CHESSNOID

In 2007 before the stock markets tumbled, I sold all my stock holdings.  From 2000 to 2007, I was a buy and hold investor and dollar cost averaged all my investments in my 401k, IRAs, and personal broker accounts.  I was both happy and amazed at how much value had built up in that last 2 years as every stock market shot straight up and I also became very nervous that I could no longer stomach  the 500 -1000 point swings in the markets.  That was the main reason why I sold.  Everyone said the time to buy was now and that’s where the disconnect was for me.  No one cared about fundamentals or technicals, and instead all the brokers and analysts were advising all investors  to jump on the roller coaster that was making me sick.

I am not a market timer, just someone who got lucky on  their hunch and didn’t let my greed get the best of me.  I remember seeing this doing the dot.com run up and after that bubble busted I started to buy everything I liked. I owned Apple, EBay, Amazon, Microsoft, Yahoo, Walmart, and a few others I can’t remember now but basically they were all products and services I used in my personal life. I got that idea from reading Peter Lynch’s books from college.

I have been out of the stock market since then and was tempted a few times to buy back into it.  I avoided the temptation because I felt it would still go lower.  I was wrong about that and missed the nice 50-60% run up from March 2009 till today.  I actually switched to gold because I felt uneasy about the decisions our federal government was making on the bailouts, stimulus packages, and running up the deficit.  Although I expect to continue to go up, I sold everything yesterday because it too has had a nice run up.  Again,  I put aside my own personal greed and am happy to make a profit versus giving it back to the market.

Looking back on it now, I see that the other metals have done much better. Silver would have been a better hedge and had an even greater move up than gold in the same time period.  I guess another reason I sold off my gold holdings is that I have had a more challenging time understanding the recent market.  In the past stocks, oil, and gold went in different directions.  Recently stocks and gold have been going up and down together against the US dollar.  But 2 days ago, the dollar went up, the stock market went down, and gold didn’t really move.  That did get my attention.

What really bothered me was the internet rumors that gold bars were missing from inventory.  I don’t buy physical gold but purchase GLD ETFs.  I didn’t like that  possibility where rumors could steal my earnings even if it wasn’t true.  The way investors  are, you can never predict if they will be rational in the short term.  So better to be safe than sorry, at least for me.

Last year in march 2008 I blogged about these investments in a post called Recession, Oil $102 a barrel, Gold $984 an ounce, + Volatile stocks end down again.   At that time the recession was just starting but if you look at the numbers and compare them to now, they don’t make sense.

At that time gold was $984, oil was $102, and the DOW was sitting at 12,258.90. Today gold is$1057, oil is $77, and the DOW is sitting at 9789.44.   I am sitting on cash earning 0% interest now and waiting to see which way all these investments will go (up, down, or sideways)  and will begin dollar cost averaging into my picks after another sizable correction.

On a side note, interest rates back then were higher and we had a federal deficit that was  $2 trillion smaller.  If you asked me to guess where gold, oil and the stock market would be back then if interest rates fell to 0% and the federal deficit ballooned another 25%, then I would have guessed gold to be at $2,000, oil at $200, and the DOW to be 7,500.  Here we are now and I would be wrong on all 3 counts.