Simple Timing system

[al_bundy]

MACD is trending down, but i see a small uptrend on the stochastics

i really don't remember the details of what each of these things is or the exact formula. all i remember is that the formulas are either simple averages over a period of time or simple statistical formulas.

yahoo offers free technicals on their charts. i prefer the look of StockCharts.com - Simply the Web's Best Stock Charts myself

[Zathras]

I haven't lost a dime in this market yet. Until I either sell some stock or one of the companies I own stock in go backrupt I won't.
Yes, portfolio value goes up and down yet I really don't see the gain in panicing and selling low only to come back later and buy at a more expensive level.
Actually, I do see one case. If someone did not have enough cash for living expenses for the next 12-18 months AND you believe the market will only go down from here, it might be better to sell now since you will be forced to sell soon anyways.
But if that were the case I would suggest that the investor was not properly diversified to start with.

[Hamlet]

There are plenty of less dramatic gaps down (and up), although they are probably not deal breakers for your plan.

I just think that there is a lot of potential for the market to move up and down over your price for the next year or two. The market was doing horrible until March. Earnings came out, and they were ok. Not great, but not end of the world bad. The market rallied, but has spent the last month or two getting terrified again.

We're in earnings season again, and I suspect earnings will be mediocre. The market will probably rally a 1000 points or so over the next month, and then start getting scared again. We may repeat that 4 or 5 times before we actually get away from 11500 for good. That may eat a fair amount of your capital.

It feels a awful lot like trying to beat the casino by doubling your bet every time.

I just think it would be simpler to just own a lower percentage of stocks, or to pick lower risk stocks.

I think that no matter what happens from this financial/housing meltdown, Coke, General Mills, Philip Morris, Kraft, Budweiser, Johnson&Johnson, McDonalds, Microsoft, and Proctor&Gamble will prosper. You won't make a killing on them, but I would bet an awful lot of money (wait, I have ) that they will be higher in 10 years.

If you do decide to go with your plan, though, I'll be very interested in hearing how it turns out. Either way, good luck.

Quote:

Originally Posted by RockOn You have to admit you are cherry picking the one day in history where the black swan would have hit. It could happen again in the next year (or ?) until the next bull market comes, but really how likely is that? On the last point, I know you believe that and that is fine. I think there are ways to remove some of the risk, you do not. Many people agree with both of us.

[2B]

Quote:

Originally Posted by RockOn P.S. by the way, the Preferred Stock funds I own lost about 17% in the last 8 weeks, so much for that being a much better plan than a guaranteed 6% annuity.

I don't remember if you were in any of the threads on closed end preferreds but one key point about them is their extreme volatility. I have a nominal 5% of my portfolio in them generating about an 11% annual return. The principle has been all over the place and most of my holdings would be losses if sold now. I agree that they have dropped significantly in the last 8 weeks but they had risen almost as much the 8 weeks prior. Because the interest rates are now bumping 13%, only my asset allocation discipline is keeping me from buying more.

I'm still getting my dividends on schedule. If I need the cash I can sell. Sometimes at a loss and sometimes at a profit.

[RockOn]

Quote:

Originally Posted by 2B I don't remember if you were in any of the threads on closed end preferreds but one key point about them is their extreme volatility. I have a nominal 5% of my portfolio in them generating about an 11% annual return. The principle has been all over the place and most of my holdings would be losses if sold now. I agree that they have dropped significantly in the last 8 weeks but they had risen almost as much the 8 weeks prior. Because the interest rates are now bumping 13%, only my asset allocation discipline is keeping me from buying more. I'm still getting my dividends on schedule. If I need the cash I can sell. Sometimes at a loss and sometimes at a profit.

I just remember you recommending Preferreds as an alternative to looking at an annuity. A annuity is a no volatility lower yielding investment. Preferreds, wow, more volatility than the SP 500 lately. Not the same animals.

I have about a 4% position and bought them this year at what looked like lows (in February and mid-June) but have still been hit pretty hard. Most funds are into financials to get the higher yields, the yields could start dropping if some of the companies don't make it. I wonder if they are worth it, maybe to much like junk bond funds, reaching to hard for yield?

[RockOn]

Quote:

Originally Posted by Hamlet I just think that there is a lot of potential for the market to move up and down over your price for the next year or two. It feels a awful lot like trying to beat the casino by doubling your bet every time. I think that no matter what happens from this financial/housing meltdown, Coke, General Mills, Philip Morris, Kraft, Budweiser, Johnson&Johnson, McDonalds, Microsoft, and Proctor&Gamble will prosper. You won't make a killing on them, but I would bet an awful lot of money (wait, I have ) that they will be higher in 10 years.

The first point, yes that wouldn't be good.

The second point, it sort of takes on that feel, keep trying until the bull market really comes back.

On the last, I bet you would have included GE, maybe even BofA, or Citibank if you made the list a year ago.

[2B]

Quote:

Originally Posted by RockOn I just remember you recommending Preferreds as an alternative to looking at an annuity. A annuity is a no volatility lower yielding investment. Preferreds, wow, more volatility than the SP 500 lately. Not the same animals.

True, annuities have no volatility. The moment you sign and give them your check the SPIA will always have a value of $0. If times get tough, you could always see what JG Wentworth will give you for your annuity.

[Hamlet]

I might still include GE, although their business is so complicated that I could never truly feel comfortable owning them.

Certainly the stocks I listed are not immune to downturns, and in a year one or two might be down an awful lot, like BofA or Citibank. I would probably want to add a few more to diversify. I think that as a group they should be pretty safe if you are looking 5 or more years out.

Here is my "I bet this outperforms bonds over the next 5 years portfolio":

The ones I've already listed:

KO
GIS
MO
KR
BUD
JNJ
MCD
MSFT
PG

Some additions to diversify and gamble that banking and insurance will continue to be a viable business:
BRKb
USB
WFC

Some retailers that will likely survive (TGT or LOW could be on the list as well):
WMT
COST
HD

A good company that I just can't help recommending:
FAST

Better get a couple oil companies in there:
XOM
BP

Defense:
LMT

Never dis the mouse:
DIS

If this portfolio is down more than 20% from here on 7/13/2013, I'll give you a gun and a week's supply of my canned goods

Quote:

Originally Posted by RockOn The first point, yes that wouldn't be good. The second point, it sort of takes on that feel, keep trying until the bull market really comes back. On the last, I bet you would have included GE, maybe even BofA, or Citibank if you made the list a year ago.

[2B]

BAC is my last remaining individual stock. I'm amazed at the plunge its taken. It seems like every day an analyst comes out with the same warning that BAC will be forced to cut its dividend and recapitalize. The stock dutifully falls 5%. I thinks its about half of its 52 week high and sets new lows almost daily.

The CEO has come out twice since the carnage began and has said that he sees no need to either increase their capital or cut the dividend. Somehow he has no credibility. Over 2% of the total stock outstanding is shorted. This is monstrous for a company like BAC. There's either a safe but harrowing 11+% dividend here or a CEO than needs a good whippin'.

[RockOn]

Quote:

Originally Posted by Hamlet I might still include GE, although their business is so complicated that I could never truly feel comfortable owning them. Certainly the stocks I listed are not immune to downturns, and in a year one or two might be down an awful lot, like BofA or Citibank. I would probably want to add a few more to diversify. I think that as a group they should be pretty safe if you are looking 5 or more years out. Here is my "I bet this outperforms bonds over the next 5 years portfolio": The ones I've already listed: KO GIS MO KR BUD JNJ MCD MSFT PG Some additions to diversify and gamble that banking and insurance will continue to be a viable business: BRKb USB WFC Some retailers that will likely survive (TGT or LOW could be on the list as well): WMT COST HD A good company that I just can't help recommending: FAST Better get a couple oil companies in there: XOM BP Defense: LMT Never dis the mouse: DIS If this portfolio is down more than 20% from here on 7/13/2013, I'll give you a gun and a week's supply of my canned goods

You might need the gun if that happens!

I do think your list looks pretty good, you are obviously knowledgeable about lower risk.

Good luck with it. It would be fun to keep track and see how they did in 5 years.

[RockOn]

Quote:

Originally Posted by 2B True, annuities have no volatility. The moment you sign and give them your check the SPIA will always have a value of $0. If times get tough, you could always see what JG Wentworth will give you for your annuity.

The second part of giving them the check is the money starts appearing in the mailbox each month. Let's not forget that. If the checks are large enough, that makes up for the $0.00 balance. At least that's how I see (and calculate) it.

If you gave someone $1,000,000 at age 55 and they gave you back $150,000 a year for life, you would take it. I know those numbers are not even close but at some payoff even you non-annuity people would be begging to buy one. I can just be bought for much less (around a 6% IRR if I live to 86). Everybody has their price.

I owned BAC also at 37, thought I really missed out when it went to 42 after I sold it, but not now.

[Hamlet]

I would believe him if they hadn't been buying Countrywide stock from 20+ to about 4. I don't have any confidence that they know Countrywide's liabilities well enough to guarantee the dividend.

This guy could come out looking like a genius if the housing market stages a sharp 2009 recovery. I don't want to count on that though.

Quote:

Originally Posted by 2B BAC is my last remaining individual stock. I'm amazed at the plunge its taken. It seems like every day an analyst comes out with the same warning that BAC will be forced to cut its dividend and recapitalize. The stock dutifully falls 5%. I thinks its about half of its 52 week high and sets new lows almost daily. The CEO has come out twice since the carnage began and has said that he sees no need to either increase their capital or cut the dividend. Somehow he has no credibility. Over 2% of the total stock outstanding is shorted. This is monstrous for a company like BAC. There's either a safe but harrowing 11+% dividend here or a CEO than needs a good whippin'.

[Hamlet]

If only I practiced what I preached .

A few of my holdings have made me much more aware of risk in the last few months.

TCB and FR are the dramatic examples.

Their prices imply that they will need to cut their dividends. I don't think they will.

I'm hoping that I'm right and the market is wrong

Quote:

Originally Posted by RockOn You might need the gun if that happens! I do think your list looks pretty good, you are obviously knowledgeable about lower risk. Good luck with it. It would be fun to keep track and see how they did in 5 years.

[Enuf]

Please tell me which!!!!! I want another buy on BAC. I bought at $30 and sold at $25, lost $50k.

When should I buy? I love the div!!!

Quote:

Originally Posted by 2B BAC is my last remaining individual stock. I'm amazed at the plunge its taken. It seems like every day an analyst comes out with the same warning that BAC will be forced to cut its dividend and recapitalize. The stock dutifully falls 5%. I thinks its about half of its 52 week high and sets new lows almost daily. The CEO has come out twice since the carnage began and has said that he sees no need to either increase their capital or cut the dividend. Somehow he has no credibility. Over 2% of the total stock outstanding is shorted. This is monstrous for a company like BAC. There's either a safe but harrowing 11+% dividend here or a CEO than needs a good whippin'.

[clifp]

A S&P 500 Dec 120 put (roughly equivalent to Dow 11,000) is currently selling for roughly $14.35. Why not just buy a put, you'll collect about $4 in dividends so the total cost is roughly 8-9% for 17 months of downside protection. If you are content with earning 6% you could simultaneously sell a Dec 135 call for $13.65. So you have now hedged downside risk to almost zero (counting dividends, and option premiums) but your upside is also limited to no more than 11-12% not sure if that averages out to 6% but it is close.

[RockOn]

Quote:

Originally Posted by clifp A S&P 500 Dec 120 put (roughly equivalent to Dow 11,000) is currently selling for roughly $14.35. Why not just buy a put, you'll collect about $4 in dividends so the total cost is roughly 8-9% for 17 months of downside protection. If you are content with earning 6% you could simultaneously sell a Dec 135 call for $13.65. So you have now hedged downside risk to almost zero (counting dividends, and option premiums) but your upside is also limited to no more than 11-12% not sure if that averages out to 6% but it is close.

On the first idea, 8 to 9% for 17 months of protection is a lot of money. But combining that with selling the call, that makes it interesting. Thanks for that idea. There are ways to limit risk.

Just staying out until the market starts a new bull market looks like a cheap way to go, but there are some problems with that idea. Potential whipsaws and gaps as we have discussed.

[2B]

Quote:

Originally Posted by Enuf Please tell me which!!!!! I want another buy on BAC. I bought at $30 and sold at $25, lost $50k. When should I buy? I love the div!!!

I got my BAC from a series of bank acquisitions. My cost basis is about $9 and I've held it since the mid-90s. I hadn't sold because it had a large capital gain I wanted to not take plus it has a good dividend. It's also well less than 1% of my portfolio. It has been a good reminder why I don't invest in individual stocks anymore. I think it will come through this without having to raise capital or cut the dividend. I think they are just being hammered by rumors and panic. But, what do I really know about this?

I'll just keep on watching the drama unfold.

[Zathras]

Annuites aren't the only way to get monthly checks.
While not the exact same every month, dividends pay me monthly/quarterly/semi-annually and over the long run provide an increase in principal.
In addition, IF the insurance company providing the annuity goes under, well, that is that (as I understand it). If one of my companies goes under I loose <1% to 8% of my portfolio.
Diversification is the key to limiting risk. After all, what is a mutual fund but a bunch of individual stocks that someone else picked for you

[CitricAcid]

In an unsure volatile market, writing covered calles or naked puts on ETF's that track indices could be the way to mitigate the risk and produce a little income depending on what direction you think the volatility will swing further. I think by writing the options on the indices of choice (if an ETF exists for one) would be the best way to mitigate the risks while keeping the costs much lower.

[clifp]

This weeks market is a pretty good example of the dangers of a simple timing system.

If your get out number was say dow 11,000 you sold out on Tuesday. If you got back in on Wed you lost out on 2.5% gain if you waited until Thursday another 2%.

IIRC, more than 1/2 of the gains of the market in a year are made in less than 10 trading days,you don't want to be on the sidelines on those days.

Who knows maybe it goes below 11,000 tomorrow and you'd have to sell again, but it is an expensive trip in this volatile market.