The Caterpillar mistake, or no butterfly in the offing

Several years ago in my financial advisor job I met with a Midwest hedge fund heavily invested in Caterpillar. The hedge fund was a long-wave investor who tended to stay with a position or company through business cycles instead of bailing out. The conversation was on the collapse of China and how it would affect commodities. I explained that the 50-year supercycle was just bs and that no one can predict 50 years out. Also, they people pushing the supercycle were the same ones benefiting from China’s growth.

After two hours, they decided to stick with Caterpillar believing that they would outlast any dip. With Catepillar’s stock diving and its CEO unexpectedly leaving, the decision doesn’t appear to be the right one.

The lesson is that no one can afford to wait forever even if you think you are right.

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