I found it a bit interesting that some of you have very strong opinion about your own view and method and seem to suggest that it is mutually exclusive to others (e.g. keeping money in CDs vs shorting the market vs identifying sectors that’d still thrive despite a falling market). Rather I think they are just different investment methologies and risk management techniques that I believe could co-exist as that’s diversification and diversification is always good.
I figure if I position my portfolio in anticipation of an upcoming recession, I’m eseentially relying on a crystal ball of some sort because I’m making a call about the future that as clear as it seems when the call is made the outcome could easily be totally different (and yes to state my position, as of today I’m one foot in the housing-led recession camp and am looking into how I’d ride the S&P500’s fall in 2007).
At the same time I agree certain sectors could still work despite a recession and I’ll continue to go long on these. Precious metals is one and I’m debating on oil. But this also requires a crystal ball.
These versus analysing seasonality (my research confirmed that an investment in SP500 during the fall of each of the past 9 mid-term years would be a win; this kind of percentages just can’t be ignored) which does not require a crystal ball but does require a pattern in the past to continue to hold into the future. But for 2006, I’d like to see a deeper correction before I act.
For me, the objective is to make money without taking on too much risk while at the same time hopefully not missing too many opportunities due to “over risk avoidance”. So I’ll likely execute all three trades; make sure I have stop losses for all three and hopefully at least one out of three will be a win and the amount of profits will be greater than the losses … rather than arguing to death that one method has to be better than the others and it’s the only game in town.
