Let this be the death of risk on, risk off
This lazy nonstrategy might as well be called 'buy high, sell low.'
You know what didn't work in 2012? Risk on, risk off. As hard as I tried to stamp out this ridiculous bit of hedge-fund-ese, I was not able to. There are too many commentators out there, and too many traders who want to succumb to this kind of non-rigorous, intellectually lazy thinking, and it's impossible to shut them all down.
But let 2012 be a lesson to you: It was revealed that you would have underperformed these people if you'd followed them. Notice I say "underperformed," because one thing is for certain -- none of these blowhards will let you see their returns after what I bet was a fiasco year for what I can only call an "alleged" strategy.
Why did risk on, risk off lead you astray? Let's count the ways. First and foremost, the S&P 500 ($INX) gained 13.5% last year, or 16% if you include reinvested dividends. One thing we know for sure is that those who played this on/off switch game -- this binary nonsense -- didn't get to reinvest those dividends. Again, these payouts were a hugely important component of the year's performance. Some of these trading machines may not have much of any of these dividends to show for their efforts, let alone reinvested ones, even as companies continued to deliver increasingly higher payouts and even though the tax rate on them was absurdly low. (At this point, let's just call that tax rate "low," as the increase in the new law only takes it to about half of what we were warned it could be.)
Second, the shorthand "risk, no risk" let you down entirely as a daily allocation tactic. Let's take Europe. What was risky? Bonds? Stocks? Bonds were miraculous performers. But stocks were incredible, too. I guess if you flitted from risk-on to risk-off and back again, you sold low and bought high pretty regularly. After all, the biggest amounts of money were made from the riskiest moments -- theoretically what you were supposed to avoid if you were "playing" risk-off. The non-strategy might as well be called "buy high, sell low." Maybe if you do it enough times, it will work?
I don't think so.
So what's the conclusion of all of this? Simple. I ran money for 30 years before this risk-on, risk-off garbage came in to play. I am beginning to believe it is simply the refuge of those who refuse to do individual stock homework, or who can't think of anything to ask or say.
Let 2013 be the year when people who continue with this terminology get defrocked -- not that they were ever frocked to begin with. I know I will do my best to out them as short-term mental hooligans. Maybe this time, with the sterling performance of the risky S&P, it will become clear that the risk-on/risk-off nonsense is nothing but a travesty perpetrated by those seeking and offering sound bites that were nothing but costly diversions from true investing principles.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.
More from TheStreet.com
Let's see we are still headed for the biggest financial crash of all time $16.4 trillion debt and growing by about $2 trillion a year into the foreseeable future.
And our real GDP as measured by income is a mere $4 trillion GDP -- pretty much we are 4 times earnings in debt as a country and going down fast.
Over a month ago I stated there would be no such thing as going over the " Cliff " That's only for the media for drama reasons ! Going over the cliff would mean a depression ! I stated that there would be more watering down of the problems at hand. Its still continues !!
Investors should be impressed ????
"because one thing is for certain -- none of these blowhards will let you see their returns after what I bet was a fiasco year for what I can only call an "alleged" strategy"
pot, kettle, repeat daily.
Well judging from what Asia and Europe are or have done....200+ points up today on the DOW...
Certainly is not out of the question......Go for 300 maybe...
But they still have a lot of work to do, on "cutting spending."
Well, JC certainly does make some good points here for the buy and sell investor for 2012. However, I would like to see a side-by-side analysis as to how this buy and hold strategy has performed since January 1, 2000.
What would avoiding the 50% decline in the 2000-2002 tech crash have done for your long term returns - even if you only avoided two-thirds of that "tech-wreck?"
What would avoiding the plus-60% decline (mix of big/small cap U.S. and foreign stocks) in the 2008-2009 financial implosion have done for your long-term returns - even if you avoided only two thirds of that?
There are a lot of "break-even" long-term stock investors, even with this one-time "bonus dividend" year that basically robbed from future earnings.
One thing is for sure - "cherry picking" investment performance periods like this is easy .... but talking the "intellectual lazy" talk is a lot easier than taking that intellectually honest walk. Show us some long-term numbers and charts please.
Wishing everyone a peaceful, healthy and prosperous New Year.
And this morning when anohter commentator asked what about the fed being the biggest buyer of our debt by prining money, Mr. cramer smugly said "Go buy some gold". These pundits who are legends in their own minds are really something. They remind me of people who laughed at me in 2006 when I said you had to be a dummy to buy a house especially in places like Florida or Phoenix. We cant default on our debt. The only thing the U.S can do is keep doing what it has been doing and that is printing money to buy bonds to try and keep interest rates at zero. But even the fed has warned that will be coming to an end in 2014. A one percent increase in interest rates will eat up the entire obama tax increase. How come people like Mr. Cramer dont talk about that??? But in five years or so Mr. Cramer will have forgotten his smugness just like he cant remember his smugness during the internet boom when he was telling you to buy companies like Yahoo in the hundreds pers share.
FIRST OFF.....You have to have a plan.....Then if it all goes to shidt...You have to have another plan.
Let's call that Plan"B".....If that falls into the proverbial manure pile....Try Plan "C"...
If you have went this far, you probably don't need anoher Plan, because you are pretty much done OR
COOKED, TOAST, FINI........SCREWED.
"Risk on, risk off"
Funny thing....Jim gets paid to do this...We don't.
And a lot of my picks and good standbys....Have went up 3-5% today....wooohoooo !
Now I have to wait for some dips and more divs to come in...?
Give me Money..
If there were cuts in spending everyone would cry foul !!!!! Look at the Agricultural farm program .... where does it gain priority to be looked at above all else ? I'm a farmer and quit honestly I could have done a much better job being diverse in my farming operation without any farm program or intervention by the government. Without a farm program there might be farmers go belly up. But I assure everyone there are many others out there who can and are willing to take their places in farming !!! What happened to supply and demand ?
Copyright © 2014 Microsoft. All rights reserved.
Investors are anxious to see if hiring can maintain its strong pace in the second half of the year.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.