It looks like one of the bearish calls made by a financial guru recently featured in Barron's may have been to much gloom and doom. As we know, that publication has a specialty of finding the most negative financial wizards in the world and featuring them somewhere in every issue. I do recall Alan Abelson being optimistic for a couple of months in 1982. The one that I am referring to now recommended shorting Stryker for a ride down to 30. Cure for a Lush: A limitless supply of alcohol?/SYK a short?/WaMu: Just another example Socializing risk and Privatizing rewards
My comment was that I would hope for a better short idea than Stryker from someone paid to come up with short ideas. I said that I would be a buyer for sure at his 30 target and went ahead and bet against him anyway by splurging some of my cash flow by buying 25 shares (the plan is sort of to buy the other 75 at 30 just in case the guy turns out to be right.) SYK is up a lot this morning after reaffirming its guidance.
My parents were discussing one of father's doctors the other night. He was a specialist recommended by my dad's physician who referred to him as a brainy sort. My mother did not like him because he was not sociable, which was sometimes the main criteria used by many of the female persuasion to pick a physician. I then said that I would prefer having one that is bright over one that is sociable. She then looked at me, with one of those piercing female gazes that go right through you, as if I had committed some unforgivable sacrilege, and said the bright ones are rarely sociable.
In what I refer to as dynamic asset allocation, I would attempt to take advantage of buying opportunities in an asset class, like corporate bonds in the September to December time frame of 2008. However, the purpose is not to carry out a short term profitable trade but to create a more ideal long term hold for that asset category.
Likewise, this dynamic process would require an occasional elimination of an entire, minor asset class due to a parabolic move, which would have been the case recently for commodities and non-inflation protected U.S. treasury securities. I am not one to dwell on the wisdom of buying an asset class that just reached a fifty year high or that has had a 200% move in 2 or 3 years. It is best just to sell and wait. It goes without saying that the craziness may even go further, but who really knows when to sale to that greater fool.
Today, I am looking at some small caps jettisoned in 2007 at a profit that have now fallen more than 80% in price but are nonetheless still profitable with balance sheets that do not strike terror in the heart of a cautious buyer. Possibly, I will put some cash flow into some of them, for many of these companies are no longer small caps but more aptly described as micro, micro caps. It would be best to limit my financial dollar commitment to them and simply trade them as a group, similar to what I have been doing with the REIT cumulative preferred stocks.
But, the gist of the matter is that I can now buy five of them at 100 shares a clip for what one was sold for in 2007 so only a minor amount of capital is needed and the risk is consequently small in dollar terms. I believe that most of them would fall into the treasured category of playing with the house's money. They fall into the Sunopta category previously discussed where a position was re-established at less than two dollars to partially replace one sold at around 15 at the urging of my ivy bound nephew. Maybe I am that Uncle Frank fellow that Darst kept referring to in his book The Little Book That Saves Your Assets: What the Rich Do to Stay Wealthy In Up and Down Markets. I am always mindful that mining for a gem or two in a trash heap will often result with nothing more than having a bunch of foul smelling garbage on your hands.