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. sex toy reviews commented on Jan 30

    sex toy reviews

    […]Wonderful story, reckoned we could combine some unrelated information, nevertheless definitely really worth taking a appear, whoa did one particular master about Mid East has got extra problerms too […]

  2. فیلترشکن رایگان commented on Jan 30


    normally posts some incredibly intriguing things like this. If youre new to this internet site

  3. تبلیغ گوگل commented on Jan 31

    تبلیغات در گوگل

    Wonderful website! I located it although browsing about on Yahoo News. Do you have any ideas on how to get listed in Yahoo News? I’ve been striving for a while but I by no means seem to get there! Cheers

  4. رفع آیفون خطای 1009 commented on Jan 31


    I know this if off subject but I’m hunting into beginning my personal weblog and was curious what all is essential to get established up? I’m assuming having a site like yours would expense a rather penny? I’m not extremely web savvy so I’m not a hundr…

  5. خرید vpn آیفون commented on Jan 31

    وی پی ن آیفون

    make sure you pay a visit to the internet sites we adhere to, such as this one particular distinct, as it signifies our picks by means of the net

  6. amazon promotional code today commented on Jan 31

    amazon promotional code today

    […]very couple of web-sites that take place to be detailed beneath, from our point of view are undoubtedly nicely worth checking out[…]

  7. möbler commented on Feb 01


    […]Here are some of the web pages we advocate for our visitors[…]

  8. online simulation games commented on Feb 01

    online simulation games

    […]Every once inside a whilst we pick blogs that we study. Listed below are the most current websites that we select […]

  9. hosting commented on Feb 02


    […]we like to honor several other world wide web web sites on the internet, even if they aren’t linked to us, by linking to them. Beneath are some webpages really worth checking out[…]

  10. رفع ارور 1009 commented on Feb 02

    رفع ارور 1009

    Hey! I know this is somewhat off subject matter but I was asking yourself if you understood exactly where I could get a captcha plugin for my comment form? I’m using the exact same weblog platform as yours and I’m having issues discovering one? Thanks…

  11. کولر صنعتی اصفهان commented on Feb 03

    خرید کولر صنعتی

    Correct now it looks like Movable Variety is the prime running a blog system out there proper now. (from what I have read through) Is that what you are employing on your weblog?

  12. رفع ارور 1009 commented on Feb 03

    رفع ارور 1009

    Do you have a spam issue on this weblog I also am a blogger, and I was curious about your situation several of us have created some great procedures and we are searching to trade tactics with other folks, why not shoot me an e-mail if intrigued.

  13. کولر صنعتی بزرگ commented on Feb 03

    خرید کولر صنعتی

    What’s up it’s me, I am also browsing this web site on a typical basis, this internet site is genuinely enjoyable and the viewers are in fact sharing very good thoughts.

  14. گوگل adwords commented on Feb 03

    تبلیغات در صفحه اول گوگل

    Admiring the dedication you put into your site and in depth info you offer. It’s great to come throughout a website every after in a although that isn’t the exact same old rehashed data. Fantastic go through! I have bookmarked your internet site and I’…

  15. وی پی ان ایفون commented on Feb 03

    رفع ارور 1009

    remember to visit the websites we adhere to, this kind of as this one distinct, as it represents our picks via the internet

Read this next.