Investment Guru Interview - Money Matters Radio Network |
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Submitted by Steve Selengut
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Stu Taylor's Twenty Questions of Professional Investor Steve Selengut
For nearly ten years now, Stu Taylor and I have been entertaining audiences throughout the country with a Q & A format program that consistently draws an hour full of interesting (and sometimes off-the-wall) investment questions. We have never, ever, gotten very far into the script --- thought you might be interested in it.
ONE - Steve, you've managed investment portfolios for about 40 years. What are the three biggest mistakes that people make?
: They don't have a clear cut plan or a clear idea of what to expect from investment securities and markets.
: They get stuck in the fear and greed emotional cycle, always buying high and selling low.
: They rely on gimmicks, software programs, and predictions, ignore cyclical realities, and choke performance with unrealistic time constraints.
: They ignore the income generating portion of their portfolio --- the list is really much longer than just three.
TWO - OK, and just what is reality?
: Markets, the economy, and interest rates are cyclical entities. Their movements do not correspond with calendar time periods.
: Performance criteria used by most people today are portfolio growth destroyers, because they generate transactions that are based on short-term market movements.
THREE - So, this is where your Market Cycle Investment Management Methodology comes from?
: Pretty much, it's no great discovery really. Years ago, professional investment managers and trustees always compared their performance with cycles. It's clearly the best approach, if you study the charts.
: Today, novice investors control huge amounts of "self directed" money that didn't exist years ago. Today's investors/speculators are jumping into the cockpit of a jet plane, solo, after following a few blogs on the Internet.
FOUR – And there's no reason to expect this to change?
: Well, I'm sure that Wall Street's product and derivative proponents would argue that they can "smooth the curves" --- but I doubt that anyone who wants to preserve their "guru" status would suggest that cycles don't exist or that they are ever going to disappear.
: But, who knows, the government may declare cycles illegal and make Wall Street refund people's market losses --- I hope I'm just kidding.
FIVE – So when the market gets to a certain point, you just sell everything and wait for it to go back down and then, at the bottom, you buy everything and wait for it to go back up?
: Oh, if it were only so easy, and if market timing really existed. It's not, and it doesn't. You can't time the market or really know the right time to buy or to sell.
: But you can understand where you happen to be within the cycle(s), right now, and have a set of realistic buying and selling guidelines that help you tune your responses appropriately.
SIX & SEVEN – So what have you been doing lately, what are you doing today, and why?
: Mostly taking profits, even on some stocks I bought just weeks ago --- and I'm also continuing to take a few profits within the income allocation of portfolios, although those prices have weakened recently. I'm always buying income securities, but I'm having trouble finding Investment Grade Value Stocks that I consider bargains.
: My goal is to never leave a profit of 10% (net/net) on the table, and that's goes for income securities as well as for equities. I'm almost always buying and selling, every day --- there's no inconsistency in that. The Glossary in "The Brainwashing of the American Investor" defines terms like "bargain" and Investment Grade Value Stock.
EIGHT & NINE – So how do you know where you are in the cycle, or is it plural, cycle(s)?
: Yes, clearly there are several inter-related cycles – Stock Market, Interest Rate, and Economic are the ones I focus on. I look at three separate "market stats" and one index to determine where we are. I analyze these monthly and publish the results on my Value Stock Index website.
: Once upon a time, the investment media used to analyze these stats thoroughly --- now they are pretty much ignored. The Index is my own creation, and it tracks only Investment Grade Value Stocks.
: The IGVSI established a new all time high February 18th. That means that the stocks I include in my portfolios have raced ahead far more quickly than those in either the Dow or the S & P 500, which are still well below their 2007 highs. And, by the way, the IGVSI didn't fall nearly as far during the financial crisis.
TEN: And The Market Stats, what are you looking at specifically?
: The most important measure is "Issue Breadth", or how many stocks are up today vs. how many are down. Seems pretty basic, doesn't it? Duh! But during the dot-com bubble, breadth was glaringly negative well before the meltdown, actually during most of the run up. The historical data is linked to from valuestockindex.com.
Click for Details --> Guru Interview - PART TWO <--
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