Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Market Timing when to ditch equities
Old 02-24-2018, 01:41 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 9,027
Market Timing when to ditch equities

This deserves its own thread even though it is related to RunningMan's thread about selling equities and going to a more conservative asset allocation.

A very nice article about Recessions, Inverted-Yield Curves, Unemployment claims, the Manufacturing PMI, and Market Timing from our friend Big ERN at Early Retirement Now:

https://earlyretirementnow.com/2018/...acroeconomics/

After reading this article, I am even more confident in increasing my allocation to equities.
__________________

LOL! is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-24-2018, 01:58 PM   #2
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 10,710
Good article. I also look at the Conference Board LEI chart. It peaks at least 6 months prior to a recession.
__________________

__________________
Living an analog life in the Digital Age.
Gumby is offline   Reply With Quote
Old 02-24-2018, 02:30 PM   #3
Thinks s/he gets paid by the post
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 1,630
Quote:
Originally Posted by LOL! View Post
... After reading this article, I am even more confident in increasing my allocation to equities.
With respect: Confirmation bias?

If any of these dart-throwing monkeys could make accurate predictions he/she would be on a private tropical island sipping from a glass garnished with an orchid and making a few trades when the checkbook got low. He would not be working "full-time in the asset management division for a large bank." He would also not be working for a mutual fund company, an asset manager, a wire house, or an investment newsletter. IOW if such a monkey actually exists, we will never know it.

My favorite quotation recently is from John Kenneth Galbraith: "The purpose of economic forecasting is to make astrology look good."
OldShooter is offline   Reply With Quote
Old 02-24-2018, 02:46 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 9,027
Whatever. The indicators are discussed along with their caveats and errors. I didn't see any evidence of dart throwing or using "feelings."

What I did like is that reasons for the February drops suggested no problem and a buying opportunity. As you know, I bought quite a bit during the drop and have sold at a gain after equities went back up.
LOL! is offline   Reply With Quote
Old 02-24-2018, 03:31 PM   #5
Thinks s/he gets paid by the post
Onward's Avatar
 
Join Date: Jul 2009
Posts: 1,742
OldShooter's point is that the world's smartest analyst, using the world's most advanced indicators, has as much chance of accurately calling market direction as a dart-throwing monkey.

And ... Oops! OldShooter is right.

The moment you ask, "Is this the right time to get in?" or "Is this the right time to get out?" you are lost. Doesn't matter what "evidence" you have. You may win one or two, but in the long run you are executing an inferior strategy.

Snatch the pebble from my hand...
__________________
And if I claim to be a wise man, it surely means that I don't know.
Onward is offline   Reply With Quote
Old 02-24-2018, 03:46 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 20,882
I like the article. It shows how the inverted yield curve usually preceded a recession. This is not original with this article.

I recall in 2007 people talked about it, but some people dismissed it. I will not be dismissing it the next time it happens.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 02-24-2018, 03:52 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 9,027
Quote:
Originally Posted by Onward View Post
The moment you ask, "Is this the right time to get in?" or "Is this the right time to get out?" you are lost. Doesn't matter what "evidence" you have. You may win one or two, but in the long run you are executing an inferior strategy.
I agree with the gist of that sentiment. I am always in and never out.
Sometimes though I am more in than I would otherwise be.

Even folks like me who have a portfolio of passive index funds with low expense ratios have to decide when to rebalance -- or if you like: when not to rebalance.
LOL! is offline   Reply With Quote
Old 02-24-2018, 04:11 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,117
My subtle version of market timing is what I call "opportunistic rebalancing"... I'll rebalance when markets "feel" over or under valued... for example, I rebalanced during Brexit cause I "felt" like markets overreacted, and I sometime rebalance during strong rallys that "feel" like they have gone up too much too fast... I know it is just nibbling at the edges but it is a fun game for me.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 02-24-2018, 04:26 PM   #9
Thinks s/he gets paid by the post
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 1,630
Thanks @Onward. You make my point nicely.

Let me try it from another angle: This particular monkey works "full-time in the asset management division for a large bank." If he had any forecasting skills at all, certainly bank management would have recognized this and promoted him to Chief Economist or some other position where his forecasting skills would be of great benefit in guiding the bank's business decisions.

Re "The indicators are discussed along with their caveats and errors." Any successful witch doctor, fortune teller, palm reader, magician, or prophet will use props and sophistry to make himself sound more credible. Crystal balls, black top hats, masks and rattles, pairs of parameters graphed together, ... really no difference.

I'll stop now. This is not a debate that ever leads to agreement.
OldShooter is offline   Reply With Quote
Old 02-24-2018, 06:28 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Jan 2014
Posts: 1,428
LOL, Thanks for posting that link.
splitwdw is offline   Reply With Quote
Old 02-24-2018, 07:41 PM   #11
Recycles dryer sheets
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 497
Quote:
Originally Posted by pb4uski View Post
My subtle version of market timing is what I call "opportunistic rebalancing"... I'll rebalance when markets "feel" over or under valued... for example, I rebalanced during Brexit cause I "felt" like markets overreacted, and I sometime rebalance during strong rallys that "feel" like they have gone up too much too fast... I know it is just nibbling at the edges but it is a fun game for me.
"Opportunistic rebalancing" - I like it. It is a good description of my approach as well.

For my overall AA I've settled on an "age in stocks" approach based on a muted rising glidepath (see research by Pfau, Kitces, ERN and others). Muted in that those guys talk about going from 30/70 to 70/30 over some period of time. I'm going from 55/45 to 70/30 between now (55 and just retired) and SS (at 70). However, my default is the traditional 60/40 so in addition to that research I decided that 55/45 "feels" right with the current high stock market valuations, and that feeling went into my age-in-stock equation.

55/45 actually feels strange to me because throughout my accumulation phase I was 90-100% equities, but the recent 10% correction was instructive because I only lost 5.4% from the peak.

My sub-allocations are also feelz-based, so within my equity allocation I'm currently heavily weighted in international stocks, again based on valuations. Similarly, I've been reducing my duration/maturity on by fixed income side pending rate hikes.

In the end I suspect this may have little impact vis-a-vis a static 3-fund portfolio, but it feels like I'm doing something!
__________________
Semi-ER March 24, 2017
USGrant1962
USGrant1962 is online now   Reply With Quote
Old 02-24-2018, 07:48 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 9,027
BTW, the linked article is about Risk Management and is not about ditching equities like RunningMan did.

I think we all manage risk in our portfolios.
LOL! is offline   Reply With Quote
Old 02-24-2018, 08:27 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 18,017
Quote:
Originally Posted by NW-Bound View Post
I like the article. It shows how the inverted yield curve usually preceded a recession. This is not original with this article.

I recall in 2007 people talked about it, but some people dismissed it. I will not be dismissing it the next time it happens.
Well the curve was starting to flatten and looked like inversion might happen until end of Han when suddenly all rates started moving up. Can’t say it’s steepening, but it stopped flattening and started developing a bit of a center bulge.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 02-24-2018, 10:45 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 20,882
Here's the yield curve in Jan 2018, compared to one in Jan 2007.

Note that this curve is already outdated, as the 1-yr yield is now 2.02%, 2-yr yield is now up to 2.25%, 30-yr yield is up to 3.16%.

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 02-24-2018, 11:16 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 18,017
Yeah the current yield curve has changed dramatically since early Jan 2018.

Rates have moved up sharply across the entire curve, with a little bulge developing between 5 and 10 yr duration. Rates have kind of shifted left with the 5 yr where the 10 was a month ago, the 10 yr where the 30 was at start of the year, the 2 where the 5 yr was at the start of the year.

Current curve scroll down this page https://www.marketwatch.com/investin...countrycode=bx
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 02-25-2018, 11:23 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 6,046
About that article, I use some of this kind of data in my own model. I think getting into the data and doing your own analysis is best. Very few people do this despite all the talk back and forth about the futility or good of market timing.

I use the 10yr - 3month Treasury data because the Fed really controls the 3 month Treasury. Not sure about the 2yr Treasury. The Fed source for this (nice chart) is here:
https://fred.stlouisfed.org/series/T10Y3M
BTW, the inverted yield curve also predated the 1929 crash.


Such indicators are not going to be the only source of market timing success. You cannot hang your hat on them but maybe looking at equity momentum along with these will work. We will see looking back from the next recession low.
Lsbcal is offline   Reply With Quote
Old 02-25-2018, 11:38 AM   #17
Thinks s/he gets paid by the post
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 1,630
Quote:
Originally Posted by Lsbcal View Post
About that article, I use some of this kind of data in my own model. I think getting into the data and doing your own analysis is best. Very few people do this ...
I have no problem with people who want to play with the numbers. But I would point out something I think is important: The DOL says that there are 950,000 people working in the investment industry. There are something like 8-9K mutual funds and another 2k or so ETFs. So I think it is logical to expect that there are thousands if not tens of thousands of people studying the numbers, especially simple things like the yield curve. Not "very few."

So (1) IMO it is unlikely that an individual working alone will find anything that has not already been found by many others and (2) in the event there is some kind anomaly or mispricing, it will quickly be arbitraged away by thousands of traders jumping on it.

So ... we're back to Malkiel's random walk and, probably, to Fama's Efficient Market Hypothesis.
OldShooter is offline   Reply With Quote
Old 02-25-2018, 12:01 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 6,046
I meant very few individual investors.

Anyway I get your point. You don't like market timing period.

Different viewpoints make up markets. I am not going to change mindsets here and that is fine.
Lsbcal is offline   Reply With Quote
Old 02-25-2018, 12:24 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RonBoyd's Avatar
 
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 5,358
Mr. Buffett has an idea when one should ditch equities:

https://www.marketwatch.com/story/wa...son-2018-02-24

Quote:
Buffett acknowledged that in any “upcoming day, week or even year” stocks are “far riskier” than short-term U.S. bonds, but as an investor’s investment horizon lengthens, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, if the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.
(If you don't already know his Annual Letter is here.)
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
RonBoyd is offline   Reply With Quote
Old 02-25-2018, 12:27 PM   #20
Thinks s/he gets paid by the post
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 1,630
Quote:
Originally Posted by Lsbcal View Post
... Anyway I get your point. You don't like market timing period.

Different viewpoints make up markets. I am not going to change mindsets here and that is fine.
Oh, I like the idea of market timing a lot. I've just read enough (and tried myself a few times) to believe that it is impossible. Not that people can't get lucky, though.
__________________

OldShooter is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Ditch landline for cell phone + cordless units? Lsbcal Other topics 61 05-06-2017 08:02 AM
Real Estate/Equities Market Bull Run yakers Stock Picking and Market Strategy 2 09-25-2016 05:39 AM
Market Timing Schmarket Timing bob boag FIRE and Money 160 10-20-2014 08:10 PM
ditch the car retire early mosaic Young Dreamers 32 08-10-2006 09:41 PM

 

 
All times are GMT -6. The time now is 06:17 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.