LOL!'s Market Timing Newsletter

[audreyh1]

Quote:

Originally Posted by LOL! I am sure that folks are tax-loss harvesting muni bond funds. I am almost sure that the FOMC will set the FFR higher next week, so I think some folks are waiting to buy bond fund shares. I think when US rates go higher that it might suck money out of Europe and Asia into the US market. I don't believe in any Santa Claus rally thinking.

Yes - the muni bonds have been whacked (wow - Federal income taxes are going away?) but seem to have stabilized. Muni bonds seem to get hit for some reason or another in Dec every other year. There is always some story.

[LOL!]

It is too soon to tell how the market will finish today and/or this week. I don't intend to do anything for awhile with the big wad of cash I have from selling VEU yesterday.

I did calculate that I am now within my desired asset allocation ranges, so I feel no compunction to sell anymore at this time.

[LOL!]

Once again I hit a hard upper target to rebalance out of equities, so tomorrow I will be selling.

This time I intend to move about 2% of my total portfolio out of equities and into fixed income. Right now, the plan is to split the 2% half from VTI (total US) and half from VSS (small-cap foreign). These particular shares are held in tax-deferred accounts, so no tax consequences.

I will use the proceeds to buy AGG and BND (total US bond index).

I think tomorrow will be a decent day to do this since the FOMC press conference will reveal to traders what those bond funds should be doing for awhile. I may buy some shares before, during, and after the FOMC press conference. I just don't know yet. The sales of VTI and VSS are more than 30 days since the last purchases, so no commissions to sell them.

Also, I intend to use the cash from the previous sales in December to buy bond fund shares.

My prediction is that bond funds will sort of do nothing tomorrow since everybody (and I mean everybody) expects the FOMC to raise the FFR.

I'll post updates tomorrow. Wish me luck!

[NW-Bound]

Quote:

Originally Posted by LOL! Once again I hit a hard upper target to rebalance out of equities, so tomorrow I will be selling. ... I'll post updates tomorrow. Wish me luck!

"Tomorrow will be too late
It's now or never
Your stock won't wait"

Too bad the market already closed.

I wish you luck.

https://www.youtube.com/watch?v=l0-FBlfvgxo

[audreyh1]

It's hard to say. People are waiting to see what the Fed signals in terms of rate rises in 2017. If they appear to be aggressive in outlook, 10 year treasury could jump to 3% quickly.

CPI also comes out tomorrow.

[NW-Bound]

By the way, I do not have anything to sell. A lot of my stocks and MFs like energy, EM, biotechs, material, and mining are not reaching new highs like the S&P for me to sell.

[LOL!]

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.

[NW-Bound]

0.01% on $1M is $100, on $2M is $200, etc... Hey, every bit counts.

I have been selling covered calls or cash-secured puts for around $300-500 each shot, and manage to make 1% of portfolio for the last 12 months. Compared to a WR of 3 to 4%, that's not insignificant.

[pb4uski]

Just a note for those who have target maturity bond funds. The ones I'm in tend to have depressed returns in their terminal year because as bonds mature during the terminal year they reinvest the proceeds in low-yielding short-term investments until the end of the year when they make the terminal distribution.

My solution to avoid those last year low returns is to sell them about a year before the terminal distribution... though you could argue and any time between now and mid-next-year would be fine too.

Anyhow, I'm selling my 2017 maturities now and reinvesting back at the top of the ladder.

[NW-Bound]

+1

I neglected a bond fund like that, and only discovered the dismal return in the end year after the fact. It was even slightly negative!

[audreyh1]

Quote:

Originally Posted by LOL! 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]

Quote:

Originally Posted by 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

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...AoaU2Ab2w76wBQ

[LOL!]

Quote:

Originally Posted by SecondCor521 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!]

Quote:

Originally Posted by Running_Man […] 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!]

Quote:

Originally Posted by 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.