess that's why you didn't use it. The problem with the shorter version is that it can be misconstrued. This is perhaps why my posts don't err on the side of brevity

Why did I ever bother coming back to acknowledge the OP's post ! :mad:

Because you have no intention of staying away from a debate where you think you are right?

I take a slightly different approach. Not trying to suggest I'm right all the time. I know that would be folly. I am not an expert. I just like to call people out on things when they are only able to see one side of the story and may benefit from some perspective. It doesn't always work on every reader.

bowlhead99,

I am still left with no desire to reply to your posts.

You have no desire to do something, yet your ego prevents you from not doing it. I wonder...

You might benefit from listening to the advice of a wise man known as TakeCareOfThePennies. You may see him on these forums. If I understand his philosophy correctly, I think his view is that when it comes to investment, we should not let emotion and ego drive us to persist with a failing position. We should know when we are beaten, change our view, stop out of our position, take emotion out of it and go somewhere else. Maybe there is an analogy that could be drawn there.
:beer:

Don't feel the need to come back and respond - I know you'll have read it, and you blood will be boiling, which is satisfaction enough for me. As the bigger man, you'll be able to control your ego and restrain yourself from arguing back...:dance:

jimjames

masonic wrote: »

Well I don't know about other fools, but this fool has done rather well from adding to the investments in his portfolio that have fallen out of favour and avoiding topping up the ones that have ballooned.

Absolutely.

I think there is a massive difference between adding more to a sector based fund that has dropped and adding more to a single share that may never recover and TakeCareOfThePennies doesn't seem to understand that.

To suggest that a sector that has been out of favour such as emerging markets for example should have your money taken out rather than adding to it just crazy.

Kendall80

masonic wrote: »

Well I don't know about other fools, but this fool has done rather well from adding to the investments in his portfolio that have fallen out of favour and avoiding topping up the ones that have ballooned.

Like topping up Russia during the height of the Ukraine issue. 24% up since.

tejero23f

Thank you everyone for a most entertaining thread-much to think about!
With the markets so high i think it's time to take profit and go on Holiday for the summer....That Neptune Russia and Greater Russia i bought in January means that new conservatory in on the cards!

collingbone614

tejero23f wrote: »

Thank you everyone for a most entertaining thread-much to think about!
With the markets so high i think it's time to take profit and go on Holiday for the summer....That Neptune Russia and Greater Russia i bought in January means that new conservatory in on the cards!

I'm an indexer by habit but I couldn't resist setting up a watch list bet. It is now up 33.47%.

racing_blue

tejero23f wrote: »

Thank you everyone for a most entertaining thread-much to think about!
With the markets so high i think it's time to take profit and go on Holiday for the summer....That Neptune Russia and Greater Russia i bought in January means that new conservatory in on the cards!

Hang on Sir

Russia 30% up, JPM natural resources 50% down...

I can imagine a cunning plan which might net you two new conservatories, one at the front and one at the back?