Greedy When Fearful

The crisis in Europe seems endless. I started buying into the panic in 2010 with the National Bank Of Greece (NBG) to take advantage of a turnaround. Fast forward two years later, and my original investment is down a massive 89% and I’m still waiting. Thankfully, this kind of pain I am numb to.

During the crisis of 2009, I was at the gym thinking “This collapse is a GREAT opportunity! But, I’m not prepared for it. What’s the secret to landing massive gains during a crisis?” I think I have come up with the correct answer, and I believe it’s cash and baskets. Much like the picture above but replace debt with cash. Thankfully here I am two years later and I realize I missed the baskets part. But, I do have more cash than I did in 2009 ready to be deployed.

Some of the smartest minds I follow won’t even invest in banks as they are black boxes that could contain cash or atomic bombs and it’s almost impossible to know which one. Take the most recent story of best-of-breed CEO Jamie Dimon and his loses that could pile up to 5 billion in JP Morgan Chase (JPM). He runs the company, is one of the best in the business, and billions in loses slipped past him! What most people don’t talk about though is that banks are immune to becoming obsolete. Yes, they could go bankrupt from bad loans, but money is going to be here a hundred years from now. Everyone is a potential customer. These two reasons are why I will always be invested in the banks.

My investing thesis here is that I’m going to pick six of the cheapest banks in Europe, one for each country (though most overlap), and bet they all don’t go bankrupt. They are cheap because they are weighed down with huge amounts of debt and uncertainty. But, if I have just one or two successful turn-arounds in my euro-trash basket, I’ll make money. I can wait decades. If they all go bankrupt, it won’t hurt much either as each position only represents only 0.4% of the entire portfolio. I also prefer making my own baskets over ETFs so I have 100% control over allocation. If a bank runs 600%+, I would want to sell that position but not the position that’s down 89%. You can’t do that with an ETF.

Euro-Trash Basket

Who will survive?

Monty

P.S. If you haven’t been following my page on Facebook, here is what I have been up to since the last article.

6/8/2012

Buy more 52 week low, sell less 52 week high. Under Armour (UA) hit 52 week high on 6/8/2012 @ 5.39 Billion. PEG 2.07. Sold 20% of position to lock in a gain of 73.7% on those shares. UA now makes up 4.5% of portfolio instead of 5.5%.

6/6/2012

Buy more 52 week low, sell less 52 week high. Since the 52 week low list has been full of my stocks, picked up more of:

First Solar (FSLR) @ 1.10 billion. Increased from .5% to 1.0% portfolio. PEG .17

Zip Car (ZIP) @ 4.12 billion. Increased from 1.1% to 1.4% of portfolio. PEG .73

JP Morgan Chase (JPM) @ 32.77. Increased from 2.8% to 3.7% of portfolio. PEG 1. Jamie Dimon losing 5 billion? BUY!! He’ll make it back.