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Old 10-30-2013, 12:55 PM   #61
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I hate it when W2R whees in public...
She did it first!! Not me!

60/40 hands off, full auto, balanced index.

Go you Vanguard computers/ rebalance away. Hum them thar electrons or whatever.



heh heh heh -
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Old 10-30-2013, 01:56 PM   #62
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I have been trimming some of my stocks, and thought of bringing the stock AA from 70% down to 65%. Was at 66.5% yesterday.

But what's goin' on today? Looks like the market is helping me bring that AA down further, without me having to sell anything!

Did someone say "Wh***" or something?
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Old 10-30-2013, 03:37 PM   #63
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Your first statement is selling into this rise. Your second statement is true, but irrelevant to the question.

Ha
I am confused at how you are viewing my original statement I never said I wasn't selling into the rise. That is why one maintains asset allocation.

My earlier point was simply that the rise is occurring totally divorced from improving the general economic state of a lot of people, which is not what has happened in the past... and the government stimulus is helping investors much more than traditional middle class workers. One doesn't expect this rise to continue and therefore - in my view - maintaining an asset allocation that allows one to sleep at night and not getting caught up in the market "exuberance" is the best way to deal with future unknowns.
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Old 10-30-2013, 03:45 PM   #64
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We need a few more modest down days, and then a nice 300 point sell off to add some fear back into the market.

There isn't a single stock that I want buy at these levels. Other than ones which will go up...
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Old 10-30-2013, 03:57 PM   #65
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...(snip)...
My earlier point was simply that the rise is occurring totally divorced from improving the general economic state of a lot of people, which is not what has happened in the past...
While the rate of adding jobs is not wildly robust, something like 140K jobs per month is decent. There are so many variables in the economy and how that ties into sales and earnings, I wouldn't even attempt to model that with an eye towards equity pricing. If it were easy to do, all those institutions would have great equity models.

What we do know is that equities are a leading indicator ... in general. Not saying that they are always right about the next set of future news events, they just anticipate given the known information in the moment. New news begets new pricing.
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Old 10-30-2013, 08:29 PM   #66
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I am confused at how you are viewing my original statement I never said I wasn't selling into the rise. That is why one maintains asset allocation.

My earlier point was simply that the rise is occurring totally divorced from improving the general economic state of a lot of people, which is not what has happened in the past... and the government stimulus is helping investors much more than traditional middle class workers. One doesn't expect this rise to continue and therefore - in my view - maintaining an asset allocation that allows one to sleep at night and not getting caught up in the market "exuberance" is the best way to deal with future unknowns.
I agree completely with your analysis. I look at rebalancing as "market timing light".

Ha
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Old 10-30-2013, 08:50 PM   #67
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While the rate of adding jobs is not wildly robust, something like 140K jobs per month is decent. There are so many variables in the economy and how that ties into sales and earnings, I wouldn't even attempt to model that with an eye towards equity pricing. If it were easy to do, all those institutions would have great equity models.

What we do know is that equities are a leading indicator ... in general. Not saying that they are always right about the next set of future news events, they just anticipate given the known information in the moment. New news begets new pricing.
Good point. My hope is that the jobs added are decent. I imagine McFast Food Taco Chicken King hiring 500 new part time workers at minimum wage is not the same as Engineering Megacorp hiring 500 new workers at 80K each with benefits. But in both cases 500 new jobs are created. I'm sure there is a breakdown somewhere, I just have not investigated.
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Old 10-30-2013, 08:55 PM   #68
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I agree completely with your analysis. I look at rebalancing as "market timing light".

Ha
I can see that point, no argument here. My investing philosophy has evolved to eking out a string of singles rather than swinging for the fences, so I prefer a "light" touch.
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Old 11-07-2013, 08:48 PM   #69
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The Dow dropped 153 today. S&P down 1.32%. Looks like that "Wh***" finally took effect after 1 week delay.

Brace yourself. More is to come.
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Old 11-07-2013, 09:03 PM   #70
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The Dow dropped 153 today. S&P down 1.32%. Looks like that "Wh***" finally took effect after 1 week delay.

Brace yourself. More is to come.
The Wh*** earlier in this thread, was uttered on Saturday, October 26th. The Dow had closed the previous day at 15570.

Today, the Dow closed at 15594, which is 24 points higher!!!! The missing information is that it went up, then down (but more up than down).

What a roller coaster. November has been a bust, to a minor extent, I agree. But overall, the market is still thriving IMO.
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Old 11-07-2013, 09:08 PM   #71
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OK. Sorry my timing was a bit off.

Next time I will buy on "Wh***", then sell 10 days later.
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Old 11-07-2013, 09:14 PM   #72
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OK. Sorry my timing was a bit off.

Next time I will buy on "Wh***", then sell 10 days later.
I guess the best thing to do on "Wh***", is to pour yourself a drink of your choice, smile, do nothing financial, and enjoy life. That's what I do, anyway.
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Old 11-07-2013, 09:17 PM   #73
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But, but, but the "Wh***" in the past has demonstrated powerful predictive power, in more than one occasion as I recall.

Is it just like mutual funds' performance now, that "past performance is no guarantee of future results"? Noooo....
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Old 11-07-2013, 10:15 PM   #74
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Anyway, I woke up at about 4AM my time, checked the news on the Web and saw that ECB unexpectedly cut interest rate from 0.5% to 0.25% due to fear of deflation. What the heck? I thought everyone was saying Europe was recovering, and indeed their stock market was not doing too badly lately. I also saw that the US stock future was rising in response to the news.

I went back to sleep and woke up after the market opened. What was going on here? Something about consumer sentiment... And as we needed to do grocery shopping for a couple of parties this weekend, I did not check the market again until later. It had been dropping through the day.

It is difficult to tell when the market will turn. People have been expecting a correction, and this may be it. Well, I've got some cash that earns next to nothing that I might use... Heh heh heh...
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Old 11-07-2013, 10:33 PM   #75
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I am not exuberant at all. I started investing in 2000 and my own experience taught me that what the market giveth, the market taketh away soon enough. So I have a strategy of harvesting gains when the market gets overbought, and this is no exception.

Hello, Can I ask what you use to determine when the market is overbought?
Do you have any hard and fast rules that you follow? I ask because I've tried to do the same at times with mixed results. It's so easy to be wrong about such things.

What do you folks think about using the Moving Average as a guide for getting out? What's nice about it is that it's so simple and it did a great job of exiting the market in both the dot com meltdown in 2000 and the drop in 2008. Of course in the future it may not perform as well but if these 50%+ drops start to recur every few years, it may very well help avoid the steep losses once again.

The long term (S&P 500 - VFINX) graph demonstrates how well this has worked over the last 20 years. The short term graph shows how 4 times this year the S&P has been bouncing against the long average, but has continued to rise. Given this pattern, it sure looks like we could be heading back down to that long average. The question is, will we get another bounce?

And am I correct to assume you are the creator of FireCalc? I love it. I may eat it.

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Old 11-08-2013, 06:20 AM   #76
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The Dow dropped 153 today. S&P down 1.32%. Looks like that "Wh***" finally took effect after 1 week delay.

Brace yourself. More is to come.
Yes, there certainly will be more of something. We just have no clue what.
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Old 11-08-2013, 07:20 AM   #77
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...(snip)...
What do you folks think about using the Moving Average as a guide for getting out? What's nice about it is that it's so simple and it did a great job of exiting the market in both the dot com meltdown in 2000 and the drop in 2008.
....
Steve
There is a study of the Dow 200 day moving average from 1886 to 2001. See Siegal, Stocks for the Long Run, chapter 17. It depends on your time frame as to whether it beats buy-hold or not. Some years there are many switches like 2000 with 16 switches. Taxes can play a role too.

Most people will not want to deal with such an active strategy. I wouldn't want to personally. Too many real world problems to distract one.
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Old 11-08-2013, 07:59 AM   #78
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I think we will be calling this the Twitter/Bitcoin crash or the Twitter/ Bitcoin run. I am going with the former.
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Old 11-08-2013, 11:12 AM   #79
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There is a study of the Dow 200 day moving average from 1886 to 2001. See Siegal, Stocks for the Long Run, chapter 17. It depends on your time frame as to whether it beats buy-hold or not. Some years there are many switches like 2000 with 16 switches. Taxes can play a role too.

Most people will not want to deal with such an active strategy. I wouldn't want to personally. Too many real world problems to distract one.

So this was a buy above the 200 EMA and sell below? I don't think that's the best way to use the moving average. Many use a long average and short average. So you buy when the short average crosses above the long average. In the example shown it uses a 77 day short average, a 110 day long average, and a there is a 3 day trade delay (don't act on a signal unless it remains in effect for more than 3 days) which reduces whipsaw trades.

In this example there were only .76 trades per year and 15 total trades in the last 20 years, so it's not a very active strategy. If you don't use the trade delay there were 17 trades.

Of course the numbers I used in this example are only one possibility, but I found these have worked pretty well. Many use a 50 day short and 200 day long and this had a 12.10% CAGR over 20 years.

I tried using just the 200 day average and this resulted in 157 trades total (7.91/year) so that's definitely not the way to go.

Using the moving average strategy I described, over 20 years a $20,000 investment grows to $236,245 v.s. $107,379 for buy and hold, so over double the result and with greatly reduce volatility (a maximum drawdown of 19.20% v.s. 55% for the S&P). This (or any strategy including buy and hold) may not perform as well in the future, but it might. A lot of people follow the "buy and hold" approach which is fine, but here's something to consider:

If you look at the graphs for the last 20 years and the results were reversed, and the buy and hold strategy produced the moving average result and the moving average strategy produced the buy and hold result, I think people would be absolutely raving about the buy and hold (better gains, lower drawdowns) and bashing the moving average (half the gains, horrible drawdowns).

Since the graphs aren't reversed, maybe the buy and hold idea deserves some bashing??

I propose that any strategy that has resulted in 2 stress filled 50%+ drops in the last 10 years may not be the best way to go. Food for thought.

Maybe the above mentioned strategy isn't for you (And when say you, I mean any reader, not just Lsbcal), but I'm genuinely curious about what other strategies people are using that they have found to work well. I'm here to learn.
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Old 11-08-2013, 11:25 AM   #80
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I think we will be calling this the Twitter/Bitcoin crash or the Twitter/ Bitcoin run. I am going with the former.
I think you might be on to something there. How do you value a company that has never made a profit?? And who the heck makes the Bitcoins?

I"ll stick with the guys at VG. . .
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