On January 24, I reallocated approximately 40% of the taGMan portfolio to cash by selling shares in each of the portfolio companies (Tesla, Apple, Google, Microsoft, Amazon, Nvidia, General Motors). The idea about having a higher cash allocation began late last year after shopping at a prominent timepiece and jewelry store. I didn’t sell taGMan shares because I need cash to buy nice watches. It was the story told by a store associate about a recent watch auction which reminded me of a well-known Warren Buffet lesson.
“Be fearful when others are greedy, and greedy when others are fearful.”
The auction story was about the 170 year partnership between Patek Philippe and Tiffany & Co. To commemorate their partnership, Patek is producing 170 Nautilus timepieces with the famous Tiffany blue dial at a retail price of $52,000. The first watch of the 170 to be produced was sold at auction for $6.5 million.
$6.5 million for a $52,000 watch that is only one of one hundred seventy!
The Nautilus auction seems to be emblematic of a mania happening with other U.S. assets as well? Are we reaching a period similar to the “irrational exuberance” time described by former Federal Reserve Chairman, Alan Greenspan, in 1996 during the dot-com bubble as he described “unduly escalated asset values?”
The U.S. market…has the greatest buy-in ever…that stocks only go up. - Jeremy Grantham
For example, how are NFTs suddenly selling for millions of dollars? Recently an NFT created by digital artist, Mike Winklemann (better known as Beeple) sold last year for $69.3 million.
How can the meme stock craze be explained? Driven by social media hype, GameStop (the money-losing computer game company) saw its share price rise from under $19 on December 31, 2020 to $325 by January 29, 2021. Similarly, another meme stock company, AMC, saw its share price rise to $63 on June 2, 2021 from only $12 on May 21, 2021.
Dogecoin, a cryptocurrency conceived as a parody, increased 300x in value mainly because Elon Musk continually tweeted about the cryptocurrency.
In describing why asset manias occur, Charles Kindleberger described in his 1978 book, (Manias, Panics, and Crashes) that “there is nothing as disturbing to one’s well-being and judgement as to see a friend get rich. Unless it is a non-friend get richer. It’s not long before a follow-the-leader process develops…”
In a recent white paper, Let The Wild Rumpus Begin, Jeremy Grantham wrote, “we have the most exuberant…even crazy investor behavior in the history of the U.S. stock market. The U.S. market…has the greatest buy-in ever…that stocks only go up, which is surely the real essence of a bubble.”
Admittedly, selling stocks just because prices are up is generally a bad idea. And trying to time market corrections might even be a worse idea. Yet, having the ability to sleep well at night is also is a worthwhile goal as an investor. I still believe in the long-term future of each of the taGMan portfolio companies. Although I sold portfolio shares, I continue to be invested in each taGMan company. Today, however, I’m also sleeping better at night while having ‘dry powder’ available as I prepare “to be greedy when others are fearful” when appropriate.
What I’m Reading, Watching, and Hearing
An Eye Toward the Future with Sebastian Thrun - Steve Forbes “What’s Ahead” podcast
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.