Future Actions

Bear markets don't die violently; they usually die a quiet, slow, long bleed….. this market could drip, drip, drip for months and months

This Action Plan must based on the Lessons Learned on the Stock Market

Sell in May and go away

• Historically, stock market volume slows from Memorial Day until Labor Day. The slow summer months are believed to come about because traders go on vacation and the traditional stereotype is that most of Wall Street is playing on the beaches in the Hamptons (Rick Pendergraft)

Bull market bashes end with October crashes

Buy portfolio insurance

• Write put options to protect all margin accounts from falling prices in/before May 2017: be ready for a +50% fall by November, plus more downturn in 2018 as the emphasis changes to petroleum

Wait for the capitulation

• everybody capitulates
• war spoils are being taken over
• a few weeks after there is blood in the streets

• When such a buying panic hits, the fastest way to get money to work is to buy stock index futures, which are also nice if you can't find any particular stocks worth buying. Through the magic of program trading and index arbitrage, that buying gets translated into the purchase of big stocks, which then become the best performers (NYT, February 4, 1996)

Wait until interest-rate-cuts stop

• The economy will still need a few extra months to show to start growing more than the population growth — the stock market will visit the lows a few times after the Fed stopped interest-rate cuts

Wait until banks are selling for single-digits P/E(s)

• After the recession is widely recognized, petroleum will start raising rapidly and the stock market will go down again — and banks will be selling at single-digit P/E(s), even in Europe. This happened in 1998 and 2008

In the mean time, follow what the most successful value investors are doing

• Read the Annual Reports written by:
  • Francis Chou
  • Warren Buffett

• Do not buy when they complain that they are unable to find value

In the mean time, deposit all savings in market indexes

• CAD$ in TSX Indexes like the S&P/TSX 60

• USD$ in Berkshire Hathaway Inc BRK-B.N shares. Other alternatives: SPDR S&P 500 (SPY.N), Dow Diamonds (DIA.N), iShares:NYSE Comp Index (NYC.N)

• Almost all of the The Kirk Report's lazy portfolios have some exposure to three basic areas: a broad market index such as the Vanguard Total Market Index or the SPDR's S&P 500 Index, a small-cap index such as the Russell 2000, and some form of exposure to an emerging market index (Zachary R. Fruhling)

The cardinal principle of investing is to think first about preserving capital before thinking about making money. The greater the probability of permanent loss of capital, the greater the spread should be between a particular debt instrument and risk-free treasuries

Francis Chou