Why I believe we are about to embark on a historic bull market run

[OldShooter]

... I will be making money during both a bull market and a bear market. This separates me from the average investor.

And what are your actual historical results from using this strategy and with how much money?

 

[Markola]

I

I intend to rotate back to equities as follows: 10% drop means 10% equities/90% treasuries, 20% drop means 20% equities/80% treasuries, etc. No guessing where the bottom will be. Just a systematic reallocation to catch the recovery spikes. Since I am buying equities at dirt cheap prices, I will be making money during both a bull market and a bear market. This separates me from the average investor.

Stocks have dropped significantly from the peak, and from when you sold last summer, so are you buying now?

 

[2177V]

I do not need historical experience.

I was a combat soldier who had duty in a hostile fire zone and I was taught that you should "always take the initiative".

This explains why I can never be a passive investor because a passive soldier is usually a dead one.

I am different and that's the way it is. I cannot expect other people to be like me.

 

[Dtail]

The market has fallen 1900 points today! Sounds like you jinked the stock market for your prediction! Next time you make a prediction, I will do the exact opposite.

In fact, I actually did.

I re-allocated from 60/40 to 100% treasuries in the Summer of 2019. For me...this is my best bear market ever.

That's good about Gundlach. He also has made multiple bad predictions too like the 10 year yield going to 3.5% when it started creeping to 3%.
Nevertheless it worked for you. That's good.

 

[2177V]

Stocks have dropped significantly from the peak, and from when you sold last summer, so are you buying now?

Yes I am. I went from 100% treasuries to 10% equities / 90% treasuries and now I am 20% equities / 80% treasuries.

I am buying equities at depressed prices.

Like I stated: Best bear market ever.

 

[OldShooter]

I do not need historical experience. ...

So it is a strategy you have not actually tried that makes you money in both bull and bear markets and separates you from the average investor? Got it.

One of the behavioral finance books, Thaler or Kahneman -- I don't remember, talks about experiments that showed the less someone knew about a subject the more confident they were in their knowledge.

 

[Markola]

Well, you seem confident you’ve found an infallible strategy that, as you say, sets you apart from the average investor. Good luck. For my taste, that’s a lot of money to potentially have on the sidelines in treasuries awaiting crashes that could be earning yield and compounding year after year in a fully invested and diversified portfolio. Keep us posted.

 

[audreyh1]

That's good about Gundlach. He also has made multiple bad predictions too like the 10 year yield going to 3.5% when it started creeping to 3%.
Nevertheless it worked for you. That's good.

I think he even said it was going to 6% by now!

 

[Fermion]

Yes I am. I went from 100% treasuries to 10% equities / 90% treasuries and now I am 20% equities / 80% treasuries.

I am buying equities at depressed prices.

Like I stated: Best bear market ever.

Had you paid attention to my post in Feb and bought 100 March 20, 2020 puts on SPY at $325 for $3 each, you would have turned $30,000 into $700,000

 

[bobandsherry]

Had you paid attention to my post in Feb and bought 100 March 20, 2020 puts on SPY at $325 for $3 each, you would have turned $30,000 into $700,000

Is that what you did? If so, congrats!

 

[Fermion]

Is that what you did? If so, congrats!

hah, no, I sold for like $10,000 profit or something (can't remember off the top of my head, I did several trades)

I have weak hands.

 

[2177V]

Reminds me of my treasuries which exploded upwards at first but are now declining because people had to raise cash to meet their margin calls..... so they had to liquidate their treasuries and gold in their portfolios. Having gold and treasuries decline in a bear market is not typical.

However, I am still +10% instead of +15%. This is much better than -10% or -20% In the long term, I think my 20% equities / 80% treasuries should do well. If the market move up, my equiities that I purchased at depressed prices will move up. If the market move down, I buy more equities and go to 30% equities / 70% treasuries, I have no margin calls to satisfy and I avoided the initial loss which was my original objective.

Coronavirus is temporary. However, the damage it is causing may not be. There may be large scale bankrupcies in Europe because Europe has a debt issue and has been hit harder than the USA. Government are already talking about bailout loans. Note the lag time...China, Europe, USA. I prefer a V shape recovery since I rather make money quickly than slowly...even at the cost of lower profits during my best bear market ever situation.

Life is too short for a U shape or L shape recovery. I am pretty sure passive investors would rather see a V shape recovery too.

 

[ERD50]

So it is a strategy you have not actually tried that makes you money in both bull and bear markets and separates you from the average investor? Got it.

One of the behavioral finance books, Thaler or Kahneman -- I don't remember, talks about experiments that showed the less someone knew about a subject the more confident they were in their knowledge.

Could have been Taleb (of Black Swan fame) as well, or maybe any two, or all three of them.

-ERD50

 

[bmcgonig]

So it is a strategy you have not actually tried that makes you money in both bull and bear markets and separates you from the average investor? Got it.

One of the behavioral finance books, Thaler or Kahneman -- I don't remember, talks about experiments that showed the less someone knew about a subject the more confident they were in their knowledge.

And you indeed are always quite confident that we shouldn't time the market

[emoji16][emoji16]

 

[OldShooter]

And you indeed are always quite confident that we shouldn't time the market ...

Yup. I don't think betting on the slots is a good idea either. In either case you can win, but the odds are against you. And actually, slots are probably the better choice.

In most of what I have learned about investing, I simply stand on the shoulders of giants. For example, here is some collected wisdom: https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes

Here is what will happen: Some fraction of people here will successfully time the market. Maybe 25%. They will account for maybe 95% of the posts and in most cases they will have concluded from being lucky that they are geniuses. We will hear little or nothing from those who have failed. Nassim Taleb calls this "silent evidence:"

Diagoras, a nonbeliever in the gods, was shown painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that praying protects you from drowning.

Diagoras asked, “Where are the pictures of those who prayed, then drowned?”​

 

[OldShooter]

... Life is too short for a U shape or L shape recovery. I am pretty sure passive investors would rather see a V shape recovery too.

Actually, passive investors in the accumulation phase should want the market to recover very slowly until just before they retire. Their regular savings will buy more.

For passive investors drawing on a portfolio in retirement, it depends on whether and when they might need to sell equities. No need to sell = little need for angst, though the brokerage statements will be more fun to read after the recovery.

 

[tulak]

Here is what will happen: Some fraction of people here will successfully time the market. Maybe 25%. They will account for maybe 95% of the posts and in most cases they will have concluded from being lucky that they are geniuses.

I'm far from a genius and wouldn't make that claim. But I don't think this outcome was that difficult to predict. Check threads here in early February and you'll see that's the case. And just to note, I've been investing for over 20 years and have always been a classic index investor, buy and hold. I don't try to time the market (usually).

This time around, I felt that it could be different. The source was obvious: China. People couldn't get to work and massive quarantines. At the time, I felt that this would have at least a quarter impact and cause short-term supply chain issues. Keep in mind, the markets kept rising at this time. Made absolutely no sense to me. I also suspected that this could spread throughout the world. EMH was not working.

This was early February, but I got lazy and didn't do anything. Then the market dropped on 2/24. S&P closed that day at ~3200. I remembered my earlier thoughts on what could happen. Remember, I wasn't convinced it would happen, just felt that the probability that we would go down was a lot higher than going up.

So what did I do:

1. Sold equities from ~72% of AA down to 50%.
2. Bought puts against SPY.

If I was wrong, I was giving up some gain. So be it. The puts were a small amount of my overall portfolio and if I lost that, not a big deal. Cheap insurance.

Since then, I've sold some puts and I'm above what I paid from them. It could be I sold too earlier, but I am selling when I hit certain price-levels. I also rebalanced twice to 50% and bought equities back to 55% at ~2400 and greatly simplified my portfolio. Probably too soon, but that's ok.

So was this luck?

Idk. But it didn't require a genius to see how this could play out, even though I'm surprised at how quickly it unfolded.

 

[2177V]

And you indeed are always quite confident that we shouldn't time the market

[emoji16][emoji16]

+1
There are people who believed that "you can't time the market".
I do not believed in the word: "Can't"
(Only ex-military understand this)

I saw nothing wrong with my strategy of changing my 60/40 portfolio into a "capital preservation" portfolio of 100% treasuries in 2019.

This is now my best bear market ever. You can't argue with success.

 

[OldShooter]

... You can't argue with success.

True enough. You successfully dodged a big hit, but no one can say whether it was due to luck or to skill. That is Taleb's point in "Fooled by Randomness."

 

[Hyper]

I do not believed in the word: "Can't"
(Only ex-military understand this)

What a BS pathetic ignorant statement!

Humble much?

 

[bmcgonig]

Yup. I don't think betting on the slots is a good idea either. In either case you can win, but the odds are against you. And actually, slots are probably the better choice.

In most of what I have learned about investing, I simply stand on the shoulders of giants. For example, here is some collected wisdom: https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes

Here is what will happen: Some fraction of people here will successfully time the market. Maybe 25%. They will account for maybe 95% of the posts and in most cases they will have concluded from being lucky that they are geniuses. We will hear little or nothing from those who have failed. Nassim Taleb calls this "silent evidence:"

Diagoras, a nonbeliever in the gods, was shown painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that praying protects you from drowning.

Diagoras asked, “Where are the pictures of those who prayed, then drowned?”​

Taleb times the market. He goes short. He goes long. He will hedge and de-hedge whenever he see outside risk or not. Hedging is just another form of market timing.

 

[OldShooter]

Taleb times the market. He will hedge and de-hedge whenever he see outside risk or not. Hedging is just another form of market timing.

Well I don't know if he does or not, but I do know that your comment is irrelevant to the concept of "silent evidence."

 

[ERD50]

Taleb times the market. He goes short. He goes long. He will hedge and de-hedge whenever he see outside risk or not. Hedging is just another form of market timing.

Does he publish an annual report (I assume nothing we would have access to)? I'd love to see how his investments have done.

He appears to be a brilliant well-grounded guy. His approach just might work to identify miss-priced items in the market. And I think he generally finds this miss-pricing out at the tail ends, and those rarely get hit. Kind of like betting on the horse with the worst record, and seeing that the odds of that horse placing are actually better than the betting odds. You don't win often, but you win big. That's a tough game to play!

Related to that - I'm not interested in real gambling, but DW likes to go to the horse races with friends once or twice a year, just as a get together. So I made the "safe bets", but then you might win $1.20 or something from time to time, not worth it to stand in line to redeem it. So then I went for the long shots. Just threw my money away. Either one was boring for me.


-ERD50

 

[ERD50]

Originally Posted by vchan2177 View Post
I do not believed in the word: "Can't"
(Only ex-military understand this)

What a BS pathetic ignorant statement!

Humble much?

This guy did not believe in the word "Can't" either:

-ERD50

 

[OldShooter]

I haven't paid any attention to Taleb as an investor. Someone told me once that he had run a hedge fund but I have not researched it. From his books I have concluded that he likes to buy long-shot options that are inefficiently priced -- too cheap for the risk that the seller is taking. Most of them expire unexercised but he implies that he does well when on of the options hits. I dunno. Not my game.

I like him as an observer of people in general and of investors in particular. He can be kind of a lunatic but he is also very insightful. He is not afraid to go against the grain, either. In one of his books he takes on Markowitz, Fama, et al in a very amusing few paragraphs. I don't know if he coined the term "Black Swan" but it is frequently attributed to him.

He'd be a good author to download and read during this virus kerfluffle.