“Hey ‘Deep Pockets ‘, what were you doing on October 19th, 1987″, the Wall St Jungle columnist asked? I was gritting my teeth, shaking more than a bit palms sweaty but placing many individual orders for the best NYSE, dividend-paying, corporations — at costs that just about everybody thought would drop farther. Looking around the room, I appeared to be the only one at the office that was actually buying! The other brokers were fielding telephone calls from scared clients. Sell! Sell! Sell! The crash of ’87 was the first heavy test of an investment system developed in 1970 by an RIA customer of mine. 2 months earlier, many of his investment management clients were puzzling over why he had sold practically everything, and was sitting on mountains of what he called “smart cash” — whatever that meant. Now they knew, but why were they so quiet? Their money was totally invested, the media was forecasting the end of everything — my telephone was the only one not ringing! The investment executive had one call from a customer that day — the man wanted to learn how many calls he had got. Just that one call, he revealed, and that customer is still on the books today.
5 years on, a smaller scale but similar situation rattled the markets — we invested what we were then both calling “smart cash”, fearlessly, never doubting that we’d at last be taking profits on the new positions established at levels well under the manager’s trained diversification boundaries. Cycle after cycle, profits were taken methodically, sanguinely, and without delay — with nothing save revenue stocks bought — till individual equity costs retrenched at least twenty percent. Slowly the smart cash would get a new home. The race toward the year 2k brought with it a demented worship of unproven, unprofitable, high potential corporations — but few “new economy” megastars met the manager’s draconian Quality and Revenue generation standards. Find me a “dot-com” that fits, and I will give it an opportunity was his challenge. 15% gains were not adequate for plenty of our shared clients and the greediest among them threw millions of borough bond greenbacks under dot-com IPO busses and into hyper-inflated funds. Almost 1/2 of them were gone when the bubble burst.
The leftover stalwarts kept growing at that snail’s pace 15% while the turncoats lost virtually everything. Working capitalization grew gradually ; the critical “base revenue” grew yearly ; market values rose and slipped with the cycles — rates, commercial conditions, and investment grade worth stocks. Not even the regulators could think the manager’s claims that there wasn’t any dot-com crash for Market Cycle Investment Management users. However there it was, a technique with focus, discipline, and security selection rules like these : “No Naz , No Open-End hedge funds, and No IPOs” ; and these, for individual stock selection : “S & P B+ or better, dividend paying, NYSE and nothing else”.
This discipline produced a risk protection mechanism that might be trusted during market recessions enormous and little. But maybe more vital was a reasonable profit taking discipline that allowed no reasonable profit to go unrealized. Over time, this “portfolio positioning” strategy acted like a present day GPS for our shared client’s portfolios. We eagerly exited rallying markets, one stock at a time, as reasonable profit targets were achieved. As the market cycle turned, money was slowly reapportioned to investment grade worth stocks, bit by bit, slowly. And with a cost-based asset grant formula, the earnings portion of the portfolio was permitted a life of its own, to resume growing the earnings, regardless of the where we were in either stock exchange or economic cycle.
Overall, and over thirty years, what we presently have recognised and relabeled a “Market Cycle Investment Management” system has proved its capability to get backers thru the cycles with less risk, less discomfort and suffering, and a growing money flow. “Then 20 years after, ‘Deep Pockets ‘, where were you when the financial emergency hit the fan? Absolutely invested, or entirely capable of exploiting replenished bargains in both equity and fixed revenue markets? And where are you today?” Well boy, I am still standing — and still smiling.
Want to find out more about where should i invest, then visit Author Name”s site and get related info about small cap stock picks for your needs.