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Source:
More “Boom and Bust” Cycles Coming: The Real Reason Buy and Hold Is Dead
Aaron Task
Yahoo Tech Ticker, March 29, 2010
http://finance.yahoo.com/tech-ticker/more-%22boom-and-bust%22-cycles-coming-the-real-reason-buy-and-hold-is-dead-453648.html
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
"Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries." -Bill Gross
Signs continue that European markets are getting tired. The Spanish and Italian stock markets, big beneficiaries of the sharp decline in their bond yields over the past few months are falling to the lowest since Feb 1. The European bank index is at a 1 1/2 week low after earnings reports from Commerzbank and Credit Ag (RBS bouncing although reporting weaker than expected earnings) were disappointing. This market action is in spite of the German IFO business confidence figure which rose to a 7 month high coming in a touch above expectations and Italian consumer confidence which bounced more than...
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March 30th, 2010 at 12:15 pm
I agree with their general position, when applied to U.S. large caps.
But I am not so sure this is going to apply to international equities, especially in higher growth economies. Also, should we assume that commodity based equities are also dead money? I think not. So my position here is that we don’t have to consider whether the on / off switch is on or off. Better to find the market sub-sectors which remains in a long-term bull, and concentrate on that.
Also, if the U.S. equity market is in a period of consolidation and reorganization, I think it is a good time to watch closely and see what develops. This is frustrating and boring (lets DO something!) but I believe it will lead a patient investor to the best deals in what will eventually be a decent buyer’s market once again. I am actually coaching myself to just watch the domestic equities, and be prepared to not go long for as much as a decade. Man…I wonder if I have the discipline! But what I tell myself every time I get the itch, is that I AM long…in the mentioned in the first paragraph.
March 30th, 2010 at 1:46 pm
This post demonstrates the fact that being an ideologue is much too easy.
The term “buy and hold” is abstract. Mention the term among a group of investors and they will all nod their heads to acknowledge their understanding of the term. Ask each investor for a concrete meaning of the term and you’ll get an array of definitions.
Here are a few questions for the speaker in the featured video, this ECRI ideologue:
What is your definition of buy & hold?
Is Warren Buffett buy & hold?
Can a buy & hold investor actually sell a holding?
How long is the holding period in your definition of buy & hold?
Do you think there are any investors or money managers, describing themselves as “buy & hold,” that did actually receive a positive return in “the lost decade?” If not, can you cite evidence proving your case?
Do buy & hold investors buy securities other than large-cap domestic equities (i.e. foreign stock, emerging markets, sector ETF’s, small-cap stock, bonds)?
People that say “buy & hold is dead” most likely are selling something (as the speaker in the featured video admits) that does not support the buy & hold idea. The people buying the argument and accepting it as absolute truth are fools.
Once again, it is much too easy to be an ideologue. Just come up with an abstract idea and cherry-pick a few pieces of information that favor your bias (oops, I mean your valid argument)! The best ideologues, such as the one in this video, never really define “buy & hold.” They just know that the vast majority of people adhere to the abstract (universal) meaning.
Fortunately, for ideologues, there are plenty of mindless people on the planet just waiting to buy what they are selling.
“The average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think.” ~ Jesse Livermore
March 30th, 2010 at 7:19 pm
Buy and hold is not dead, it was never even alive. The reality is that the buy and hold investor only does well when they are lucky enough to hold during a period of sustained growth.
Here is proof – http://etfhq.com/blog/2010/02/19/buy-and-hold/
March 30th, 2010 at 7:34 pm
@ Kent, great comments. It is true that people tend not to clearly define what buy and hold is. In my opinion the term suggests that people are not attempting to bring anything to the table other that participation in the market – buying a diversified bunch of stocks, a mutual fund or ETF and holding it until retirement.
People like Buffett are not buy and hold investors, he is a value investor who would prefer to never have to sell a company. But in 1969 he returned all the money he was running to his investors and liquidated nearly all of his holdings. Why? Because the market was over valued.
You are spot in, most people want something for nothing. Buy and hold may be better than not investing at all but for the diligent investor it is far from the best option.