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Ken Moraif

Book Interview: Buy, Hold, and Sell!: The Investment Strategy That Could Save You From the Next Market Crash

Buy, Hold and Sell

Getting To Know The Author: Ken Moraif

Isaac:

Today I’m happy to introduce Ken Moraif for an interview on his book Buy, Hold, and Sell!: The Investment Strategy That Could Save You From the Next Market Crash, Ken how are you doing today?

Ken Moraif:

I am doing very well thank you!

Isaac:

That is great to hear, now before we delve into the book can we get a little background about yourself? You are known as the man who called the financial crisis.

Ken Moraif:

Yes we have a strategy that we call Buy, Hold & SELL! and we reached our sell point of all stocks in November of 2007 and advised our clients to sell and to stay out until June of 2009.

Isaac:

So were you working in wealth management at the time? What determined the sell point, and what was it like watching the crash unfold while you and your clients were relatively safe?

Ken Moraif:

We have been in business for 28 years and so yes we were in the wealth advisory business at the time. The only regret that I have is that I could not have helped more people to avoid the tragic losses that 2008 dealt out. As the crisis unfolded more and more people came to us and their stories were heart-wrenching.

That is why I wrote the book. In my book I actually outline four different strategies that we use in our firm to help avoid catastrophic losses in bear markets.

Isaac:

I’m sure it was, it was a hard time for almost everyone. But I think readers will be very interested in learning about some of the strategies you used to survive it. Seeing as you were on the front lines of the Great Recession, what is your opinion on the market today? Do you see another chance of recession soon?

Ken Moraif:

I think that the current market represents a significant risk. We have had seven years of historic money printing by governments around the world. I call this the “government infusion bubble.” This unprecedented amount of global debt is strangling growth and has not produced the kind of prosperity that governments were hoping for. I think most people understand that the path to prosperity cannot be borrowing money. Unfortunately our governments do not subscribe to this notion. Leading into the bear market of Y2K, the market had risen a hundred percent over the previous five years. Leading into the bear market of 2008 the market had risen by 100% over the previous five years. Currently the market has risen over 200% over the last seven years. Why have we seen this growth? Only because of the massive amount of debt that we have taken on. I cannot see how this ends well.

The important thing to remember is that in all walks of life we always have a defensive or exit strategy. This applies when we go to war, in sport, in business in almost everything. However when it comes to investing we are told not to play defense ever. We are to buy and hold regardless of what happens with no concern that we could experience losses that would take years to recover from. This is insanity, in my view. It is incumbent upon investors to always have a plan to protect themselves from a down market.

Getting To Know More About The Book

Isaac:

I’m poised to agree with you Ken, I feel as if Central Bankers may just be trying to delay the inevitable, and the more they do, the worst it will get. But on to a more optimistic subject – lets talk about your book! Clearly by the title Buy, Hold, and Sell you are espousing a different strategy than the conventional wisdom of buy and hold á la Warren Buffet whose favourite holding time is forever. You mentioned defense being key but why should investors try your strategy instead of buy and hold?

Ken Moraif:

Warren Buffett gets to sit on the board of directors of companies that he buys. We do not have the same luxury that he does to have the kind of inside information that will tell us whether everything is okay or not. As an aside, had Warren Buffett Had followed my advice and sold his own stock in Berkshire Hathaway in November 2007 and bought it back in June 2009 he would be several billion dollars richer than he is today. To answer your question regarding why one should have a defensive strategy. The reason is that buy and hold assumes the market will come back. People who bought and held through the Japanese stock market crash are still down over 60% from the peak in 1989. Lest you think that America is immune to that, people that lost money in the 1929 stock market crash got back to even 25 years later. One could argue that the market in our country got back to the highs of Y2K in 2013. Yes the market rose through 2007, but then it crashed and had to recover again and it wasn’t until 2013 that it was back to where was in Y2K.

A young person who has many years ahead of them may want to experience this roller coaster ride but our clients are people who want to retire or are retired already. They cannot afford to wait 13 or 25 years to get back to even. In addition, if you are living on the money, meaning you are drawing money out, and the market is going down at the same time, you are doing what farmers call eating your seed corn and if you eat enough of it you may run out of seed corn when growth season comes and have nothing left to plant.

Isaac:

Right, thats a great explanation. Many people forget just how long it can take to fully recover from a full blown crash. Now besides being content with just buying and holding, what other mistake have you seen clients make repeatedly over your long career?

Ken Moraif:

Bear markets come on average every three and half years and bring with them a 35% average loss. You don’t have to be a math genius to figure out that if you’re going to be retired for 30 years you cannot afford to keep taking those kinds of hits while you are living on the money

Mistakes that I see prospective clients make is our not being properly diversified, taking too much or too little risk given the return they need to make so as to support their lifestyle. In my book I have a section dedicated to that entitled “the hurdle rate.” To design your proper financial plan you need to know what you are trying to accomplish and to do that you have to have a solid understanding of your the return expectations that you will need to cover your cost of living and inflation and taxes etc.

Isaac:

I noticed you have mentioned retiree’s a few times, will this book be of use to non-retirees or possibly a younger generation?

Ken Moraif:

The buy hold and sell strategy is best suited for people who are retired or who are soon to retire. Having said that, I am the financial advisor for my three daughters the oldest of which is 25 and I don’t want them to lose 37% or more of their money in the next bear market any more than I do my clients. I can’t think of anyone that benefits from taking large losses that take years to recover from. The fact that a young person has more time to recover doesn’t change that.

Isaac:

Excellent point, avoiding these losses while young just serves to further compound our gains later in life! Finally, if you had to convince an interested reader in picking up your book, what would it be?

Ken Moraif:

The average bear market occurs every 3 1/2 years. The last one ended almost 7 years ago. The average rise of the market between the end of the previous bear and the new bear is 100%. The market is now up over 200% since the last bear market ended. Given the massive amount of global debt that has supported this historic rise in the stock market, doesn’t it make sense to have a strategy to protect yourself from the next market crash? If it does, I have just the book for you!

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