Sunday, November 09, 2008

Long term value? Or frightened professionals?

I'm a fairly avid reader of various financial blogs and financial newspapers. Many of these blogs and the news reports relate to people who make their living in the stock market world.

I've noted a big theme among them - over the years, these professionals on the whole claim to be stock pickers who concentrate on "long-term value creation. Very few of them at or near the market highs said "Whoa, stock prices are pretty high - so I've got my fund positioned in 50% cash". There were a few notable exceptions of course, but mostly the long-term investment mantra remained chattered amongst the investment class professional masses.

Now that the market dropped, some of these same investment managers talk about "nibbling" on some "good" stocks, or "scaling" back into the market.

I'm confused! If the market was good enough for you when it was 60% higher than today, then doesn't your long-term value creation model hold intact? Or is that only palaver you dole out when the market is high, and you run scared just like the general public when the market is low?

Just asking.


The Confused Capitalist


james said...


Are you talking about guy's like this:

I think you may be missing part of the strategy these people use, but I think this guy explains it pretty well.

Jay Walker said...

Actually, no, I'm not complaining about people like him. He took his money out of the market - in that case, all of it - prior to the market drop. He's obviously entitled to wait until it's got the value he thinks he needs to produce better long term results, and so long as he enters at a lower point than Aug/08, his clients will have been better off.

My complaint is with the ones exiting the market when its down, then entering on the upswing.

I always thought you are supposed to measure value if you are a long-term investor - and be happy when volatility arrives, because prices become depressed in some areas.

Instead, it seems like many managers run with the herd.


Joe said...

That's because they play for there cut of the fee they charge to play with other peoples money. We have no idea what they do with their money. It's great because when everthing goes in the toilet they can claim "hey my fund is no worse off than the other guys, it's not my fault"

Andrew said...

Hi Jay,

I'm emailing you in regards to an email I sent to you last month about a partnership, have you had a chance to think about it?

If you have any questions or would more information, please advise me and we can go from there.

Kind Regards,
Andrew Knight

Jay Walker said...

Hi Andrew,

I don't recall the information you sent. Please resend it to my email. bloggering (at) and I will look it over.


Anonymous said...

This week is going to be critical as to whether we rally out of our recent problem or go back and test the October lows. Everything is down right now. Oil is off about $1.00 or more (note that oil moved higher after the equity markets stopped trading on Friday). The Japanese markets and the U.S. futures are down at the time of this writing. Everyone seems to be talking these markets up and I am not convinced. Admittedly, we saw stronger action last week than I had anticipated. I do believe that we will see some profit taking and I don't expect the S&P to easily run through 920 like some of the talking heads would have you believe. I think we are in an area where the market is expecting bad news, but if we see sustained bad news, it will create a new dynamic. I think the fundamentals are getting worse by the day as world bankers continue to print money. If we start to see inflation before we see employment improve in our country then we could break 5000 on the DOW. I said IF and I don't see it near term, but things are not as rosy as many of the pundits would have you believe.

We have been having the inflation/deflation debate for quite some time and I thought that we would settle it with a Jim Rogers interview that was done recently on Bloomberg. I have attached it to the bottom of this post. Of note, Mr. Rogers says that at NO TIME IN HISTORY HAVE WE HAD ALL CENTRAL BANKS PRINTING SO MUCH MONEY AND HISTORY SHOWS US THAT IT WILL LEAD TO HIGHER PRICES. He talks about how low many of the commodities are and that is even unadjusted for inflation. He used the term forced liquidation several times during the interview (we only have one part posted here). I have said that we are going to see much higher prices because when this all settles out we are going to see that the forced liquidation has caused prices to over correct. The over correction will cause demand to heat up faster than normal---and the rest will be history. Mr. Rogers believes that the dollar rally has been because of so many positions being unwound. He didn't seem to be buying into the "dollar is stronger simply because we are in better shape than everybody else" theory---even though he did say that some of the European countries are in really bad shape. He does say that a lot of other countries are feeling the ramifications of dealing with our companies. So we are having an impact, but it is in a negative way from our companies slowing down---not in a positive way because we are still so superior.

I had planned a longer post, but I will leave it at this---watch the video and you decide!!!!

Visit to watch the video.