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TheDumbMoney (58.47)

Not Buying

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March 28, 2012 – Comments (4) | RELATED TICKERS: SPY

I haven't made a major new stock purchase in over two months, as is reflected in my CAPS picks, which all reflect real life money and are my only stock holdings.  I am generally not happy when people are as happy as they have been over the last two months.  In fact, I sold the last of my MSFT LEAPS when the stock crossed thirty, and I sold one of my BAC 2013 $10 LEAPS when that stock hit $10. 

Part of me wants to put more money to work.  But I'm really sensitive to the argument that profit margins are at historical highs.  I suspect a lot of that, per Montier's recent paper, has to do with government deficit spending. 

For me to put more money to work, I need to see more concret evidence that business investment and hiring is actually picking up.  Otherwise, I think that the additional austerity we are going to see in 2013 will hurt profits, other things being equal.  I invested a lot of money in the market between 10/2008 and 9/2011 in particular, and for that reason I'm happy for now to be building cash.  Maybe this is inning three of a massive recovery.  If so, I'll sit out innings four and five and put some more money in at inning six.  But my read is that new money invested at today's levels does not have an acceptably high risk of generating sustainable gains for people like me who don't want to sell for five years or more.  Maybe I'm wrong.  Forecasts are stupid.  But that's how I see it.  There is no harm in holding a little more cash, especially given how much money I already have at play. 

That's not to say I'm investing no new money.  I have three DRIPS (BDX, UNP, and LMT).  I may also make other purchases.  But a lot of the stocks I thought were great have had serious run-ups already.  I need to reevaluate them to see if the earnings goalposts have moved sufficiently as well to demonstrate that they are still good values.  Until I have time to do that, I won't be putting more money to work in them.

Just ruminating.

http://dumbmoney.tumblr.com/

4 Comments – Post Your Own

#1) On March 28, 2012 at 7:45 PM, HarryCarysGhost (99.78) wrote:

Dude were pretty much in the same boat, all I've been doing is putting money into My KO drip. Goal is to own enough shares where the dividend buys a full share on it's own.

I figure this will take me a few years. So the daily gyrations of Mr Market don't have much bearing.

Ben Graham was dead on when he called all of our favourite next door neighbors a schizo.

Cheers 

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#2) On March 28, 2012 at 8:37 PM, thecherryz (94.68) wrote:

Harry- Hahahaha the goal where the dividend buys a full share on its own was my goal with UPS stock, finally hit it last year roughly.  =).  Awesome to see it.

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#3) On March 29, 2012 at 8:23 AM, TheDumbMoney (58.47) wrote:

Ha, yeah my biggest DRIP is XOM.  I stopped my automatic add to that in January though because it has had such a cyclical run-up.  Before the stock had that run I had just gotten to the point where I was getting a share per year from dividends.

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#4) On May 18, 2012 at 6:41 PM, TheDumbMoney (58.47) wrote:

AND apropos this post from March, all of 2012's gains with respect to the broader market view are pretty much NOW GONE.

Have a nice weekend,

DM

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