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Old 12-31-2010, 04:20 PM   #41
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$5 a gallon? You guys crack me up. Please point us Europeans at anywhere we can get gas at less than $6.50 a gallon today (that's about the price in Luxembourg or Spain; more like $8.00 in France and Germany). And we drive pretty much the same cars you do nowadays too, unlike a few years back when y'all were getting 15mpg.
Yes, but don't you have a fairly elaborate public transportation system throughout Europe?

Except for the larger cities, public transportation is non-existent in the US.
Intercity travel is either by airline or private vehicle. Amtrak coverage nationwide is spotty, and no one rides long distance buses anymore except the indigent. For a large portion of the population, owning and fueling a vehicle is a necessity.
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Old 12-31-2010, 04:34 PM   #42
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Yes, but don't you have a fairly elaborate public transportation system throughout Europe?
Yes, paid for by the very high "carbon taxes" on gasoline and diesel. Even large rural countries like Spain (~65% the size of Texas) have very good public transportation.
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Old 12-31-2010, 06:58 PM   #43
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Market timing - Wikipedia, the free encyclopedia

Market timing
is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis. This is an investment strategy based on the outlook for an aggregate market, rather than for a particular financial asset.

++++

Asset allocation - Wikipedia, the free encyclopedia

Asset allocation is the process of choosing among possible asset classes.
A large part of financial planning consists of finding an asset allocation that is appropriate for a given investor in terms of their appetite for and ability to shoulder risk. This can depend on various factors; see investor profile. Asset Allocation is the product of an examination of an investor's needs and objectives. Asset allocation, done well, is a plan to invest in assets or asset classes which will best meet the needs and objectives of the investor. Investors seeking high returns and willing to expose their investments to an elevated amount of risk will allocate to equity(ownership) investments. Investors seeking stability and income will allocate to debt investments. Most investors, particularly personal investors, will find mixtures of equity and debt investments most nearly meets their needs. Asset Allocation can be practised by optimization techniques, minimizing risk for a given level of return or maximising return for a given level of risk. It also can be accomplished as goal based investing.
===============

Asset Allocation is simply a subset of Market Timing.
The technique used is the difference between AA and other market timing techniques. The AA market timers are using price (technical analysis) and their AA as the the timing tool.

An AA market timer makes changes when their AA is out of balance from what they established. When one asset is off (e.g. higher) from the established AA the market timer is saying that that asset is at a high and at a good point to take a profit.

I do not think a person who never changed their investments would be a market timer. (color added)

The conclusion, which I've highlighted in blue, doesn't follow from these definitions. An investor following an asset allocation plan sells the assets that are above their target level and buys those that are below the target because the overall allocation has been chosen to result in a portfolio with specific characteristics of return and risk, and too great a deviation from the targets for each asset class means that the portfolio will no longer have the desired characteristics. If the amount of stock in my portfolio goes up to 40%, I move some of my money out of stocks and into bonds or cash, not because I think this means stocks are at a top, but because I don't want the extra volatility inherent in a higher equity allocation. An investor whose target allocation was 50/50 would be buying stocks at the same time I was selling, not because s/he thinks that they are due to go up, but to obtain the higher returns that come with a higher percentage of the portfolio in equities. This is not using price as a signal. My "sell signal" for equities is "above 35% of portfolio", not "above some specific price". If each asset class is at or near its target, an investor following an asset allocation plan doesn't move money from one to another—prices moving up or down or hitting a certain level don't enter into the decision. Anyone who has read even a few threads on the bogleheads list has probably seen the admonition, "stay the course", meaning stick to your asset allocation and ignore the siren song of price signals, fundamental ratios or anything else that might divert you from it.

Rebalancing to a target allocation is a response to what the market has already done, not an attempt to predict what it will do in the future. I know I can't predict the future. What I like about an asset allocation plan is that I don't need to be able to, to carry it out successfully.
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Old 12-31-2010, 07:13 PM   #44
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Originally Posted by kyounge1956 View Post

The conclusion, which I've highlighted in blue, doesn't follow from these definitions. An investor following an asset allocation plan sells the assets that are above their target level and buys those that are below the target because the overall allocation has been chosen to result in a portfolio with specific characteristics of return and risk, and too great a deviation from the targets for each asset class means that the portfolio will no longer have the desired characteristics. If the amount of stock in my portfolio goes up to 40%, I move some of my money out of stocks and into bonds or cash, not because I think this means stocks are at a top, but because I don't want the extra volatility inherent in a higher equity allocation. An investor whose target allocation was 50/50 would be buying stocks at the same time I was selling, not because s/he thinks that they are due to go up, but to obtain the higher returns that come with a higher percentage of the portfolio in equities.
Good explanantion of AA

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Originally Posted by kyounge1956 View Post
This is not using price as a signal. My "sell signal" for equities is "above 35% of portfolio", not "above some specific price".
The price change is what changes the percentages. It is a specific price. If the price did not change the % would not have changed.



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Originally Posted by kyounge1956 View Post
If each asset class is at or near its target, an investor following an asset allocation plan doesn't move money from one to another—prices moving up or down or hitting a certain level don't enter into the decision. Anyone who has read even a few threads on the bogleheads list has probably seen the admonition, "stay the course", meaning stick to your asset allocation and ignore the siren song of price signals, fundamental ratios and anything else that might divert you from it.

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Rebalancing to a target allocation is a response to what the market has already done, not an attempt to predict what it will do in the future. I know I can't predict the future. What I like about an asset allocation plan is that I don't need to be able to, to carry it out successfully.
"target allocation is a response to what the market has already done" and an expectations for the future for the market - e.g. the risk above 35% is above your risk level meaning the fear of a market decline. If these expectations for the market were not there; there would be no need to rebalance. See the bolded words in the first quoted section.
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Old 01-01-2011, 10:18 AM   #45
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I'm also giving you the benefit of the doubt regarding the implication I am a fanatic.
Eh, we both know there is no point in discussing with a fanatic.

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Asset Allocation is simply a subset of Market Timing.
The technique used is the difference between AA and other market timing techniques. The AA market timers are using price (technical analysis) and their AA as the the timing tool.
At the risk of beating this to death, I second Dex's post above. While people claim not to make a prediction of where the market is heading, they are actually making a bet on the "reversion to the mean", which is still a prediction of where prices are going.

Yes, it is true that the normal rebalancing is using pure price or technical analysis. P/E ratio and any other fundamental measure are not used, even when the latter offer some more insight. I can think of an example. In the 2000 tech bubble, many analysts warned of the impending burst. They said that the "information technology" stocks had grown to become too large a percentage of the S&P 500, in fact way larger than it used to be (I do not remember the actual numbers). Proponents of the tech stocks said that it was a new paradigm. It was the "new economy". I remember thinking to myself that we still needed more than just silicon chips. Don't we still need potato chips? Of course we knew how it turned out. Then, in the years leading to the housing bubble and the subsequent financial burst, I remember someone also noted that the financial sector was getting too big for its britches. Yes, same disastrous results.

Now, if someone rebalances by slicing and dicing the sectors based on P/E, do you call them market timing? If someone got out of the 2000 tech stocks with high P/E or actually negative E, was he market timing too? Or avoiding buying a new home in bubble areas in 2006? Note that he made the decision based on fundamentals, while the normal portfolio balancers only use prices. Perhaps that is the main discrimination between mainstream rebalancers and the "market timers"; the former use price and price only with no regards to fundamentals. It is curious as to how one becomes a DMT if he looks for more signals than price to rebalance.

Following dex's link to Wikipedia, I found the following excerpt that corroborates what I tried to say in some long-ago past posts. Note that the underlining below is mine.
When such backward-looking approaches are used to forecast future returns or risks using the traditional mean-variance optimization approach to asset allocation of modern portfolio theory, the strategy is, in fact, predicting future risks and returns based on past history. As there is no guarantee that past relationships will continue in the future, this is one of the "weak links" in traditional asset allocation strategies as derived from MPT.
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Excuse me.... I think you are confusing market timing with a Tactical Allocation.

Ah! I have heard that term before, but did not know that is what people call what I have been doing all these years. I don't get out much on the Web, and just fumble around to do what I think is right. It's amazing that I survive all these years without knowing what people call me: a DMT Tactical Asset Allocator.

So, by it being given a formal name, what I do is now legitimate and respectful within mainstream investor cycles. Hey, all I could come up with before was the term "clean market timer", because I could not see why trying to look at a stock or a sector fundamental is a dirty deed.

Here's another excerpt from Wikipedia.
There are three basic types of asset allocation strategies based on investment goals, risk tolerance, time frames and diversification: strategic, tactical, and core-satellite.

Strategic Asset Allocation - the primary goal of a strategic asset allocation is to create an asset mix that will provide the optimal balance between expected risk and return for a long-term investment horizon.

Tactical Asset Allocation - method in which an investor takes a more active approach that tries to position a portfolio into those assets, sectors, or individual stocks that show the most potential for gains.

Core-Satellite Asset Allocation - is more or less a hybrid of both the strategic and tactical allocations mentioned above.

Systematic Asset Allocation is another approach which depends on three assumptions. These are-

The markets provide explicit information about the available returns.
The relative expected returns reflect consensus.
Expected returns provide clues to actual returns.

It seems like nowadays, the buzzword Asset Allocation will give legitimacy and respect to anything anyone wants to do. It's great!

But I will let this subject rest. As I said before, who the hell really cares what something is called. It is just semantics, but I was curious. There are more than one way to make money (and many more to lose it). I believe the most important thing that everyone needs is diversification.

Happy New Year. Cheers!
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Old 01-01-2011, 10:35 AM   #46
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What happened to the high gas price discussion

Oh well. I'm off to the RV forums where the gas prices have everyone talking about "The Death of RVing"
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Old 01-01-2011, 11:48 AM   #47
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According to this site
http://autos.msn.com/everyday/gasstations.aspx
folks in Hana HI are already paying $4.59 per gallon.
Scroll all the way down to see lowest, average, and highest prices.

Enter your own zip code in the blue box at the top of the page for local prices.
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Old 01-02-2011, 09:30 AM   #48
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This sounds like another Goldman Sachs oil bubble being talked up. They bid it up to $149 a barrel last time, before they pulled the short lever. I think they will go for $199 a barrel this time. Just a guess.
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Old 01-02-2011, 09:56 AM   #49
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Looks like I might have an opportunity to sell some oil-related positions and buy a new V8-powered tow vehicle on the cheap in the next couple of years...
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Old 01-02-2011, 11:12 AM   #50
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According to this site
http://autos.msn.com/everyday/gasstations.aspx
folks in Hana HI are already paying $4.59 per gallon.
To be fair, that's like making Schenectady drivers go to Ballston Spa for their gas. On the "back" roads. I'd sure hate to be driving to Hana on the road behind the gas truck, too.

Costco is consistently rumored to be Hawaii's largest gas seller, both by volume and revenue. They even undercut the military bases, and more telling, I've seen them sacrifice parking-lot space to put in additional gas pumps. So $3-$3.50 seems to be a trading range.

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Looks like I might have an opportunity to sell some oil-related positions and buy a new V8-powered tow vehicle on the cheap in the next couple of years...
You could buy a cheap used Prius now and sell it for a tidy profit when you're ready to "trade up" to the V8!
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Old 01-02-2011, 12:05 PM   #51
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Looks like I might have an opportunity to sell some oil-related positions and buy a new V8-powered tow vehicle on the cheap in the next couple of years...
But doesn't one need to go long now to get something to sell later, or just wait for the "right time" to go naked short?

I remember in 2008, gas prices and some stock prices lagged the overall market and stayed high when everything else came tumbling down. Now, that's real "market timing" and is scary to me.
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Old 01-02-2011, 12:22 PM   #52
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But doesn't one need to go long now to get something to sell later, or just wait for the "right time" to go naked short?

I remember in 2008, gas prices and some stock prices lagged the overall market and stayed high when everything else came tumbling down. Now, that's real "market timing" and is scary to me.
I am quite long energy related stuff now, via positions in CHK and MEOH. The former is now the target of an activist investor (Carl Icahn) and the latter is a chemical company that uses long term, fixed price supplies of natural gas to produce something that can substitute for diesel and gasoline. So if the price of energy goes nuts these things will rocket and I will liquidate, potentially using some of the proceeds for a gas-guzzler. If I short it would most likely be via put options on energy producer ETFs.
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Old 01-02-2011, 12:38 PM   #53
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I did not know of MEOH. Used to have CHK. Wasn't it the one whose CEO got caught in a margin call, which also caused the stock price to tumble a couple of years ago?

I still have nat gas producers like APA, APC, and oil-related equities like OIH, etc... But I admit I do not know off-hand the total as a percentage of portfolio.
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Old 01-02-2011, 12:59 PM   #54
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I did not know of MEOH. Used to have CHK. Wasn't it the one whose CEO got caught in a margin call, which also caused the stock price to tumble a couple of years ago?

There is a poster that knows quite a lot about MEOH's industry and has been kind enough to favor me with his knowledge. I've had a position in the company for going on 6 years now and I have a healthy respect for management. I even got the surprising opportunity to buy some of the company's bonds during the crash at a ridiculous yield. I think they are misunderstood and management has repeatedly said that the company trades at a significant discount to replacement value of its plants.

Yep, Mr. McClendon got caught with his pants down and rapidly became "no longer a billionaire." However, the company has probably the best collection of onshore natural gas assets, an expanding oil drilling operation and is dirt cheap even with nat gas prices staying flaccid. The liquidation of Mr. McClendon's stake actually makes the company more vulnerable to an opportunist like Mr. Icahn goading them into some sort of value-unlocking transformation. No telling what will happen as the CEO and the raider face off, but I would not have a hard time making a case for a $45 stock price in a merger.
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Old 01-02-2011, 02:09 PM   #55
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I'm really looking forward to $4 gas, as I bought my hybrid in 2007 and have only had a short stretch of $4 gas to "pay it off". The more expensive gas will save me a ton of money.
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Old 01-02-2011, 02:22 PM   #56
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But doesn't one need to go long now to get something to sell later, or just wait for the "right time" to go naked short?


ahem...

Carry on...
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Old 01-02-2011, 03:02 PM   #57
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You expect some photos of these actions, my dear?

Ah, I will carry on...

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If I short it would most likely be via put options on energy producer ETFs.
I do these kinds of short-term trading inside IRAs because I do not want to think of taxes when making a decision. And inside IRAs, many brokerages have restrictions on option trading. However, there are all kinds of ETFs now, and there should be a bear ETF on energy. I will look into it, but there's still plenty of time.
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Old 01-02-2011, 03:04 PM   #58
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Haven't read the responses, but in my case what I do as a hedge against these expenses is to invest in O&G trusts. Living in Canada there is no shortage of these trusts to invest in. Most pay dividends in the 6-10% range plus have appreciated nicely. My top pick, purchased 4 years ago has returned 96% annualized in the time I've had it :-). Right now I believe nat gas stocks are the way to go given their depressed prices at the moment.
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Old 01-02-2011, 04:27 PM   #59
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I am hedged with long positions in both CHK and BRY (Berry Petroleum Company). An unusual bet on rising gasoline prices might be GRA (W.R. Grace), which makes cracking catalysts for refiners.
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Old 01-02-2011, 05:25 PM   #60
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Of course gas is more expensive in Canada.
Yep, get ready for it.

I really wonder why our gas is so expensive. Is it:
  • all that crude oil we import from the US
  • the fact that crude is priced in US$ and C$ is so low
  • UFO's
  • Oh, did I forget politicians?
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