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Market Timing Strategy
Old 07-20-2011, 09:10 PM   #1
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Market Timing Strategy

I have read many threads on the forum indicating that you cannot time the market. I was just invited to a free seminar which also had a link to a website showing this person's strategy. My guess is that most people on this forum would disagree with this strategy but figured I would send the link to see if anyone agreed with it: Sell Strategy | Money Matters with Ken Moraif . He also has a link showing when his strategy fails. I am probably not going to attend his free seminar (unless I get back advice from you all that it is worth at least listening).
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Old 07-20-2011, 09:18 PM   #2
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The eternal question is this: If the strategy is so successful, why is the guy selling it to the gullible general public rather than using it to become the next brazillionaire?
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Old 07-20-2011, 09:22 PM   #3
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I agree ... and when you read the fine print on his disclaimers he says he has not actually used this strategy over the years he shows in his video. It is always easy to go back in history and come up with a strategy that "would have worked well".
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Old 07-20-2011, 09:33 PM   #4
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I agree ... and when you read the fine print on his disclaimers he says he has not actually used this strategy over the years he shows in his video. It is always easy to go back in history and come up with a strategy that "would have worked well".
The only successful and honest market timer I've ever known is Gary Smith-- not the motivational-speaking public figure, but rather the author of "How I Trade For A Living". He was a big fixture on FundVision and FundAlarm in the late '90s-early '00s, and he might have done some TMF or REHP posts too.

I appreciated Gary's book because the first chapter was a recitation of his "Day in The Life" detailed strategy. It was not exactly what you'd call a life, and he had the failed careers & marriages to prove it.

The good news is that he ER'd a few years ago and dropped out of sight. I've been hoping to hear how he did during the 2008-2010 years but I haven't seen anything. I hope he's surviving his ER, because he earned it harder than most.
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Old 07-20-2011, 09:47 PM   #5
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The only successful and honest market timer I've ever known is Gary Smith-- not the motivational-speaking public figure, but rather the author of "How I Trade For A Living". He was a big fixture on FundVision and FundAlarm in the late '90s-early '00s, and he might have done some TMF or REHP posts too.

I appreciated Gary's book because the first chapter was a recitation of his "Day in The Life" detailed strategy. It was not exactly what you'd call a life, and he had the failed careers & marriages to prove it.

The good news is that he ER'd a few years ago and dropped out of sight. I've been hoping to hear how he did during the 2008-2010 years but I haven't seen anything. I hope he's surviving his ER, because he earned it harder than most.
A quick Google search reveals he became disillusioned with his trading strategy, closed up his Chartman service, formed a hedge fund ( Exemplar Capital) and is a regular guest on Fox Business news...

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Old 07-20-2011, 09:55 PM   #6
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The eternal question is this: If the strategy is so successful, why is the guy selling it to the gullible general public rather than using it to become the next brazillionaire?
Because helping other people manage their hard earned retirement money is his passion! He is a CFP after all.

To the OP don't waste your time or your money with this guy. Anyone here could come up with a 20:20 hindsight strategy that would have worked for the last 10 years. The problem is will it work for the next ten?

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Old 07-20-2011, 10:23 PM   #7
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Market Timing Strategy during retirement? Maybe he should change his quote to say "My goal is to take your money when you are old"
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Old 07-20-2011, 10:56 PM   #8
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Is it as good as Mike Caro's Roulette System #1?

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Old 07-20-2011, 11:06 PM   #9
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Timing will require some extra measure of your time, depending on the complexity of the system. It will incur extra costs for trading that you will have to make up with market-beating gains. Doing it in retirement could easily become a problem as you age. There are plenty of studies showing that financial prowess declines in your 60's and beyond, and you should probably be simplifying as you age.

If you are attending free seminars and then asking about timing on this board I have to assume your level of investing knowledge might be a little low to be selecting a timing strategy, faithfully follow it, and achieve an acceptable result. Try with 5% of your portfolio if you like, but stay mainstream with the rest of it until you feel confident.
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Old 07-21-2011, 01:05 AM   #10
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A quick Google search reveals he became disillusioned with his trading strategy, closed up his Chartman service, formed a hedge fund ( Exemplar Capital) and is a regular guest on Fox Business news...
DD
You might be a little quick on the Google search there. I'm referring to the Gary Smith who wrote the book and posted about his trades:
How I Trade for a Living by Gary Smith - Reviews, Discussion, Bookclubs, Lists
Amazon.com: Gary Smith: Books, Biography, Blog, Audiobooks, Kindle

I left FundVision about six months after he ER'd and stopped his trading activity, so I don't know what he's up to these days.
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Old 07-21-2011, 01:10 AM   #11
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I have had decidedly lackluster, and costly, outcomes when I tried doing some market timing many years ago.

I was a tad fortunate in 2008, having moved much of my IRA assets to individual corporate bonds. But I moved out of stocks a little after the bloodbath had started, and missed out on the recovery from March 2009 up until beginning of this year.

So I am now beginning to slowly get back into a buy and hold strategy, this time selecting quality stocks and preparing to hold for the long haul, depending on the dividend stream rather than being fixated on the Share Price itself.
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Old 07-21-2011, 05:37 AM   #12
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While I have studied these techniques.... I have never had the confidence to do... partly because there are plenty of "experts" that pan the technique. Partly because I am not sure I would stick with it through thick and thin.
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Old 07-21-2011, 06:09 AM   #13
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Even when a few timing opportunities do come up, by the time they are published like this the market has taken advantage of them and they disapear.

Example is the January effect. People noted that stocks generally go up in the first two weeks of January, possibly due to tax loss harvesting in December. Some guy writes a book about it and then everyone is trying to buy earlier and earlier to capture this effect, with the result that the January effect ends up happening in December...or November, or February, or maybe June.

It is also really easy to study past data that is truly random and pull out what look like obvious trends. If you were to flip a coin 10 times, the result is just as likely to look like HHHHHTHTTH as it is HTTHHTHHTH. If you studied the first set of data from the coin flip, you might come to the conclusion that it is more likely to get heads when you first start flipping the coin. Then you can apply some theory to why this is so...perhaps the coin is warmer from being in your pocket and the air moves faster over the raised side blah blah. Then you write a book on how it is possible to predict coin flips.
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Old 07-21-2011, 07:54 AM   #14
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Thanks all for your inputs. I figured this is what I would hear. I will toss his brochure into the circular file.
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Old 07-21-2011, 08:45 AM   #15
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I do a little market timing, on a small scale, with one of my old 401k's. I have the money split up between a Boeing common stock fund and a bond fund. Usually, when one goes up, the other goes down, and naturally, the fluctuations are much larger with the Boeing stock. I don't exactly have a set asset allocation in that fund. Right now it's 70% stock fund, 30% bond fund, but when the stock goes up enough, I'll sell a bit off, and when it goes down enough, I'll buy a little back.

Now, what qualifies as up or down enough? Mainly gut feeling. Not the most scientific thing in the world, but usually, if the stock shoots up about 10%, I'll sell a little off. Then, if it goes up even more, I might sell a bit more off. I'll continue until I get down to around 50% stocks, 50% bonds, and at that point, just hold steady, unless the stock goes up enough to throw that percentage off enough.

Also, if the stock has gone up 10%, often the bond fund has dropped maybe 1-2% over that same time, which makes the spread even sweeter.

Then, if the stock starts to drop, once it goes down about 10% I might start to buy a little back, and then keep buying as it drops. But I don't think I'd ever get to the point that I'd be more than 80% stock, 20% bond fund.

I'm somewhat shielded from extra cost here, since I don't have to pay taxes on the gains as it's in a 401k. And, as long as I don't sell less than 16 days after I buy, no fees, either.

As for my success? Well, I started playing around with this account back in early 2010. Since 12/31/09, I'm up about 41% as of yesterday's close. I estimate that, if I just left it alone and didn't market time, rebalance, or whatever you want to call it, I'd be up around 35.4%. So, I guess that's an indication that I'm a bit conservative with my market timing?
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Old 07-21-2011, 09:14 AM   #16
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I do admit to market timing microsoft stock around earnings. Buy about 3 weeks before earnings, sell the day of earnings. Have done this for a profit about 10 times...eventually it will stop working I guess.
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Old 07-21-2011, 11:04 AM   #17
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Market timing on a consistent basis is a fools game. But sometimes fools games have interesting results. I just wouldn't want to put my money in to play.

DoraM - I really like your coin flip analogy.
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Old 07-21-2011, 11:22 AM   #18
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You might be a little quick on the Google search there. I'm referring to the Gary Smith who wrote the book and posted about his trades:
How I Trade for a Living by Gary Smith - Reviews, Discussion, Bookclubs, Lists
Amazon.com: Gary Smith: Books, Biography, Blog, Audiobooks, Kindle
My bad...

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Old 07-21-2011, 12:06 PM   #19
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Market timing on a consistent basis is a fools game. But sometimes fools games have interesting results. I just wouldn't want to put my money in to play.
Your money already **IS** in play if you're doing buy & hold. You're just leaving it totally exposed to market disasters.

IMHO, anybody who assumes buy & hold is going to make you rich in the next 20-30 years is delusional. B&H has worked pretty well in the past 100 years, but the game has changed. The US (and the world) is not in the economic position it was in for the last 100 years. You cannot assume the markets will continue working the way they worked in the past -- especially the recent 1980-2000 past.

Ask any Japanese retiree how B&H has worked out for them. The Nikkei 225 index is currently about 72% below its 1990 peak. If you bought & held starting in 1990, you currently have about 1/4 of your account left. That's a TWENTY YEAR SWOON with no end in sight. What would happen to your retirement plans if that happened in the US markets?

And it very easily could. Our current financial mess is a much bigger version of what happened in Japan in the 1990's, and the US govt's response is too close to a carbon copy of what Japan did in the 1990's. (And what the US govt told them, at the time, was the wrong thing to do. Too bad we don't follow our own advice.) Furthermore the Japanese markets tanked in the midst of an unprecedented roaring bull market in the US and many other countries. What might it look like if the US markets went into a similar tailspin, in the mist of a global recession?

So it is my very strong opinion that B&H is NOT going to perform well in the near future. At best the markets might go sideways like they have for the past 11 years. I think you need to practice defensive investing.

I don't recommend jumping in & out like a flea on a griddle. That can be done very successfully, but only by talented professionals who focus on it. But there ARE ways to make sure you don't get massacred if the market tanks.

Here's a very simple example: once a month, calculate the average monthly closing price of SPY, the S&P 500 ETF. If the past month's *low* price is higher than the average, buy SPY. If the past month's *high* price is lower than the average, sell.

Look what this would have done for you in the last 11 years:



When the market tanks, you're out. When the market peaked in 2000, this would have gotten you out about 15% from the absolute top, and you would have sat on the sidelines (in tbills or whatever) while the market dumped 50%. Then you'd have gotten in again 25% off the absolute bottom, rode it up, ducked most of another 57% dump in 2008, etc. Instead of going sideways for 11 years, with gut-wrenching drawdowns, you would have made about 84% profit.

Furthermore you'd have caught about 90% of the 1980-2000 bull market with this strategy. You don't lose anything by following it.

If you want to get crazy with it, you can short SPY when the market's headed down. (Unfortunately it doesn't work to hold SH, the inverse S&P500 ETF, due to obscure reasons having to do with the way they formulate the ETF.) That will MAKE you money while the market's dying. But I know that's outside the comfort zone of most people here. The idea of this approach is just to tell you when to sit on the sidelines, to help you avoid getting killed like the Japanese B&H investor.

Now to be honest, our hapless Japanese investor still would have lost money since 1980, even using this approach. But he would have lost only about „2300 per N225 share, instead of the „29000 he would have lost by hanging on. In other words, instead of losing 72% of his account, he would have lost only about 6%. If he'd been brave enough to short the market when the system told him to, he would have MADE about a 40% profit on his account. (And that's without compounding, just trading a fixed size.)

No doubt everybody is going to chime in that this is all curve-fit to the past data, and it couldn't possibly work in the future. It's true that I tested it on past SPY data, though a 12-month average is hardly a difficult choice. BUT the results on the Nikkei were totally "out of sample" -- I didn't look at the Nikkei at all when I came up with this. If it cut the Nikkei losses from 72% to 6%, don't you think it's worth considering?

It's not rocket science. It's just saying "when the market goes down hard, you'd rather not be sitting there squirming while your account implodes."

If you believe in the religion of B&H, and you're sure that nothing can possibly beat it -- then good luck to you. I think you'll need it. Better hope we don't go through what Japan did.
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Old 07-21-2011, 12:19 PM   #20
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