Wednesday, March 29, 2006
Back on February 7 I noted that Ed Keon reduced is equity weight in his model portfolio from 100% down to 55%. I had forgotten about this call until I saw him on CNBC after the close.
In my post I questioned just about every aspect of the call and mentioned my inability to recall him being correct very often. It would appear that this call was very poorly timed. On that day the S&P 500 closed at 1254.78. That was the lowest closing level of any day since he made the call.
Since making the call the S&P has been as high as 1307.25, on a closing basis, that on March 17. That is a move of 4.17% or more than all of last year. His call cost anyone that was unlucky enough to follow his advice 180 basis points.
The point here is not to pick on Mr. Keon but to realize something I have been saying all along which is there is no need for investors to make drastic portfolio shifts all at once. The consequence for being wrong is too great. The move his call missed could turn out to be all the upside for the entire year.
Bear markets start slowly not with crashes. Since bear markets to start slowly there is no need to sell stock quickly which made Keon's call flawed from the start. Strategists will make calls like this one in the future and they will be no less unnecessary. We'd all be well advised to ignore these calls altogether.
Posted by Roger Nusbaum at 5:58 AM