Don’t Patch The Holes In Your Portfolio

Don’t be fooled by the current bull run on Wall Street. Despite investors’ optimism, headlines are sounding the alarm.
“Veteran strategist Ed Yardeni says US stocks are overvalued.”
“More than 3 in 4 money managers believe the market is overpriced, the most since the Bank of America survey began in 1998.”
“U.S. Stock Market is Overpriced by 16%.”
“Oxford Economics warns bloated valuations will bring on a correction.”
“Don’t Be Fooled By The Recent Stock-Market Rebound.”
The current run on Wall Street is based simply on the fear of missing out (FOMO) and not market fundamentals. It’s no different than consumers emptying store shelves of toilet paper based on an irrational fear of missing out.
Stores and toilet paper manufacturers all reiterated time and time again that there was no need to hoard toilet paper. There was plenty in the pipeline. People didn’t listen. They saw everyone else stocking up and if they didn’t too, they’d be the ones stuck using newspaper instead of toilet paper. All this did was drive up the price of toilet paper.
The run on the stock market is exactly like the run on toilet paper.
COVID-19 and the economic devastation it triggered exposed the leaks in the financial boats of millions of Americans.
Many who lost their jobs or saw their incomes slashed rushed into Wall Street looking for a quick fix. Just look at the record rise in new accounts on popular online brokerages like Charles Schwab, TD Ameritrade, Etrade and Robinhood.
A spike in new online broker accounts showed that millions of the young and the homebound who saw their friends starting to pile into the stock market dove headfirst into the market as well for no other reason than it was what everybody else was doing.
The new accounts mostly represent “new investors who sense a generational-buying moment but do not have much background in the equity space,” said Citi chief U.S. equity strategist Tobias Levkovich. Source: cnbc.com.
The following quote from a new investor from an article on advisorhub.com says it all,
“I’m a complete noob when it comes to stocks. It’s not thousands and thousands of dollars that I invested, but it’s a start. We’ll see what happens. I hate to say it, but it’s like gambling, isn’t it?”
And that’s exactly what the stock market is for these millions of investors rushing into the stock market.
They are not basing their investing on any sound economic fundamentals. They’re looking to fill an economic void left by COVID-19 that exposed the leaks in their economic boats.
The truth is these noobs are overpaying for stock and buying up extremely high risk penny stocks and even the stocks of companies like Hertz that have declared bankruptcy.
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”  -Warren Buffett
For those heavily invested in the stock market who saw their portfolios plunge 34% in March then decided to patch that hole with more stocks like everyone else may be in for a nasty surprise when the market inevitably corrects to match economic reality.
  • Take a good look at your portfolio and ask yourself what you’re investing for?
  • Do you think that Warren Buffett is sitting at home in his underwear day trading?
  • What are your financial goals?
  • Are you just gambling? Buying random stocks to “Buy Low” and “Sell High”?
  • Is your investment strategy meeting your goals for income and buying value?
Maybe it’s time to change vessels.
There are times in your life where it’s time to QUIT.
If something does not match up with a long-term goal, sometimes it’s just better to cut bait – whether it be relationships, a job or an investment path.
It’s no surprise that the top two investments of the ultra-rich are commercial real estate and private equity (typically invested in commercial real estate funds).
Unlike stocks, the goal of owning private equity and commercial real estate isn’t to buy low and sell high. The ultra-rich don’t gamble. They’re interested in something with intrinsic value that cash flows – something tangible that appreciates over time.
Do you think the ultra-rich would ever buy the stock of a bankrupt company? Not in a million years.
It goes against their three overriding objectives:
  • Cash Flow
  • Growth
  • Tangibility
Cash flowing investments with long investment windows are insulated from market volatility. It prevents panic buying like we’re seeing on Wall Street today that will come back to bite all those involved in the near future.
It’s time to consider a new ship – one based on sound economic fundamentals.
The sophisticated investors on this ship ask the right questions and pursue the right objectives.  
If potential assets don’t have minimum economic fundamentals the ultra-wealthy won’t touch them and neither should you.
That’s why they’re only interested in assets:
  • In proven markets.
  • With proven demand.
  • That cash flow.
  • That appreciate.
  • That are tangible.
  • Have low correlation to the broader markets.
  • That are shielded from inflation.
Don’t Rely On Chance.
Control Your Fortunes.
Stop Throwing Good Money After Bad.
Invest Based On Fundamentals.
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About the author

Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.

In addition to TruePoint Capital, LLC, Kyle is a Global Sales Leader for a large Fortune 100 technology company and responsible for revenue attainment of over $250M worldwide.

Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.