Market timing

[Lsbcal]

I exhibited spectacularly bad timing last week. Rotating about 120K out of S&P500 into short/intermediate bonds I had given myself a sell level of 1680. And the next day Larry Summers withdraws and the market goes up 1%, then a couple of days later the Fed decides not to taper and the market promptly rockets up to 1720 plus. So I threw out over $3K by not waiting a week. Grrr.

Seriously though, this is exactly why I NEVER move more than 10% of my assets at a time. I've guessed wrong and right over the years, but burned myself often enough that I believe in dollar cost averaging (in AND out) as an article of faith.

Trading is something a person should do after careful study. Don't study the stuff? ... then don't do it. The best traders are mathematicians.

Even when you study the stuff, you realize this is a statistical situation where you will be on the wrong side of the trade for possibly a long time. Some trades will bring a long term loss.

BTW, I'm not a trader. But I'm fascinated by the stuff.

 

[stepford]

Trading is something a person should do after careful study. Don't study the stuff? ... then don't do it. The best traders are mathematicians.

Actually, I AM a mathematician (or at least that's what my degree's in), and that's part of why I don't try to time markets. Too much voodoo and mob psychology mixed in with the analysis for my taste.

 

[easysurfer]

Actually, I AM a mathematician (or at least that's what my degree's in), and that's part of why I don't try to time markets. Too much voodoo and mob psychology mixed in with the analysis for my taste.

From a mathematician's perspective, what is your investment strategy? Boring index funds and rebalancing?

 

[RobLJ]

Sorry, but some will probably not like this but after Many yrs. of Following the Leader and Indexing..Down the Yellow Brick Road...


1- I think The S&P500 is a Conspiracy supported and Monopolized by Corp America.. And ever wonder why CNBC and others Don't Talk much about using Mutual Funds?
2- If Real Growth is In Mid Size Co's, why hasn't that been the 1st Index and The Most Indexes Advocated? Why did it take so Long for them to Come out? and Compare VFINX to VIMSX starting at the same time..(98') & to past 15,10, 5 and 3 yrs..


Best of Luck!

My stock AA is biased towards mid, small value, and international. If I had a simple portfolio, I'd hold a big chunk in Total Stock Market and add in the mid/small/international pieces.

 

[RobLJ]

I exhibited spectacularly bad timing last week. Rotating about 120K out of S&P500 into short/intermediate bonds I had given myself a sell level of 1680. And the next day Larry Summers withdraws and the market goes up 1%, then a couple of days later the Fed decides not to taper and the market promptly rockets up to 1720 plus. So I threw out over $3K by not waiting a week. Grrr.

Seriously though, this is exactly why I NEVER move more than 10% of my assets at a time. I've guessed wrong and right over the years, but burned myself often enough that I believe in dollar cost averaging (in AND out) as an article of faith.

I move in chunks--usually three a year--over at least a year and often two, since I've discovered I'm often right when I sense over or undervalueing makes buying/selling attractive, but I'm often early a year or two. In the case of China, I was 4 years early, but kept dollar cost averaging into it. I was wrong about Japan, both in buying and then in selling, although at least I diversified the money into an Asia fund, so got part of the gains, just not nearly as much as if I'd held.
I tend to take half gains after one of these goes up 100% in a 2-3 year period.

 

[pb4uski]

I move in chunks but I rarely look back to pat myself on the back for good timing or chastize myself for bad timing. Ignorance is bliss.

 

[easysurfer]

I know...AA..and rebalance.. and that's the course I will follow..but with all the shutdown and debt ceiling talk, is anyone getting nervous?

Just checking ...

The Treasury Department cautioned about dire consequences that might arise from the debt-ceiling issue, which some strategists view as blending together with the government shutdown. If Congress does not raise the debt limit and the U.S. defaults on its obligations, that would be “catastrophic” for financial markets and the economy, potentially resulting in more damage than the 2008 financial crisis, the Treasury said.

U.S. stocks extend losses; Dow off 180 points - Market Snapshot - MarketWatch

 

[REWahoo]

I'm more pissed than nervous.

 

[easysurfer]

I'm more pissed than nervous.

Good point

 

[Lsbcal]

I'm more pissed than nervous.

And we all know who to blame ... the "other" party.

 

[M Paquette]

A default would be undesirable. One of the first things impacted would be short term treasury bills that mature shortly after the projected exhaustion point. Even the threat of a default is already having an impact. Short term treasury bills now have an inverted yield curve. The 4 week bill I now has the same rate as the one year note, and about 5 times the rate of the 12 week note. This implies a near term liquidity crunch.

US Treasury 1year credit default swaps rose from 10 basis points to 35, also linked to near term risk, and higher tha the 5 year swap. The last time these rose to this level was in 2011 hours before the debt ceiling fuss was resolved. As of last Friday there were 886 contracts open, mostly Euro denominated, for a potential default payout of 3.4 billion dollars equivalent. (Small potatoes, I know, but I'd love to know who's buying these.)

Biggest risk to retail investors is the increased probability of money market funds "breaking the buck". These funds generally have a significant holding in T-bills under six months duration. The risk driven rise in interest rate and associated drop in bond price impacts these money market funds, just as it did in September 2008.

And then my news agent turns up with this:

http://www.ft.com/cms/s/0/11d59fa8-2c38-11e3-acf4-00144feab7de.html#ixzz2ggZ4N3MN

Two of the country’s 10 biggest banks said they were putting into place a “playbook” used in August 2011 when the government last came close to breaching the debt ceiling

One senior executive said his bank was delivering 20-30 per cent more cash than usual in case panicked customers tried to withdraw funds en masse.

Wrong kind of market timing! Good grief.

But as the debt ceiling deadline looms in the absence of an accord in Washington, money funds are looking to lighten up on their holdings of October-dated bills, said traders.

Better kind of market timing... Step around the short term risk event...

 

[FIREd]

I know...AA..and rebalance.. and that's the course I will follow..but with all the shutdown and debt ceiling talk, is anyone getting nervous?

Not really. I think there is a lot of posturing going on with a limited economic impact so far. As we get closer to default and pressure from businesses and constituents builds, I think that some will find that compromise is not such a bad word after all.

 

[LOL!]

I know...AA..and rebalance.. and that's the course I will follow..but with all the shutdown and debt ceiling talk, is anyone getting nervous?

Not getting nervous, but starting to salivate.

 

[pb4uski]

I'm more pissed than nervous.

+1

 

[unclemick]

I'm more pissed than nervous.

Me too!

heh heh heh - and not one politico has called me and asked for my brilliant advice. Heck I was a legend in my own mind back in 1966 when I discovered the stock market.

 

[Which Roger]

Most of those who call the shots on Capitol Hill have a large stake in the market, and I don't think they'd be any more willing to commit financial suicide than they would political suicide. I get an odd sort of comfort from this.

 

[F4mandolin]

If the market goes down tomorrow....I buy.....probably.....

 

[timo2]

So today DW moved the balance of her stock index fund accounts to a safe fund. She has come to the conclusion that the USA is going to go crash through the debt ceiling, at least for a few days. She left her current contributions in the index fund, but she had some gains and wanted to keep those. I'll urge her to move them back after a while.

 

[REWahoo]

I'm following Paul Merriman's advice:

This month's partial federal shutdown provides a valuable lesson for investors. It's an immediate example of a real crisis that affects the markets and at the same time leads millions of mistaken investors to think they should do something about it.

Let me start by telling you what I am doing about it as an investor. Nothing. I'm staying put.

The shutdown and your retirement portfolio

 

[timo2]

I'm following Paul Merriman's advice:

The shutdown and your retirement portfolio

I agree in principle. But this is her money. For DW, she was holding up through the budget shutdown just fine, because that is small potatoes regarding long term investments. But the increasing odds of crashing the debt ceiling finally proved too much. I'm not going to argue with DW right now because it doesn't affect our short and mid term strategy, and I'm retiring in a couple years. If she lost her gains because of the debt ceiling baloney, her resulting attitude would make it difficult for me to have a flexible investment strategy in the future. But if nothing happens, I can say 'see it was OK' and put the money back in. One has to pick their battles. (I'm also a furloughed fed, so that adds to the dark cloud)

 

[Lsbcal]

I agree in principle. But this is her money. For DW, she was holding up through the budget shutdown just fine, because that is small potatoes regarding long term investments. But the increasing odds of crashing the debt ceiling finally proved too much. I'm not going to argue with DW right now because it doesn't affect our short and mid term strategy, and I'm retiring in a couple years. If she lost her gains because of the debt ceiling baloney, her resulting attitude would make it difficult for me to have a flexible investment strategy in the future. But if nothing happens, I can say 'see it was OK' and put the money back in. One has to pick their battles. (I'm also a furloughed fed, so that adds to the dark cloud)

In a way I can sort of see some logic to her concerns. The likelihood is extremely low but if triggered it could be very, very bad. This is really an insurance type of decision she has made (maybe not framed this way) and we know that insurance generally costs us money. We also hope never to have to collect on our insurance.

I personally have not taken out this insurance but understand the urge. I do have earthquake insurance, hope never to have to collect on it, and would be richer if I did not take the insurance.

Addendum: We do not know the cost of this kind of stock market insurance in advance (don't know how much pricing is already built in, don't know what other events will occur in parallel, etc.). Earthquake or fire insurance costs are available at the time we take it out.

 

[eta2020]

Market timing never works. But I am ready to convert some of my cache (which earns close to nothing) into 1000 shares of some Vanguard ETF if market drops below 1600.

 

[2B]

I'm more pissed than nervous.

I'm more amused. The House has already voted to give all the civil servants furloughed their back pay. Last time they at least waited until the whole thing was over. Of course, the contractors are SOL just like the last time (speaking as a former govt. contractor).

Speaking of the Keystone Cops -- the National Park Service is also comical in their obsessive steps they are going to to create as big an inconvenience as possible at any national park property. I especially am amused at putting traffic cones up to block scenic overlooks on public (not park) roads at Mt Rushmore. Blocking WWII vets from the wide open WWII memorial also shows a certain level of class. All monuments and park properties were kept open last time.

 

[Mulligan]

I'm more amused. The House has already voted to give all the civil servants furloughed their back pay. Last time they at least waited until the whole thing was over. Of course, the contractors are SOL just like the last time (speaking as a former govt. contractor).

Speaking of the Keystone Cops -- the National Park Service is also comical in their obsessive steps they are going to to create as big an inconvenience as possible at any national park property. I especially am amused at putting traffic cones up to block scenic overlooks on public (not park) roads at Mt Rushmore. Blocking WWII vets from the wide open WWII memorial also shows a certain level of class. All monuments and park properties were kept open last time.

I am heading to St. John USVI in a couple weeks and was getting concerned as they had shut down the parks there and that is where all beaches we go to are at. Somehow after a couple days of closure, they have re-opened them and we will have access to them, after all. I do not know how they are getting around this. Probably wouldn't have mattered as I would have went anyways and ignored the closure.

 

[SumDay]

If I can make it through 2008 without even checking my 401(k) balance, I think I can handle this. I too am more angry than nervous.

"Everything will be OK in the end. If it's not yet OK, it's not the end."