Wednesday, May 16, 2007

Wasting away in Margaritaville

So Buffett doubled up in JNJ, Soros in MSFT, and Lampert in Citi. Couple of observations:
1. None of these stocks are going to be takeover candidates, just investments.
2. When you have $1billion to invest, you really can't park it in any old tech stock.
3. As investors, these guys are good. As traders, you could do a lot better. One of Buffets top holdings, Coke, has done nothing until this year. You would have done better in cash and waited for the breakout.
4. Markets will be liquid until they are not. Just last week C traded 15mm in blocks at the 53 level. Where were those buyers in March at the 49 level? Running screaming "sub-prime" disaster. Hey in 2000 we had the biggest M&A activity of all time, did not keep the investors happy forever.

All I am saying is be careful. Diversify and do not chase. There are times to load up, but I don't see this as one of them.


Scott said...

I agree that this is not the time to load up. Although there will always be opportunities to go long in stocks, there are fewer and fewer bargains to be had as stock prices climb.
A lot of people will be holding the bag when this market comes back to earth, and it will take quite some time to recoup those investments.

Eric P. said...

I don't know if you were in the market back in 1993, but this feels like a similar situation. The first part of the year had low volatility, followed by a quick correction, followed by low volatility. It wasn't until the latter part of the year did the market come back to reality.