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Open Thread: So, uh, what DO you like?

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April 08, 2010 – Comments (8)

Within the past 6 months I've written negatively about the dollar, the euro, gold, lots of overpriced stocks, treasuries, etc? Logically, a question I've gotten then is what do I like? I've tried to get at the question in this week's Global View column (with a bonus Rage Against the Machine allusion for anyone who is a fan). The short answer, though, is diversification.

In the long term, of course, I am a believer in emerging markets, but these will continue to be volatile and it will be a long time before many prove themselves. So above all, the key for the time being is to spread your bets.

Agree? Disagree? Think you've found you're own safehave? Let's talk about it in the comments.

8 Comments – Post Your Own

#1) On April 08, 2010 at 1:45 PM, RonChapmanJr (92.59) wrote:

"Guns, Lots of guns". 

Neo - The Matrix

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#2) On April 08, 2010 at 2:12 PM, TMFRosetint (98.99) wrote:

I don't know in regards to the macroeconomic picture - but I've been having a lot of success finding small and micro-cap E&P companies that I think have a lot of potential.

If anyone cares which ones they are, you can find most of them in my CAPS pick. One, however, is too small to pick on CAPS yet - SSN, but it's up over 50% over the past three days due to the results of a partial frac of one of their Bakken wells, with an IP of over 1,100 BOE/d on the first set of fractures alone. They've done 5/16 so far, but we should get full well results this week or next.

I don't want to mislead anyone - Bakken decline rates are really steep at first, leveling off at about 30% of the IP after the first month of production.

It just seems to me - and you may well disagree with this - that it's better to analyze companies individually to find ones that are trading at a great discount to their intrinsic value, giving you a substantial margin of safety. Macro investing never really has been my style, but I could definitely see it working if you used proper fundamental analysis as a base and then screening for the ones whose prospects should also improve based upon your macroeconomic outlook.

I have not been a subscriber of Global Gains, though, so please don't take this as a critique of what you guys do - it just reflects my own personal views about investing.

 Best wishes,

Scott

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#3) On April 08, 2010 at 2:18 PM, FleaBagger (29.66) wrote:

The reason no one else is like Buffett is because no one else is ballsy enough to eschew diversification, and grab great opportunities with both hands. But then, some investors are like Buffett (except more spendthrift with their earnings). No great investor practices diversification.

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#4) On April 08, 2010 at 2:23 PM, FleaBagger (29.66) wrote:

That said, long term, I think you're right that the best returns will come from emerging markets. Mid term, I think gold and silver will be the most profitable way to exploit the slo-mo collapse of the world's primary reserve currency. Short term - well, I get on CAPS every day to see if anyone is both able and willing to predict the short term accurately and consistently.

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#5) On April 08, 2010 at 2:33 PM, catoismymotor (41.19) wrote:

I buy good small to medium sized companies at great prices in stable parts of the world and hold them for the long term.  

I think diversification is good to a point. It is possible to spread yourself too thin.

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#6) On April 08, 2010 at 3:10 PM, DJDynamicNC (40.99) wrote:

Diversification is prudent. And prudence is good for people looking to retire. That's what I'm about, so I'm with you on this - I don't need to be really rich, I just need enough to live comfortably in 50 years.

 For people looking to get REALLY rich, however, who are not already somewhat wealthy, prudence is going to slow them down. They need the big scores, and simple math will tell you that spreading your investments among many securities will yield you many more average or subpar performers than it will monster gains.

Emerging markets are a great place to start investing and you definitely do want strong diversification now, while they remain so volatile. You will want to trim and focus as time goes on and certain markets stagnate while others bloom. I do like having a strong safe haven of consistent stalwarts and dividend bearers as well. I have heard it said that the best portfolios have around 45 different securities, which sounds like a reasonable meshing of diversity with focus to me.

 But take my advice with a grain of salt; I'm quite new to this, and much of my opinion is second-hand or conjecture at this point. Experience, as they say, is the lesson you learn right after you need it. :lol: So I'm still waiting on mine.

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#7) On April 08, 2010 at 9:35 PM, ChrisGraley (29.74) wrote:

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#8) On April 12, 2010 at 12:11 PM, TMFMmbop (40.74) wrote:

Great thread!

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