Inversion countdown

[poyet]

One wishing to time the market must rely on precise criterions, apply these rules and check whether they are fulfilled or not, not just breathing the air in the morning and thinking he should go there better than here....

Let's take a very simple example, using the rate of change of a long term moving average (200 days) ROC MM200. When ROC MM200 turns negative on three markets (say SPX, RUT, NDX) you exit LONG, etc... then you check what it gives on historical data and improve the system until it gives results which you are happy with. You can use whatever rules you wish, TA or non TA, etc. Then you run the system and apply the rules not having mind boggling thougths.

Today, all world markets and LONG and even the Shanghai index is now neutral (which means that very probably Chinese indexes will go up in 2006). Why would you stay on the sidelines, why would you have QQQQ puts ? The worse is to be Bear when the market skyrockets and then to be Bull too soon when it's going to make a final and lethal dive.

If the yield inversion, or oil, or whatever kills this bull market, we'll see it. You just need to look at it and avoid divination.

Best luck to you all, we all need some !

 

[Jarhead*]

Ha- happy to be called a market timer.

Ha: You're a market timer! (Want to keep you happy during the holiday season).

Nothing wrong with being a market timer.
But being a two-timing Salsa Dancer, now that's just bad form.

Sorry, Ha, but I find growing up a painful condition that I'm not sure I'm capable of.

 

[HFWR]

Well, I intended to ride out the 2000-2002 downturn, thinking a 10-20% haircut was doable. When it blew through 10-20-30%...

I moved a bunch to cash in early July 02, then more in Oct 02, and missed two more big down drafts. Probably just luck in the timing...

Moved to REITs, XLB, XLE, and made some nice returns. 8) Thanks to Larry Kudlow!

Currently have about 12% cash. Need more bond exposure, so could put some there. Also, want a stash for some bargain hunting. But I'm holding to my current allocation, until I don't... :

 

[brewer12345]

Well, I intended to ride out the 2000-2002 downturn, thinking a 10-20% haircut was doable. When it blew through 10-20-30%... 

I moved a bunch to cash in early July 02, then more in Oct 02, and missed two more big down drafts. Probably just luck in the timing... 

Moved to REITs, XLB, XLE, and made some nice returns.  8)  Thanks to Larry Kudlow!

Currently have about 12% cash. Need more bond exposure, so could put some there. Also, want a stash for some bargain hunting. But I'm holding to my current allocation, until I don't...  :

Sounds like a CD would be a good place for your 12%. If things go seriously on sale, you cash in the CD, take the early withdrawal penalty and go shopping. If not, you collect some nice interest (5.75% @ Pen Fed).

 

[haha]

Nothing wrong with being a market timer.
But being a two-timing Salsa Dancer, now that's just bad form.

You're right- salsa is 4 count music. Now merengue, that
is for the dirty 2-timers!

Happy New Year, Jarhead. Let's pledge to never grow up.

Ha

 

[Nords]

Happy New Year, Jarhead. Let's pledge to never grow up.

I'll drink to that!

 

[Cut-Throat]

I think that if things get rough, and stay that way for a while, a lot of people who didn't think they were market timers will dsicover that they are.

Unfortunately, many of them will discover that they are poor market timers.

Remember-- he who panics first panics best.

Ha- happy to be called a market timer.

I am more bullish on stocks right now than I have been since 1997. The world is awash in liquidity with no home to park it. That said I won't change my allocation, because I know I could be wrong. But I've listened to the bears for about 5 years now. Stocks are more fairly valued now than they have been in years.

 

[Jarhead*]

I'll drink to that!

Here's to Beefsteak when you're hungry,
Whiskey when you're dry,
All the girls you ever want,
and Heaven when you die.

 

[justin]

Justin,

Would you change your asset allocation if we did have a steep inversion curve ?

I probably would stay 100% stocks like I am now. I'm 25 so I can afford to have swings in my asset values. I lost a large percentage of my portfolio in the 2000 crash, so I've experienced large volatility.

 

[Jarhead*]

I probably would stay 100% stocks like I am now.  I'm 25 so I can afford to have swings in my asset values.  I lost a large percentage of my portfolio in the 2000 crash, so I've experienced large volatility. 

Justin: At your age (25), stocks should probably be front and center in your long range plans.

You mentioned that you lost a large percentage of your portfolio in the 2000 correction.

Congratulations for having more than two nickles to rub together at age 20.

 

[mikew]

I found this in the NYT. Yippy for globalization.

The World Isn't Flat, but Its Yield Curve May Be

In recent months, the yield curves in Japan and Germany, the second- and third-largest economies in the world, have been flattening, while the yield curve in Britain has already inverted. "Long-term interest rates are even lower in Europe and Japan than they are in the U.S.," said Kenneth Rogoff, a professor of economics at Harvard.

"The conundrum is global," said Lakshman Achuthan, managing director at the Economic Cycle Research Institute, based in New York. The same factors that are influencing the interest rate climate in the United States are having similar effects on overseas bond markets.

http://www.nytimes.com/2006/01/08/business/yourmoney/08view.html

 

[poyet]

I probably would stay 100% stocks like I am now. I'm 25 so I can afford to have swings in my asset values. I lost a large percentage of my portfolio in the 2000 crash, so I've experienced large volatility.

Justin, what you experienced was not volatility, it was staying long on a bear market (can destroy 80-90% of your portfolios). While being 100% in stocks @ 25 on a bull market is perfectly appropriate. The longer the bull run the longer you sit on it the richer you'll get (remember the saying "I made the most money with my a** sitting on my positions E. Lefevre " though bear mkts are more rapid and you make more bucks for the same timescale. The dive in Oct 98 was a big downturn on a Bull market and the rest is volatility, like the market being down/up 5-10% a month...

 

[justin]

poyet,

I was an uninformed invester. I bought a handful of hot tech or .com stocks, and lost my shirt. Luckily it was a small 5 digit loss at that point. I look back on it as a rather cheap lesson in investing. The price of 4-5 multithousand dollar investment seminars, all crammed into one gutwrenching bear market crash. When you're own money is at risk, the losses are real, and the emotions are real.

I learned:
1. Diversify
2. Don't buy on Margin
3. Don't buy "what's hot" (at least not in great numbers)
4. Don't buy individual stocks

These lessons may not apply to everyone, but for me, they let me sleep at night (more important than potentially juicing returns 1-2%). I don't need astronomical portfolio growth to reach my ER goals. Just a slow steady climb.

 

[brewer12345]

poyet,

I was an uninformed invester.  I bought a handful of hot tech or .com stocks, and lost my shirt.  Luckily it was a small 5 digit loss at that point.  I look back on it as a rather cheap lesson in investing.  The price of 4-5 multithousand dollar investment seminars, all crammed into one gutwrenching bear market crash.  When you're own money is at risk, the losses are real, and the emotions are real.

I learned:
1. Diversify
2. Don't buy on Margin
3. Don't buy "what's hot" (at least not in great numbers)
4. Don't buy individual stocks

These lessons may not apply to everyone, but for me, they let me sleep at night (more important than potentially juicing returns 1-2%).  I don't need astronomical portfolio growth to reach my ER goals.  Just a slow steady climb. 

Well, we both lived through the same period when our portfolios were small. I learned different lessons:

1) Valuation is the most important thing in investing. Never lose sight of the difference between what an asset is worth vs. what someone is (temporarily) willing to buy or sell it for.
2) If you run with the herd you will get trampled. It is psychologically difficult at times, but doing the opposite of what everyone else is doing often pays well.
3) Don't bet too much on any one stock/sector/asset class. It pays to concentrate modestly, but establish position limits and stick to them, even if it means leaving some money on the table.
4) Show me the money! If the business doesn't throw off enough free cash to pay a dividend or regularly buy back significant quantities of stock, it should be subject to extra scrutiny.
5) Stay the hell away from serial acquirers. It always ends in tears.
6) Don't let the tax tail wag the investment dog.

 

[Marshac]

Thanks for the tips brewer. Good stuff. Now you just need to throw in a pumpkin pie recipe, and you could write a book

 

[justin]

Add investment contributions slowly over time, stir occasionally, and let bake for 20-30 years.

 

[cute fuzzy bunny]

Thanks for the tips brewer. Good stuff. Now you just need to throw in a pumpkin pie recipe, and you could write a book

Vanguard pumpkin pie recipe:

Buy pumpin pie from store. Eat.

 

[HFWR]

It's better to eat the pie before pumpin' it... :

 

[MasterBlaster]

That would be Pumpin Pie ala mode 

 

[cute fuzzy bunny]

I thought the apple pie was the official pumpin pie?

 

[HFWR]

No, that would be cherry pie...

 

[poyet]

Well, many things have been said. Some I share others not. I've had the feeling from what I read (may be wrong) that brewer is a bit of a contrarian (from the QQQQ puts story...). My two cents are dont try to be short on a bull run and dont try to be long on a bear dive you'll loose your shirt. Putting leverage quickens things. Even properly used it is one of the most difficult things to master without appropriate software tools providing daily guidance to what you do.

 

[ESRBob]

Poyet,
Not to hijack this scintillating excursion into market timing, but...

I just copied the image from your posts into a bigger format and wondered -- are you building a small observatory? It looks terrific, whatever it is. Is it in France? Judging by the rock, it could be somewhere in the south, possibly even Luberon or Provence?

Anyway here's to interesting architectural projects in ER!

 

[poyet]

Poyet,
Not to hijack this scintillating excursion into market timing, but...

I just copied the image from your posts into a bigger format and wondered -- are you building a small observatory? It looks terrific, whatever it is. Is it in France? Judging by the rock, it could be somewhere in the south, possibly even Luberon or Provence?

Anyway here's to interesting architectural projects in ER!

Yes, apart from trading, diving, roller skating, skiing, etc for ER I also build telescopes (kind of 3 tons scopes with 5 meters domes...) it keeps me busy )
http://cic.cstb.fr/amsee/scopes/scopes.htm
http://cic.cstb.fr/amsee/scopes/tmess4.jpg
http://cic.cstb.fr/amsee/

Located at 1250 meters 50mn from Nice International airport.

 

[ESRBob]

Poyet,
Looked up Caussols -- in the middle of one of my favorite parts of the world --- Route Napoleon and the hills up above Cote d'Azur -- rented a house a couple summers ago in Bar sur Loup just a few miles from you which was a delightful spot. Well done on your telescopes. Now back to market timing. (Somehow I think you'll find more long term happiness with your telescopes, but, bon courage and to each his own).