Buy and hold is dead

I posted this in a MarketWatch.com comment a bit ago and decided it was worth putting here.  This post was in response to another comment about the importance of having a long term (10 years) time horizon when investing.  I disagreed.  :-)

Here’s the post:

So if you put $100,000 into the S&P 500 10 years ago (which is the timeframe you give) how much would it be worth today? On Jan 11th, 1999 the S&P 500 was at 1243.26. Today (10 years later) it closed at 870.26. You’d have about $70,000 left.

That’s a 30% loss over the past 10 years for “investors”!

I have read everything that Warren Buffett has written or said publicly. I read everything Ben Stein writes. I listen to Dave Ramsey daily. I understand where you’re coming from when you talk about investing vs trading. But you are living in the past.

Buy and hold only works when you’re in a bull market. Period. If you read Buffett in the late 90′s, he was right to keep billions in cash instead of “investing” in tech. He should have listened to his own advice. Because he was wrong (and lost billions of Berkshire wealth) when he bought into Citi and GE last year. I said so publicly at the time, and I’m still saying it.

I’m simply saying that buy and hold is dead. It has been dead since the peak in 2000. Those of you you disagree are down at least 30% since then, while those of us who move in and out based on long term trends are up at least 30% since 2000.

This may turn out to be a great buying opportunity – but I don’t think so. the S&P 500 earnings estimates for 2009 are still way too high at $81.80. In other words, S&P is STILL estimating that 2009 earnings will come in $16 HIGHER than 2008!

Anyone wanna bet that 2009 comes in closer to $40 than $81?

This aint rocket surgery. :-)

gk

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