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  • Timothy

Preparing the Warchest, and Averaging down into DBS

I have been keenly monitoring some stocks in my wish-to-accumulate-more list.

These are businesses which I am already vested in which I believe have strong fundamentals, and in this challenging climate, should present opportunities for buying more. I guess the question on everyone's mind is the same: should we adopt a wait-and-see approach or do we just go for it?

As you can see from my small but frequent accumulations in D05 over the last week, the answer to where I stand is pretty definitive. Can they drop even further? Sure. All businesses will experience a drought in earnings which will have an impact on its balance sheet. We will have to wait for the quarterly earnings report to filter out the fundamentally-weak companies from all the noise. In fact, not so many years ago DBS fell to a low of about $12.00-ish.

Asking if it will reach those levels again is fundamentally the wrong question. If it does, so what?

The more important question is: are we ready to act on it, if it does?

Not knowing where the bottom is is precisely why having a war chest at the ready is so important.

I have been preparing for this. The recent annual bonus, pay raise will help. In addition, I have also been trimming down on the amount of luxury watches I have, because there are 'too many' and they were just sitting at around. Selling those got me some much appreciated liquidity. Along with what I have been slowly building over the last few months, I should be in good stead to continue accumulating.

The market may improve in a few months, or it may be a protracted sell-down that leads into a proper financial crisis.

In any case, we need to plan accordingly. Not just to have money to chiong in, but to size our entries properly to not run out of cash at the most important opportunities of the decade.

As Warren Buffet once said:

It's only when the tide goes out that you learn who has been swimming naked.

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