I have a personal question to ask. I really respect the collective intelligence on this board and have greatly appreciated advice in the past. I’ve been wrestling with this decision and believe I know the answer, but would like to hear any thoughts you might have. I have a deadline to meet tomorrow, and obviously I am not sleeping with this and everything else that’s happening right now.
I have stock in a private family business. The company does $700m selling kitchen sinks, cabinets, and drinking fountains. Obviously, the company just had some of the best years ever in its 80+ year history, but now it will have to endure the downturn in the housing industry. It has very little debt and is cash heavy (assuming they can get their cash).
I sold half my stock last year in the 3rd quarter. I sold it to help finance a new business, but those plans are on the shelf right now. Needless to say, selling stock in a family business was/is not well received (not that I care at this point).
I think I’m fairly well positioned at this point, being in 1/3 paper cash, 1/3 electronic cash (trading accounts), and 1/3 bullion/GLD. I think (hope) I will weather this storm and am salivating over some of the fixed income opportunities if the markets survive. I had felt pretty comfortable holding the remaining stock from a diversification standpoint.
However, there are some very real doubts about their chances of survival. There will be zero new homes built in the foreseeable future, just about everyone who wanted to remodel their kitchen has done so through the home equity ATM (which is also dead for the foreseeable future), and the financial catastrophe we are witnessing will only serve to exasperate this industry downturn. I really doubt that they can weather a depression.
So, would you sell the rest of the company stock, or let it ride?
FWIW, there is zero chance they will ever try to sell the company. The majority shareholder has made this abundantly clear year after year. As their #1 company value states: “we are in business forever.”
Anyway, here’s the quandary. If I sell and get cash, I would have to park it in a bank(s) and ensure the accounts are under FDIC coverage. No problem, unless the whole banking system collapses. I doubt the FDIC could cover all accounts in the country, even if they insured all deposits (like they are talking about now). A systemic collapse would threaten the whole enchilada (except for the bullion). Of course, a systemic collapse would also threaten the viability of the company, so it looks like a lose/lose either way.
But, if by some miracle the financial system survives, this becomes a choice between riding out the downturn in the industry, or having a huge chunk of change available to invest. I’m really salivating over some of the yields out there, especially on those close-end funds. If the markets survive, I could be looking at the investment opportunity of a lifetime. 15-20-25% fixed income from here on out would blow away any kind of possible return that might come from the company, not to mention the investment opportunities that will be present if/when the next bull market starts.
As I boil this down, it seems like the smartest move is to sell the stock and pray that they save the financial system. Would anybody disagree? Why?
TIA – I deeply appreciate any insight.
BTW – headline just flashed on CNBS said: “Japan government bonds dumped by dealer rush to cash.” Could this be a canary?
If you have already taken care of your nuclear family's needs, then the question is do you care about your extended family? Everybody's different, but if it was a choice between having a little more money or the love of brothers, sisters, cousins aunts, and uncles, then it's a no brainer.
It bothers me that the responses to the question started and ended with money. If it were me, once I had taken care of my inner family I would not risk breaking or injuring the relationships I have with my relatives, especially if they are headed for tough times. Family first.
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I would be mucho careful about buying any REITS or CEF's that are real estate focused.....many REITS will fold before this thing runs its course
Agreed, Been short anything RE related and looking out my window in downtown MIAMI still see far too many cranes, but not sure everything goes to zero.......AWP is interesting because it is not leveraged and is diversified internationally......also down 80% from the peak...scheduled to pay 10% in divys by Xmas.....here are some of their holdings: Holding Dollar Value % of Total Portfolio Unibail - Rodamco N/A 4.47 Segro PLC N/A 2.53 Accor SA N/A 2.45 PIK Group N/A 1.93 Immofinanz AG N/A 1.92 Orient-Express Hotels, Ltd. N/A 1.77 Hammerson PLC N/A 1.7 Hypo Real Estate Holding AG N/A 1.65 Kowloon Development Co., Ltd. N/A 1.6 CapitaCommercial Trust N/A 1.57
Donged NQ earlier. Will probably dump it from these levels and observe till the stock market opens. NQ at 1258, but by the time you read this it could be many points away. I've never seen such volatility in my entire life. 10-20 point handles in minutes. Had to cut my normal position size down to minimze risk. No sense in getting reamed.
I watched a snail crawl along the edge of a straight razor. That's my dream; that's my nightmare. Crawling, slithering, along the edge of a straight razor... and surviving