LOL!'s Market Timing Newsletter

[audreyh1]

Nothing much happening.

I've submitted some limit orders, but the things I want sell have dropped and the things I want to buy have gone up, so it's just possible that I will have no trades executed today.

And the stupid thing is that if on this 2%-of-portfolio that I want to trade today loses 0.5% in the trades, then that will affect my YTD return by 2% times 0.5% or just 0.01% overall.

I can see the logic in that, but it sure feels like it would be a lot more than that.

Of course, something like the converse is also true: If I make an extra 0.5% on the 2%, then my YTD return will gain just 0.01% on the benchmark. Small potatoes.

Nothing is happening because most investors are waiting until the Fed announcement and the Yellen press conference that will follow.

OK - they just announced 0.25% raise.

 

[LOL!]

OK, sold VTI and bought BND. I'm glad I waited until after 2 pm eastern.

Given my track record, VTI will close higher than I sold it for and BND will close lower than I bought it.

Still will wait on the selling of VSS, maybe later this week.

Update: Should've sold equities AND bonds yesterday. And BND kept dropping to the close. It could've been worse though. I avoided a higher loss on VTI than I got on BND.

 

[NW-Bound]

EM went down harder than the S&P. I just sold an out-of-the-money covered call to recoup some of that.

 

[LOL!]

Here's a litle post-mortem on yesterday's trades.

At the end of yesterday, I was better off having made the trades than not making the trades.

This morning with VTI up and BND down, I would've been better making the trades today even though VTI has not reached yet what I sold for yesterday.

I could've done better by selling VSS yesterday instead of sellng VTI and waiting to buy BND until at least today.

I could've done better by buying back the VTI after it had dropped instead of buying BND.

So I still have that 1% of total portfolio value to move from equities to bonds. With foreign equities down further today I cannot bring myself to sell them

 

[SecondCor521]

LOL!, I enjoy this thread although I don't keep up with it as much as I'd like.

Question (maybe already answered, sorry if so): Do you evaluate over the long term (years to decades) how you are faring compared to, say, a simple buy-and-hold 80/20? And if you're ahead, do you calculate how much you're making per hour in these trading activities?

I could imagine you being somewhat ahead over time or somewhat behind. And if you're ahead, I could imagine the pay being between pennies and Benjamins per hour. You'd probably do it anyway because you enjoy it, and I understand that.

 

[Running_Man]

Here's a litle post-mortem on yesterday's trades.

At the end of yesterday, I was better off having made the trades than not making the trades.

This morning with VTI up and BND down, I would've been better making the trades today even though VTI has not reached yet what I sold for yesterday.

I could've done better by selling VSS yesterday instead of sellng VTI and waiting to buy BND until at least today.

I could've done better by buying back the VTI after it had dropped instead of buying BND.

So I still have that 1% of total portfolio value to move from equities to bonds. With foreign equities down further today I cannot bring myself to sell them

I must admit I cannot follow the thread at all, while interesting, and achieving the goal of how to get a one percent improvement, this most recent trade/non-trade being a prime example.

A decision was made to sell 2 percent of the portfolio’s equities VTI/VSS to buy BND/AGG, did so for VTI and BND goes down more than VTI most of this occuring late in day and you did not sell VSS which sold off even more strongly than BND or VSS into the close and VSS has underperformed everything pretty much since the election (Russel 2000 up 15 percent while VSS down 2 percent) when you move into an overweight into this area out of US small cap which have been the largest movers. VSS has fallen 2 percent since the FED announcement yesterday which if one percent of a million dollar portfolio would be a loss of about 400 dollars. Overweighting equities in the foreign small cap sector instead of the US sector by one percent of the portfolio since the election on a million dollar portfolio is $3,200 shortfall.

The decision to purchase or sell or to defer appears random and not part of a strategy that is followable, such as the sale/non-sale of VSS. How these trades you did/didn’t do improved your performance against your benchmark totally befuddles me. Perhaps it is just because there is a 3 card monte effect in following this thread with non-numerical share volumes while comparing depending on the post to a sub-sector of asset class return/asset class return/portfolio return/target portfolio return/or theoretical portfolio return for non-invested actions/ that is used for comparison purposes that is just too confusing for me to follow logically.

While you I am sure have been improving the performance of the portfolio since most of the moves you make involve buying when market is falling and selling at high values and with the market at all time highs that strategy would improve a portfolio performance (only a prolonged multi-year bear market would be hurt by this approach). I just cannot follow the moves logically, I must be too much of a debit/credit guy.

https://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1481835600000&chddm=1854&chls=IntervalBasedLine&cmpto=NYSEARCA:VTI;NYSEARCA:VSS&cmptdms=0;0&q=NYSEARCA:BND&ntsp=0&ei=QeRSWLHnAoaU2Ab2w76wBQ

 

[LOL!]

Question (maybe already answered, sorry if so): Do you evaluate over the long term (years to decades) how you are faring compared to, say, a simple buy-and-hold 80/20? And if you're ahead, do you calculate how much you're making per hour in these trading activities?

I use MS Money to keep track of all transactions and performance. So I can tell you how I am doing over any time period, both long-term and short-term. So far, I am ahead of my 60/40 benchmarks. This year, I have been as much at 1.95% ahead. I am about 1.1% to 1.4% ahead as of today depending on which benchmark fund is used for comparison. How much money is that? Well, I paid less money for my last Lexus.

 

[LOL!]

[…]
Overweighting equities in the foreign small cap sector instead of the US sector by one percent of the portfolio since the election on a million dollar portfolio is $3,200 shortfall.

The decision to purchase or sell or to defer appears random and not part of a strategy that is followable, such as the sale/non-sale of VSS. How these trades you did/didn’t do improved your performance against your benchmark totally befuddles me.

I have a well-defined asset allocation for my portfolio. It is not random at all. When I buy VSS, it is because my portfolio is underweight its designated percentage of small-cap foreign assets. When I sell VBR, it is because my portfolio is overweight in its designated percentage of US small-cap value assets.

So I am rebalancing to keep within my desired asset allocation "bands" and overlayed on that are some timing decisions. I am not trying to just buy the hot performing sectors and avoid or sell the poor performing sectors.

My goal with this newsletter thread is to have a public record of my trading decisions as an investing diary. I can always go look in my MS Money files for share amounts and such, so I don't think I need to reveal monetary amounts. I'll give a hint though: So far in 2016 I have made more than $5 million worth of transactions.

 

[LOL!]

I want to thank Running_Man for the comments and questions. They make me think which I like to do.

Bond funds (as represented by VBTLX, total bond index) have lost about 5% of their value since early July and about 4% since the election. That is, bonds have lost more than foreign stocks. This causes an interesting rebalancing dilemma: If one sold bonds in early November and bought stocks that gained (VTI) or did not drop as much (VSS), then one might find themselves in the position of having to rebalance into bonds by sellng stocks that had gained (VTI) and/or perversely had dropped (VSS).

That is, one can find themselves selling a loser because some other asset class lost even more money.

My portfolio has a significant allocation to international equities. Half my equities are in foreign stock index funds. Because of that desired asset allocation (for good or bad), I won't shift 30% (or 20% or 10%) of my portfolio out of foreign equities into US equities. So if US is doing better than international, I fall behind the benchmarks that have less foreign equities or even no foreign equities.

Another thought to add to the discussion: I could have used a model portfolio in this thread, you know a fake portfolio, but I did not want to do that because using real money with real trades with real consequences is quite a bit different than a woulda shoulda coulda portfolio. I think many people can appreciate that difference and the emotions that are involved even though one tries to keep emotions in check when investing.

So you get to see me losing real money on trades. With the drops in foreign equities this week, the market rebalanced a little bit for me.

 

[LOL!]

I use MS Money to keep track of all transactions and performance. So I can tell you how I am doing over any time period, both long-term and short-term. So far, I am ahead of my 60/40 benchmarks. This year, I have been as much at 1.95% ahead. I am about 1.1% to 1.4% ahead as of today depending on which benchmark fund is used for comparison. How much money is that? Well, I paid less money for my last Lexus.

Sorry, I was wrong about current performance earlier this week, so an update:

Instead of ahead 1.1% to 1.4%, I am actually doing better by 1.6% to 1.85% at the end of this week compared to my benchmarks.

 

[LOL!]

Finally! Bonds are up from where I purchased them on 12/14 and VTI (Total US Market) is down about a percent. Numbers are tricky because both BND and VTI paid distributions in the meantime which have to be taken into account.

So while I didn't do the best possible trades then, I didn't hurt my portfolio any worse than doing nothing ... so far.

Lots of dividends paid yesterday, today, and tomorrow, so I have some cash to buy a few things. With such pocket change, I usually just try to round up positions to the nearest 100 share amount. For instance, if I have 423 shares of BND, then I'll try to buy 77 more shares to get to 500 shares regardless of my asset allocation.

 

[LOL!]

I wanted to give a rough idea of how that rebalancing move from VTI to BND on the day of the FOMC press conference has worked out so far. Below is a M* chart of the mutual fund shares (instead of the ETF shares), so VTSAX and VBTLX over the last couple of weeks.

One can see in the chart above that the relative change of VTI/VSTAX and BND/VBTLX was about the same until the past couple of days when a gap opened up. Since I traded intraday, my "gap" is a little bit different than the one shown in the chart.

Although the difference could close up again, this 2% difference on about 1% of the portfolio didn't hurt the performance for the year. This rebalancing move worked. 264

 

[LOL!]

So on a rainy morning I have time to look at the portfolio results of the past year. The portfolio (which today Fidelity Guided Portfolio Summary says is 58% equities with 30% in US and 28% in international) outperformed its benchmarks by 1.7% to 1.9%. And despite an almost 50% weight of equities to the laggard foreign equities, it outperformed the Vanguard Balanced Index fund which has US equities and no foreign equities.

A drill down shows that the fixed income portion actually underperformed the 2.6% total return of VBTLX (Vanguard Total Bond Index). I will attribute that to market timing out of bonds when I needed to increase temporarily my stock allocation.

I thought that maybe part of the outperformance was that I successfully market-timed buying and selling of international funds VEA, VSS, VEU, and VTIAX. That matches the reality since a benchmark international fund VTIAX (Vanguard Total Int'l) was up 4.6% for the year, my international funds were up 6.4% which is really not enough to overcome the underperformance of the fixed income side of the portfolio.

So moving on to US equities shows that's where outperformance really happened. I have about half my US equities in small-cap value funds which were nicely volatile in 2016, so that one could buy low. For 2016, SCV in my portfolio returned 27.9% which is about double the 12.7% return of VTSAX (Vanguard Total US Stock Index). OTOH, the performance of VSIAX (Vanguard small-cap value index) for 2016 was 24.8% for someone who held it the entire year, so market timing added only another 3% extra return.

I have large chunks of the portfolio in assets that were purchased back in the spring of 2009 and are in "buy-and-hold" mode, so I get whatever those returns are. These include a large-cap US index fund and a large-cap international index fund.

All this means that probably all the 1.9% outperformance really came from overweighting small caps this year and it is wishful thinking that market timing was a significant factor. So when you are in the right asset class, things go well for you.

Good luck to everyone in 2017!
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[Marc]

Be careful using Fidelity website for asset allocation. About three weeks ago FSEVX which is an extended market index shot to 19% cash. I queried Fidelity and they said that fund actually has minimal cash (it is tracking index well) but that Morningstar, who provides the data to Fidelity, has made the error. Checked again with Fidelity again this week and they confirmed error not fixed in time for end of year. I also noticed that FXSIX shows 3% cash which is also far out of line.

So, I have to wait to see how close I am to my 60% target in equities. Two weeks ago the rep told me to add 2.3% to equities showing on website for total equities; I have no idea if that is still accurate today.

Just wanted to provide a heads up to anyone using Fidelity (or I imagine Morningstar) tools.

Marc

 

[LOL!]

Thanks, I don't have those funds, but I do notice that Fidelity GPS is slightly off from Vanguard Portfolio Watch which has its own set of problems.

 

[LOL!]

Be careful using Fidelity website for asset allocation. About three weeks ago FSEVX which is an extended market index shot to 19% ….

I explored this some more by adding a fake manual account called "Benchmark" to my Fidelity GPS tool. I can select it to see what Fido GPS says the asset allocation is after populating with a benchmark fund. Here is what it looks like when VSMGX is used (Fido on right or top; Vanguard on left or bottom):

Vanguard.com shows about 1% more than Fido in international stock.

So now that I am aware of that, I will just accept that these numbers cannot be more accurate than one or two percentage points which is OK with me.

Thanks for the heads up!
702

 

[sengsational]

Gotta ask...the three digit integer ending most of your recent posts?

 

[LOL!]

Today was a great day all around in the stock market. Everything made money. So it is not a bad day to look at some trades during the election 2 months ago. Here is a post from back then:

I'm not so sure it was good eyes at all as now my typical display of today's price changes doesn't seem to reflect at all what I was seeing this morning.

But the VSS shares are up and since I sold some bond fund shares yesterday to get the cash to buy equities, I avoided the downtick in those bond fund shares if I had not sold.

All this means that probably everything will tank tomorrow, but I hope not.

While I have already done some rebalancing, I am happy to report that the bond shares sold in the above post are still down about 2.5%, the foreign equities bought with that money are finally in the black. So that chunk of money is about 4% better off than doing nothing.

Of course, I would have been much better off buying US small-cap value with the money from selling bonds, but I didn't. A rising tide will float all non-bond boats eventually.

So far in the past 8 days, I am doing some minor portfolio management:

a. Charitable giving in 2016.

b. Got all my dividends that won't be spent reinvested last week.

c. Converting traditional IRA to Roth IRA, buying equities with the new Roth IRA assets and exchanging from equities to bonds in tax-deferred accounts to keep my asset allocation where I want it to be. That is: Stocks in Roth; Bonds in tax-deferred.
992 <- Double secret code digits

 

[LOL!]

I didn't expect to post so soon after yesterday's post, but today's market action compelled me to make some trades. US stocks and particularly US small-cap value have dropped while foreign stocks and particular foreign small-cap have gone up. For instance, VSS is up 1% and DGS is up about 1%, too, while VBR was down about 1% and IJS was down more than 1.5% at one point.

Add to above that bond funds were up about 0.4% earlier today when bond funds should not move so much in a single day.

That's a 2% to 2.5% spread between these two asset classes that should be reasonably correlated. So with the fact that VSS is up 3% this year, all this spells OPPORTUNITY. So I sold some VSS and DGS and bought some IJS. I will also submit an order to exchange VBTLX into VSIAX.

A side benefit of the above trades is that I reduce the number of ETFs used in a couple of accounts, so I get some portfolio simplification, too.

If IJS (small-cap-value) goes up after this in the next few days, I will probably sell VBR in another account and buy back shares of a bond ETF. Or if it has been more than 3 days, I will just sell IJS and buy AGG. That's the plan.

Oh, if IJS and VBR go down more, then I will just hang on like the last time until they come back up or buy more.
167

 

[LOL!]

Perhaps not unexpected, so far the things I bought late last week are down more than the things I sold. So I'm happy that I sold, but not so happy that I bought too soon.

I've submitted a sale of fixed income in a 529 plan to pay some college expenses, but bonds have gone up in the past few weeks, so this sale is of little consequence.

This post is mostly my attempt to try to talk the market into going up.
590

 

[Brat]

Thinking of switching Wellington Income to Wellesley. Any opinions out there?

 

[LOL!]

Thinking of switching Wellington Income to Wellesley. Any opinions out there?

With no context how could one have an opinion? Any comments would just be contributing to the noise like lots of articles on the internet. These funds are invested in similar things, but only the ratio of equities to bonds is different. Wellesley is 38% stocks, 62% bonds and Wellington is 66% stocks, 34% bonds.

So you are suggesting that you will reduce equities and increase bonds in your portfolio. If Wellington is 100% of your portfolio, then this is a terribly drastic change. If Wellingtion is 10% of your portfolio, then it probably is of no consequence. Since we cannot predict the future, we have no idea whether such a shift will be helpful (whatever "helpful" might mean) or not. And we have no idea what your asset allocation plan is anyways.

Sorry to be unhelpful, but your question kinda has no answer or room for opinions.

 

[LOL!]

Be careful using Fidelity website for asset allocation. About three weeks ago FSEVX which is an extended market index shot to 19% cash. I queried Fidelity and they said that fund actually has minimal cash (it is tracking index well) but that Morningstar, who provides the data to Fidelity, has made the error. Checked again with Fidelity again this week and they confirmed error not fixed in time for end of year. I also noticed that FXSIX shows 3% cash which is also far out of line.

More on this: A thread at bogleheads.org had a link to a holdings report showing holdings for a Fidelity fund that showed that it did have a lot of cash. The cash was collateral for shares that it had lent out. I suspect that Fidelity reps didn't know the full story. Since the fund benefits by the share price changes of shares that are lent out and gets cash payments for any dividends that the shares get, that it would be OK for Fidelity to state the cash fraction was low even if the holdings showed cash-in-lieu-of the shares lent out.

 

[LOL!]

Today I admit total defeat of my last trade of DGS for IJS. I've certainly dug myself a small hole on this one. At close of yesterday the exchange of VBTLX to VSIAX was even with VSIAX the same price it was bought at, but unless a miracle happens later today, the trade would have been better avoided.

OTOH, my portfolio is ahead of my benchmarks for the year, but this one still stings.
134

 

[imoldernu]

Thoughts on this?

Investors are bracing for a massive stock-market selloff