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.
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Ok,help me understand something,this "cliff" deal only held off a N E W problem,it didn't S O L V E any present problems.Sooooo,whats driving the market and oil up so much ???
allow me to explain....the market is manipulated by those who have money........they create the ILLUSION that things are going fine.....u, the dummy, invest and drive the prices they intend to sell into higher...
IT'S ALL KOOLADE
Noticed that Swaggs and Active are flitting in and out today; Hope you both had a nice Christmas and Best wishes for a Prosperous New Year in 2013...
Got to agree with a lot of what oldCHUM is saying...We got a can-kick on parts and there is plenty of work to do yet....It involves cuts, and many; OTHERWISE this was just "window dressing."
Glad some have explained what we(they) have accomplished so far...Read a little in other places,
some is important to us, and plenty might be important to others...THEY are far from done, YET.
The VOTE of 257-167 is not what I called comfortable.....We'll see.
As I called a few to a dozen days back....Expected "11th. Hour" and a "300-500 up for the week..."
But we still have the Profiteers, lurking in the shadows..And a few pennies are just that, a few pence.
Just seems like a good day to sit back and SIP...Fine whiskey...Got a few bottles for Christmas..
Have a few friends...That drink...And a couple good kids or g-kids.
As I wrote elsehere......Just sit back and muse about what has happend.
Your Congressman and Senators are probably all Gathering for expensive luncheons,in small groups.
I'm sure they are backslapping, all saying they did what they could; And won their Points..
All sitting around giggling about how they GOT their way...And the other guy was an idiot.
And we will all get this hammered out in a few weeks, and all be winners...except..
Yup guys, light up the Cigars; Time to get the "top shelf" booze out..
It makes no sense to me that the government eagerly condones the inflation caused by the federal reserve, but then must buy (and can't afford) the resulting inflated goods and services.
Thank you to Active RIA for pointing out what this bill does that is very good;
1. this provides a measure of short-term certainty over both income tax and estate tax policy
2. this provides a big stimulus of another year of federal unemployment payments
3. this fixes the whole alt min tax (AMT) mess permanently so it doesn't have to be fixed and kicked around every year
4. this shows that when it comes to a real crunch, and when obama takes the time to actually provide leadership instead of doing the hulu in hawaii, the congress can actually come together and compromise to get something done
It seems that only you and I have read and liked this bill LOL. I agree it is a solid first step, everyone on here complaining about this bill not addressing spending cuts seems to miss the point. Immediatly after the bill passed every member of congress and the president all said we now have to tackle spending but the tax issue has been solved, a first step. They are not saying they are done and admit there is tons of work ahead.
This bill does everything you wrote and maybe as importantly it will 1 less complication or issue to hide behind when negotiating spending cuts. The cuts in the cliff that will happen in 1 month actually seem less scary now without the tax increases, might be the only shot at decreasing military spending.
in the end, this was a concrete advance from the fear gripping the market based on past actions of the conservative roadblock in the house of reps. it is indeed a good beginning ....
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.
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.
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.
Let's see.... "risk on"...."risk off"...Should be on a light switch...Never know what electricity will do..?
A little bit like "lightning in a bottle."
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