[quote=B24]

FWIW, I am not even close to the same political persuasion as BG.  And that would actually have nothing to do with my opinion of his investment theory.  Not sure how one has to do with the other.

You turned a perfectly good debate about investment theory into a wet t-shirt contest.  Nice job.

[/quote]

Thanks, I was getting bored of my posts.

Let me put it together for you: we are all artists, working on a total package for our clients. No way is the best way. None of us wants to be held to performance, but many of us pretend like we are adding value in our investment approach, as was pointed out, since that has to do with "risk" (volatility) and client's ability to hold the course, and so on, I don't think there will be a definitive answer.

In my opinion, if you look back at BG's first response, I see a bigger picture. BG attacks my approach, which he really doesn't understand, as representing everything that is wrong with this industry.

What worries me is aggressive liberal economic pussies. I don't really know if the Irishman is one of them - but to the extent that they are attacking others, and making claims, and potentially pandering to client's "risk" (fear of volatility) - and making a virtue out of charging for it in their own special way - well, I guess politics and portfolio construction may be related.

My main point is that buy and hold eliminates a lot of BS. What do clients pay us for? Nothing really new under the sun - I'm just here to check in, if you like, teach me a new trick, don't attack my cred.

As for self righteous, aggressive, economic pussydom, that could threaten the capital markets, ownership, investment, and appropriate  portfolio construction, too. No Monte Carlo for economic progressivism in the American capital markets.

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

OMG, please don't tell me you really said that?

Let me approach this this way. I'll tell a horror story.

Back in 1996 or there abouts Critter 592 crashed in the Everglades killing everyone of the 110 unlucky souls to have stepped aboard N904VJ that day. They were dead less then ten minutes after the plane left the runway. You probably have heard about this crash as the crash of ValuJet flight 592. The crash did so much damage to ValuJet's reputation that after the crash ValuJet changed their name and are now known as AirTran.

The cause of the crash was a fire caused by illegally packaged and shipped out of date chemical oxygen generators. A big no no! The generators were in the cargo hold below the passenger compartment. One caught fire igniting other cargo including tires. The fire was intense and burned through the floor mounted control cables making the aging DC 9 rather difficult to control. Not that that mattered as many of the passengers were busy being burned to death. Those not being burned alive suffocated in the thick toxic smoke. The out of control jet hit the swamp in a better than 500mph death dive that was a relief for anyone onboard unlucky enough to still be alive at that point. Investigaters doubt anyone was alive at impact.

Now I tell you that horrific story in gory detail to bring up this point and ask a question: In the history of aviation a chemical oxygen generator had never caught fire and had never caused a crash. In the 14 years since this crash a chemical oxygen generator has never caused a crash. And, by the way, they are on every airliner. Here's the question, should we ignore the events that took place on Critter 592?

Or should we learn from them?

About your business. Things sure are easier  if you ignore 2008. To do so is playing with fire.

[/quote]

My main point is that buy and hold eliminates a lot of BS. What do clients pay us for? Nothing really new under the sun - I'm just here to check in, if you like, teach me a new trick, don't attack my cred.

[/quote]

First, you have to have cred.

[quote=BondGuy]

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

OMG, please don't tell me you really said that?

Let me approach this this way. I'll tell a horror story.

Back in 1996 or there abouts Critter 592 crashed in the Everglades killing everyone of the 110 unlucky souls to have stepped aboard N904VJ that day. They were dead less then ten minutes after the plane left the runway. You probably have heard about this crash as the crash of ValuJet flight 592. The crash did so much damage to ValuJet's reputation that after the crash ValuJet changed their name and are now known as AirTran.

The cause of the crash was a fire caused by illegally packaged and shipped out of date chemical oxygen generators. A big no no! The generators were in the cargo hold below the passenger compartment. One caught fire igniting other cargo including tires. The fire was intense and burned through the floor mounted control cables making the aging DC 9 rather difficult to control. Not that that mattered as many of the passengers were busy being burned to death. Those not being burned alive suffocated in the thick toxic smoke. The out of control jet hit the swamp in a better than 500mph death dive that was a relief for anyone onboard unlucky enough to still be alive at that point. Investigaters doubt anyone was alive at impact.

Now I tell you that horrific story in gory detail to bring up this point and ask a question: In the history of aviation a chemical oxygen generator had never caught fire and had never caused a crash. In the 14 years since this crash a chemical oxygen generator has never caused a crash. And, by the way, they are on every airliner. Here's the question, should we ignore the events that took place on Critter 592?

Or should we learn from them?

About your business. Things sure are easier  if you ignore 2008. To do so is playing with fire.

[/quote]

Interesting. What does this have to do with long-term ownership of equities, versus holding cash or lending your money in bonds?

You tell a long story, and make no point.  Is this liberal diarrhea of the brain? Blowhards love to tell stories, and brag about cars and scare people, and have other people suck up to them. This is what scares me about  investing in America, and why buy and hold gives me comfort.

Warren Buffet says about buying a company, " Our holding period is forever. " Blowhards like to tell stories and cheat you out of your money ( policies, taxes, programs, systems, ideologies, fairness). And attack other peoples  ideas with stories.

[quote=BondGuy]

[/quote]

My main point is that buy and hold eliminates a lot of BS. What do clients pay us for? Nothing really new under the sun - I'm just here to check in, if you like, teach me a new trick, don't attack my cred.

[/quote]

First, you have to have cred.

[/quote]

Wow, thoughtful comeback. I guess we're done, lefty. At least you didn't run away and hide this time.

[quote=Milyunair]

[quote=BondGuy]

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

OMG, please don't tell me you really said that?

Let me approach this this way. I'll tell a horror story.

Back in 1996 or there abouts Critter 592 crashed in the Everglades killing everyone of the 110 unlucky souls to have stepped aboard N904VJ that day. They were dead less then ten minutes after the plane left the runway. You probably have heard about this crash as the crash of ValuJet flight 592. The crash did so much damage to ValuJet's reputation that after the crash ValuJet changed their name and are now known as AirTran.

The cause of the crash was a fire caused by illegally packaged and shipped out of date chemical oxygen generators. A big no no! The generators were in the cargo hold below the passenger compartment. One caught fire igniting other cargo including tires. The fire was intense and burned through the floor mounted control cables making the aging DC 9 rather difficult to control. Not that that mattered as many of the passengers were busy being burned to death. Those not being burned alive suffocated in the thick toxic smoke. The out of control jet hit the swamp in a better than 500mph death dive that was a relief for anyone onboard unlucky enough to still be alive at that point. Investigaters doubt anyone was alive at impact.

Now I tell you that horrific story in gory detail to bring up this point and ask a question: In the history of aviation a chemical oxygen generator had never caught fire and had never caused a crash. In the 14 years since this crash a chemical oxygen generator has never caused a crash. And, by the way, they are on every airliner. Here's the question, should we ignore the events that took place on Critter 592?

Or should we learn from them?

About your business. Things sure are easier  if you ignore 2008. To do so is playing with fire.

[/quote]

Interesting. What does this have to do with long-term ownership of equities, versus holding cash or lending your money in bonds?

[/quote]

Thank you for chiming in on que! Two points for you!

What's interesting is that you don't see the corollary. Ignoring a once in a lifetime horrific event, making like it didn't happen. Let's just pretend it's all OK and it won't happen again. Problem is it did happen. And i'm not talking about the plane crash. The market did crash in 2008. Yeah, it was a really unusual event. Then again so was 2001-2003 and so was 1987. But, rather than learn from it, defense against it, let's make like 2008 didn't happen. That's what every fee grabbing wire house broker is doing. The fee'em up independants as well. Risk is something for the managers to handle. If they eff up, well, not our fault, it's the managers fault. Just pick a new set of managers and keep on collecting the fees. And therein lies the problem. Clients are left on the tracks without any plan to deal with risk.

60/40, collect the fee,let the chips fall where they may, about sums it up.

 I am going to try to set aside my own feelings for you as being a pompous liberal, and try to dissect your meaning in hopes of learning something.

Thank you for chiming in on que! Two points for you!

Thanks, dad.

What's interesting is that you don't see the corollary. Ignoring a once in a lifetime horrific event, making like it didn't happen. Let's just pretend it's all OK and it won't happen again. Problem is it did happen. And i'm not talking about the plane crash. The market did crash in 2008. Yeah, it was a really unusual event. Then again so was 2001-2003 and so was 1987. But, rather than learn from it, defense against it, let's make like 2008 didn't happen. That's what every fee grabbing wire house broker is doing. The fee'em up independants as well.

Risk is something for the managers to handle. If they eff up, well, not our fault, it's the managers fault. Just pick a new set of managers and keep on collecting the fees. And therein lies the problem. Clients are left on the tracks without any plan to deal with risk.

So I don't assume anything, what is the corollary? How is the fact that I don't see it interesting? When you say not our fault, are you excluding yourself as an advisor?

60/40, collect the fee,let the chips fall where they may, about sums it up.

What are you really trying to say? Is this a vague attack on wrap accounts and support for transaction trading, or what?

It seems like you have some ideas, and are also attacking others. It seems like you assume people are just supposed to know what you are thinking or assuming.

If you're trying to talk about a new reality of geopolitical turmoil and market volatility, and are justifying or sharing your own brand of active management, and talk about risk and fees, then perhaps you and I can get this discussion back on track.

Pardon me for trying to generalize your communications up until now as being support for concern about liberals trying to use the status quo to drive a social agenda, and I wish I could say I was surprised or that this is a good use my time, but I asking you to use your intellect  and experience to contribute, or at least don't get on my thread and attack my credibility with your BS, lefty.

Take some time and try to thoughtfully articulate your ideas, and receive some meaningful feedback. Why waste your time and other people's time here. No one is going to invest time here if you just satisfy your own need for emotional and political BS that reinforces your idea of the world.

Read this and think about it:

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

Don't just condescend and attack and try to win little emotional points. The reason I edit my posts is to make them better. Try waiting a few minutes and thinking a little before you respond, lefty.

[quote=Milyunair

[/quote]

Wow, thoughtful comeback. I guess we're done, lefty. At least you didn't run away and hide this time.

[/quote]

Two issues in responding to anything you write:

1. You constantly edit and re-edit your posts. I get cleaning up an unruly sentence or two, but you completely change what was written. Quite frankly, you come off as confused. So, not hiding, just scratching my head wondering what to respond to?

2.  You are not really interested in having a discusion.

If your point is to say that 75% (maybe more) of advisors are lazy and "pretend” to manage money, then I agree. I hear all kinds of stories about this guy putting some dry powder to work in Brazil or that guy found an opportunity because investors are throwing the baby out with the bath water in financials. It gets mind numbing sometimes. I want to stick my pointer and middle figure down my throat and puke in their lying bullshitting face but I know it is just playing the game. I think that many advisors are just simply playing the game. They are good at BSing and know it. The thing about it though is unless you just constantly pick crap, you will still get decent returns if you are invested in SOMETHING. A clock is right twice a day, and as our market sees the increased volatility it has over the last 10-15 years, you have to be a moron to consistently loose money if you are invested in something and it is tailored to the clients goals, time frame, risk tolerance etc.

If you want to continue discussing this topic lets stay on point or let me know a little more about what you are asking or telling us.

[quote=N.D.]

If your point is to say that 75% (maybe more) of advisors are lazy and "pretend” to manage money, then I agree. I hear all kinds of stories about this guy putting some dry powder to work in Brazil or that guy found an opportunity because investors are throwing the baby out with the bath water in financials. It gets mind numbing sometimes. I want to stick my pointer and middle figure down my throat and puke in their lying bullshitting face but I know it is just playing the game. I think that many advisors are just simply playing the game. They are good at BSing and know it. The thing about it though is unless you just constantly pick crap, you will still get decent returns if you are invested in SOMETHING. A clock is right twice a day, and as our market sees the increased volatility it has over the last 10-15 years, you have to be a moron to consistently loose money if you are invested in something and it is tailored to the clients goals, time frame, risk tolerance etc.

If you want to continue discussing this topic lets stay on point or let me know a little more about what you are asking or telling us.

[/quote]

Right. I am interested in tactical allocation around core portfolio mixes 30-40, 40-60, 50-70, and so on. Since intuition or research is in play, there may not be much more for me to say without hearing from someone else who is specifcally relating to my concerns about portfolio construction, geopolitics, interest rates, debt, aging Americans and socialism, and  so on.

I guess this is more crystal ball speculation. I know what I think and I'm looking for ideas, but I'm not going to continue building a straw man here for other purposes. 

I don't care how other advisors get paid. I'm not sure this forum is a good use of my time, but I appreciate your thoughtful posts.

My question is much simpler. We had a bellweather event. That event skewed the data out of proportion, at least in the short term. That single event made 10 year investment returns look dismal. Now, since that event won't likely repeat itself, are we overreacting by completely changing a strategy that has worked for decades? I am not offering a solution, nor am I questioning strategy. I am simply suggesting that focusing on our most recent past problem may not equip us with the optimal future strategy.

[quote=navet]

My question is much simpler. We had a bellweather event. That event skewed the data out of proportion, at least in the short term. That single event made 10 year investment returns look dismal. Now, since that event won't likely repeat itself, are we overreacting by completely changing a strategy that has worked for decades? I am not offering a solution, nor am I questioning strategy. I am simply suggesting that focusing on our most recent past problem may not equip us with the optimal future strategy.

[/quote]

The world has nearly 7 billion souls, now. The geopolitical assumptions have to change. God forbid, some idiot will explode some nuclear material in a third world country, and the fallout will shut down most of the dairies the the Northern Hemishphere for a while. This is what I'm gettting at - that changes the "model" allocation, risk discussion, everything. And it can't be tactical, not when you have the "market" melting down.

Yet it probably should somewhat tactical, because of the new reality, if only to try to squeeze out a little extra return from the "normal" economic cycle.

That sounds like increasing market timing risk, to make up for bad times. Look around the industry, I'm amazed. I'm amazed at myself, but I see my method as more touching clients and personalizing the risk tolerance, with respect to trying to be a little contrarian and educating clients. Whatver.

I think Chuck calls it "Core and Explore". Any strategy you choose will only be as good as you are willing to put in the time and effort. I use a similar strategy and break it down like this...

A client's life is a football season.

Each year is a football game.

Each qtr is well a qtr.

I use predetermined and quarterly screened models for the core and then try to determine possible catalysts to buy into or hedge against that qtr for the satellites.

Maybe it works maybe it doesn't. What I do know is that after 2008, clients want to know I am not a buy and forget guy. I am systemizing the accounts and we will start block trading in discretionary accounts soon. This will make my strategy more efficient. Every sense 2008, my office has been putting in the extra hours so clients that want to be more involved can be. If the ship sinks again, we will go down together. None of this "I can't believe you did nothing while my accounts went down" crap.

Exactly. You got it.

[quote=Milyunair]

 I am going to try to set aside my own feelings for you as being a pompous liberal, and try to dissect your meaning in hopes of learning something.

Thank you for chiming in on que! Two points for you!

Thanks, dad.

What's interesting is that you don't see the corollary. Ignoring a once in a lifetime horrific event, making like it didn't happen. Let's just pretend it's all OK and it won't happen again. Problem is it did happen. And i'm not talking about the plane crash. The market did crash in 2008. Yeah, it was a really unusual event. Then again so was 2001-2003 and so was 1987. But, rather than learn from it, defense against it, let's make like 2008 didn't happen. That's what every fee grabbing wire house broker is doing. The fee'em up independants as well.

Risk is something for the managers to handle. If they eff up, well, not our fault, it's the managers fault. Just pick a new set of managers and keep on collecting the fees. And therein lies the problem. Clients are left on the tracks without any plan to deal with risk.

So I don't assume anything, what is the corollary? How is the fact that I don't see it interesting? When you say not our fault, are you excluding yourself as an advisor?

60/40, collect the fee,let the chips fall where they may, about sums it up.

What are you really trying to say? Is this a vague attack on wrap accounts and support for transaction trading, or what?

It seems like you have some ideas, and are also attacking others. It seems like you assume people are just supposed to know what you are thinking or assuming.

If you're trying to talk about a new reality of geopolitical turmoil and market volatility, and are justifying or sharing your own brand of active management, and talk about risk and fees, then perhaps you and I can get this discussion back on track.

Pardon me for trying to generalize your communications up until now as being support for concern about liberals trying to use the status quo to drive a social agenda, and I wish I could say I was surprised or that this is a good use my time, but I asking you to use your intellect  and experience to contribute, or at least don't get on my thread and attack my credibility with your BS, lefty.

Take some time and try to thoughtfully articulate your ideas, and receive some meaningful feedback. Why waste your time and other people's time here. No one is going to invest time here if you just satisfy your own need for emotional and political BS that reinforces your idea of the world.

Read this and think about it:

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

Don't just condescend and attack and try to win little emotional points. The reason I edit my posts is to make them better. Try waiting a few minutes and thinking a little before you respond, lefty.

[/quote]

You're not responding to my post to learn anything. You're responding because i've gotten under your skin and you feel a need to defend yourself.

You edit your posts because you speak before you think.

Oh, and speaking of speaking before you think, the comment on the other thread about Porsches being the cars of the left, wrong again! Big surprise there! Average Porsche buyer is a 46 year old male biz exec or business owner with an income of $384K.  Not exactly the left's demographic.

Do yourself a favor and don't respond.

[quote=navet]

My question is much simpler. We had a bellweather event. That event skewed the data out of proportion, at least in the short term. That single event made 10 year investment returns look dismal. Now, since that event won't likely repeat itself, are we overreacting by completely changing a strategy that has worked for decades? I am not offering a solution, nor am I questioning strategy. I am simply suggesting that focusing on our most recent past problem may not equip us with the optimal future strategy.

[/quote]

Navet, do you have kids? If so, are they vacinated? Are you vacinated? If so, why? It is highly unlikely that you or your children would contract any of the dreaded illnesses you've vacinated against. You have a better chance of winning the Powerball lottery than contracting any of those diseases. Yet, do you still chose to protect yourself and those you love. And, if so, why?

You say the event won't likely repeat itself. What event? I ask because if you're talking about a mortgage backed house of cards bring down the market i probably agree. But, if you are talking about what really collapsed the market, a breakdown of trust, well, we've got a bit of that right now in the markets. And guess what? Same thing! Not as deep this time but still there. A breakdown of trust could easily cause another crash. But, the truth is another crash could come from anywhere. And, just like 2008 the circumstances that cause it will be unimaginable.

You also claim a strategy that has worked for decades. Worked for who? Did it work for those who rolled over their life savings in August of 2001? Or those who were set to retire in 2003? How about the poor people who had pension plans of 100% company stock and retired in November of 1987? How'd they do? I think of the prospect i met with 500K of Lucent stock and was building a house to retire to. I couldn't talk him out of that stock at 67 a share. How'd the strategy work out for him?

Navet, your chart works only for those with time to recover from a Black Swan event. Right now there is an entire generation, your prime prospects, who are out of time.

You can't ignore what happened in 2008, as convenient as it would be.

So, what are you doing to vacinate your clients? If you say tactical allocation - Did that work in 2008? I don't think so. It's reactive on the risk scale. Clients were still left on the tracks. Well diversified tracks, but tracks all the same.

But there is an answer. A way to protect your clients while giving them exposure to the wealth building power of the stock market. But to do it you're going to really have to start earning your fees. It's called technical analysis. You need to become an expert in technical analysis.

Tech analysis is kinda like predicting the weather. it's not always right but it's right enough, and it called this last move down as well as 08.

Learn it and apply it. It will set you apart. And, it sure beats keeping your fingers crossed.

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

Thank god.  I thought 2000-2002 actually HAPPENED (-40% S&P).  I guess it was just a massive nightmare.  And I guess since I was just a kid in 1973-74 (-40% S&P), that was probably just a sugar high.

Actually, 1982-1999 is really the norm.  Those days will be here soon enough....

[quote=B24]

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

Thank god.  I thought 2000-2002 actually HAPPENED (-40% S&P).  I guess it was just a massive nightmare.  And I guess since I was just a kid in 1973-74 (-40% S&P), that was probably just a sugar high.

Actually, 1982-1999 is really the norm.  Those days will be here soon enough....

[/quote]

B24, thanks for posting this. For a while there i thought i was in the twilight zone of alternative reality.

The old saying about those who fail to learn from history comes to mind when i think about the Tech Wreck of the late nineties. We went through exactly the same thing in the early seventies with the Nifty Fifty. The old rules no longer applied. Revenues, earnings, P/E ratios no longer mattered. Those who drank that kool aide found out that not only did these things matter, but they did so with a vengence. I did everything i could to warn cleints about the coming wreck. I even sent them letters describing the nify fifty. Most listened, some didn't . Most were fine, some no so much.

There is nothing wrong with investing clients in stocks. There is something very wrong with doing so without plan to deal with the risk of the market. Sailing on a cruise ship without lifeboats is foolharty at best.

Unfortunately, sailing on that ship describes most of Wall Street right now. The wires have trained legions of advisors to be asset gatherers. These people don't get paid to protect assets, only to gather them. Many, if not most, are clueless as to how to invest money, They've never been trained on how to invest and in my experience, most have spent scant little time educating themselves. Many of these people can't spell S-T-O-C-K  let alone complete the reasearch necessary to competently invest in one. They are ill equipped to protect investors who have entrusted their life's savings to them. And, their bosses are fine with this. Nothing interupts the fee machine. They do this by laying off responsbility to the managers and by convincing their clients that "It won't happen again."

The problem is it will happen again.

I think those who invest clients money without a plan to deal with these Black Swan events should rename their practices "Titanic Investments." At least then, prospects would know what kind of thinking is at the helm.

BG. I was posing a question, not making a statement. We experienced a once in a lifetine(OK hopefully!) event where there was no safe harbor. Using that event as a standard leaves us with little choice for where to invest. The question is, how to develope an investment strategy that deals with a future unlikely to look much like the recent past. And in my case, to do so in a Jones model that doesn't incluse hedges. Personally, I believe that we are going to be in a stock pickers market for some time(and bond pickers, but I'll leave that question yo you who seems to really have that expertise). And this site, as thin as it has become has provided a wealth of good information as compared to much that I have recieved from Jones. As to my kids innoculations, yes they were, as has been my grandchild. However, disease is constant, waterfall financial events are rare and the same innoculation doesn't cover each event. This is a good conversation and I would like to keep it going.

Navet, go back and reference my rowing vs. sailing analogy.  It's not really about sophisticated hedging strategies.  It's really about common sense. 

I'm not sure if I can make this clear in writing.....but here goes.....

Buy and Hold works real well during a secular bull market (reference 82-99).  Any fukcnut with 2 bucks and a broker could have made money on stocks during that time period.  But remember that 82-99, though a long period, was a bit of an anomoly, since it WAS the greatest bull market run, EVER.  If you go back throughout history and look at the various secular periods, and even rolling 10-year periods, it becomes clear that today's boomers and Greatest Generationers (how's that for a name) accumulated a LOT of smack in the 80's and 90's (I guess actually, the 70+'ers retired nicely on that bull run).  But there have been a LOT of periods throughout history where wealth was PERMANENTLY destroyed.  And because we all have the luxury of recent hindsight, all the buy-and-hopers sit around saying "yeah, but what are the chances of THAT happeneing again?" (referring to the last DECADE).  If you think 2000-02 and 2007-09 are anomolies and Black Swans, think again.  Or maybe they ARE Black Swans, and Black Swans just aren't THAT uncommon.

During most other periods of time, allocating assets properly is of the utmost importance.  And as I explained above, every economic era cannot be navigated with the same boat.  There are times (like now, when, if you have much uncertainty about teh direction of the market) complete diversification is critical.  Split your money 12 ways and allocate among 12 different asset classes.  THAT'S how the average investor can "hedge".  Or maybe it means just being ultra conservative, since no matter which direction the market turns, you'll still guarantee yourself 3 or 4 percent.  Maybe tax-free.  Maybe after your potrfolio runs up significantly, you take some off the table.  Or a LOT off the table.  Be happy for what you made.  Are you still achieving your goals?  Don't be a hog (Cuz hogs get slaughtered!). 

But you gotta step back sometimes and look at the big picture and use your head.