One reason is tax. After multi-decades of gains, the tax liability is enormous. At retirement or close to it, paying such a huge tax can destroy your retirement plans.
People naturally get emotional with their stocks. They treat them as part of the family. Letting go is soooo hard. I can testify to that. Despite common sense telling you to sell, you just can't. That is why people make so many mistakes in the market and usually do the opposite of what they should do. Humans are hardwired to do just that, so, with that in mind, you can add psychology to your tool box and take advantage from there. A good example was back in March where even the most harden investor capitulated. You just have to get in despite the short term risks.
A good number of blue chip stocks that you never expect to go bankrupt did. Yes, you are correct. However, never put all your money in one basket. Have at least 8 to 10 high quality stocks in multiple industries and you'll never lose all your money. That is the best and easiest way to manage risk.
You say many people here didn't manage risk properly. You are also right. Risk management is extremely complex and requires higher education. To ask the common folks to manage their risk like a pro is asking for too much. I'll bet you that over 50% of people who visit this board don't even know what a stop loss is.
This is why I believe buffett's philosophy is the best. Its easy, simple, and virtually maintenance free. Buffett, despite all his losses, he will come back strong in the coming years and will take sole place as the richest man in the world. Over 70 years of history will tell that his method works.
Unfortunately, many people does not have the level of sophistication that you do. I think the majority of investors here are best left not doing anything. As long as they are not in margin, going down to 8 briefly and quickly rebounding is not as bad as it seemed. The most likely scenario to happen, if they decide to trade, is selling below $10, dropping to $8, be happy, and waited for it to drop even more. Next thing you know, USB is at $11, $12, $13, $14. Panic buying ensues, buying the stock back at $15, then promptly dropping back down to $12. Xanax, Klonopin, and Valium are what you need after that.
You rely on technical analysis and excel at it. I tried reading books on the topic, but the only thing it does is help me sleep. So I rely on gut instinct and posts from individuals on this board to guide my trading decisions. Bushman, pops, uncle, likes, and yourself are a few that I came to trust.
Long term investing however is extremely easy. Find the right business you understand with good management, wait a few good years, voila, mucho money.
There's also mucho money to be made in short term trading of course. I myself made a fortune doing so (and also lost a fortune.) If you have the right tools and temperament, god speed to you. Otherwise, stay away.
Thanks for the post. I had not seen it yet but found it on Google.
Some highlights for the board....
1. Target price of $27.00.
2. Resistance at $25.00.
3. Technical support at $17.00 to $20.00.
4. One of only three regional banks that passed the "stress test" and repaid TARP.
5. EPS estimate for 2009 is $.96, a good bit higher than conscious earnings estimate. EPS for 2010 is $1.44.
6. "Stay on the sidelines for now".
Guys, I did not quite understand his last comment about staying on the sidelines for now with a "Buy" rating and a $27.00 target price and a buy rating unless maybe he wants to enter at the $17.00 to $20.00 support area.
Can any of you guys who use Merrill Lynch stead any light on this.
Unrelated yesterday Marc Pado of Cantor Fitzgerald on CNBC mentioned USB because......
1. USB has a very clean balance sheet.
2. USB can expand its loan book and gain market share.
Good Luck Longs
I'm very comfortable with USB. Don't have time to trade so this is a long term hold all the way. Whether it goes up or down at this point doesn't matter to me. I'm sure billion thinks it's a bad idea, but he has time.
You are absolutely right about the second child. Experience might be a bigger factor than I thought. Having all the tools already certainly helps.
I was listening to bloomberg radio and I think they were interviewing dick bove. He mentioned that some banks are reducing or stopping loss reserves as the economy recovers. By stopping loss reserves, earnings could get a big pop.
USB had been very conservative and increased loss reserves for several quarters now. I think USB might still continue to increase or hold loss reserves steady. But once that stops and things start to reverse, watch out.
USB's recent acquisition spree tells me that they have excessive capital despite the increase loss reserves. That's a great sign to the upside.
And don't forget, USB is #2 behind WFC in net margin rate and will earn itself out of this mess. In fact, USB is already out of the mess and is looking to capitalize on the less fortunate.