T.I.N.A. (or the Seller’s Dilemma)

In 1901, steel magnate Andrew Carnegie sold his entire empire to JP Morgan for $480 million – a sum he had scribbled on a piece of paper and that Morgan did not haggle over.

After years of the kind of debilitating economic and political warfare it took to remain on top, Carnegie was finally done fighting, finally free to pursue his charitable endeavors on the other side of perpetual strife. With the stroke of a pen, Carnegie had become one of the wealthiest human beings in world history – that $480 million equates to a fortune of nearly $340 billion in today’s dollars, more than the net worth of Gates, Buffett and Carlos Slim combined.

But despite this amazing windfall, legend has it that before the deal-signing champagne bottle was even through Carnegie was wondering aloud about whether or not he’d made a good deal.  Should he have departed with his business and if so, was $480 million all he could have gotten out of the insatiable banker.

When discussing the possibility for continued rotation into stocks or the lofty levels of the S&P currently relative to recent years, it is important that we consider the Seller’s Dilemma.

Think of  a portfolio manager who is charged with earning a return for investors and can assume a moderate amount of risk. Let’s suppose he’s been running a portfolio of 25% US stocks, 25% international stocks and 50% fixed income (I can’t tell you how many portfolios have looked like this in real life for the last few years).  Now assume he reads a bunch of research and news and concludes that the market is due for a ten to twenty percent sell-off. And so he sells half his stocks, putting a quarter of his portfolio into wealth-destroying money market funds.

Days go by. Weeks. In the end, he buys back into the stock market again – maybe even buying some of his old positions back at slightly higher prices.

Why does he do this?

T.I.N.A. – There Is No Alternative.

The alternative he has is to own aburdly-priced bonds, buy highly volatile commodities, or go into less-liquid assets like real estate or private equity. In other words, for most PMs there is no alternative.

Think about the college endowments – the top 800 control $400 billion in investable assets. Among these 800 pools of professionally managed capital, US equities represent only 15%. In the meantime, hedge funds are their largest allocation bucket, 20% or $80 billion. The returns have been scary-bad, not even keeping up with the pace of the schools’ spending in the past year.  Yale University posted a loss of just under 1% in their last fiscal year ended June 30th. They have a laughable 6% allocation to US stocks. If you think this kind of thing isn’t being rethought all over the country as we speak, then you misunderstand the concept of career risk.

Now we’re all going to laugh at the T.I.N.A. acronym the next time the market gets bludgeoned – and it sure is overdue for a healthy beating one of these days. But the fact remains that much of the activity we’ll see across asset classes this year will be driven by exactly that lack of alternative, barring some other calamity we’re not yet aware of.

Seriously, what else are you going to do?

This is the reason stocks are now trading at an average multiple of 14 (vs the discounted one they may deserve given the lackluster economy). It’s the reason earnings shortfalls are being ignored in the aggregate and the reason even the most dour market watchers are coming out one after the other and admitting that yes, stocks are expensive, but not relative to alternatives.

Carnegie was faced with a “dilemma” of sorts – having sold out of his stake, now what?  A good dilemma to have, but still, it bothered him. The investment management pros I talk to are all feeling the same way each time they lighten up on stocks – now what do I do?




Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

What's been said:

Discussions found on the web
  1. Valentino Garavani commented on Aug 06

    Valentino Garavani

    […]please take a look at the web-sites we adhere to, like this a single, as it represents our picks through the web[…]

  2. جدیدترین مدل دستبند commented on Aug 07

    خرید طلا

    One was produced only for showing seconds and little whilst a different 1 making use of moment graduations is manufactured for implying hrs.

  3. free porn commented on Aug 07

    free porn

    […]Sites of interest we’ve a link to[…]

  4. apps download for windows 10 commented on Aug 08

    apps download for windows 10

    […]that would be the end of this post. Here you’ll locate some web sites that we feel you will appreciate, just click the links over[…]

  5. گوشواره دایره commented on Aug 12

    خرید طلا

    usually posts some incredibly intriguing stuff like this. If youre new to this site

  6. انگشتر گنجشک commented on Aug 13

    خرید طلا

    below you will arrive throughout the link to some web-websites that we contemplate it is ideal to go to

  7. مه پاش commented on Aug 13

    مه پاش

    we arrived across a cool web website which you could value. Get a search when you want

  8. دوربین مدار بسته commented on Aug 13


    We completely love your weblog and find nearly all of your post’s to be what specifically I’m hunting for. Does 1 offer visitor writers to create content for you? I would not thoughts writing a publish or elaborating on a lot of the topics you create w…

  9. ixxx porn commented on Aug 13

    ixxx porn

    […]we came across a cool web page that you simply may appreciate. Take a appear should you want[…]

  10. دوربین مدار بسته commented on Aug 14


    Pretty! This has been a genuinely superb article. Many thanks for providing this information.

  11. Borrelen commented on Aug 14


    […]Wonderful story, reckoned we could combine some unrelated information, nonetheless actually worth taking a search, whoa did a single find out about Mid East has got extra problerms too […]

  12. دوربین مداربسته commented on Aug 15


    Hello would you thoughts stating which weblog system you’re functioning with? I’m preparing to start my possess weblog shortly but I’m getting a hard time deciding amongst BlogEngine/Wordpress/B2evolution and Drupal. The reason I inquire is due to the…

  13. مه پاش commented on Aug 15

    مه پاش

    Do you have a spam problem on this site I also am a blogger, and I was seeking to know your circumstance we have created some wonderful methods and we are searching to swap techniques with other people, be sure to shoot me an e mail if intrigued.

  14. the swan wand review commented on Aug 16

    the swan wand review

    […]very handful of sites that transpire to be detailed beneath, from our point of view are undoubtedly properly really worth checking out[…]

Read this next.