Market Timing???

[rpow53]

What does everyone think about people that put out news letters that claim to be able to time the market? can they do it are they just trying to make a buck? myself I have always done research and chose my funds that way. but since I just retired I am looking to reallocate and go more into index funds.

 

[SamHouston]

Personally, I don't trust anyone who claims his system can predict market swings. Sure, he'll be correct some of the time just based on the law of averages. That's what people tend to remember and talk about. It's sort of like what happens in Vegas; no one wants to talk about their losing visits and only remembers the winning trips.

Market timing is doomed to fail over the long term, IMO, just like gambling in Vegas is doomed to fail over the same period of time.

 

[tryan]

Yeah, nobody will be 100% right ... but, if you don't have an interest (me) or the time (not me) to do the research, it pays to subscribe. If been a Brinker subscriber for years ... pulled me out in Jan 2000 and put me back in March 2003. Doesn't really matter what happens from here on ... already justified about 500 years of subcription costs.

 

[cute fuzzy bunny]

Market timing is a fools errand...but I think there are a few times in an investors life when the markets are drunk and you can make a smart decision to commit more capital or get the hell out.

2000 and 2003 were good recent examples of those drunken moments.

 

[Bikerdude]

Yeah, nobody will be 100% right ... but, if you don't have an interest (me) or the time (not me) to do the research, it pays to subscribe. If been a Brinker subscriber for years ... pulled me out in Jan 2000 and put me back in March 2003. Doesn't really matter what happens from here on ... already justified about 500 years of subcription costs.

Ditto!

However, he will be wrong someday (some say he already was with the QQQ call) I just hope it's on the buy side.

 

[Ed_The_Gypsy]

I am not smart enough to be a timer and I don't trust anyone to make my decisions for me.

I have been fully invested for maybe 25 years and it has paid off well so far.

 

[chinaco]

I think timing the market is very difficult. I do not believe it is impossible. IF you have enough information and know how to interpret it properly, I believe it can be done. If one is correct a greater % than not correct, they will come out on top. That said, I believe very few people have the skill to do so. A few life long professionals.

All of the rest of us should stay away from it.


Some very legitimate people put out those letters. There are also some hucksters.

 

[tryan]

(some say he already was with the QQQ call)

I missed that party - thankfully - because my 401k did not carry the Q's. Read many threads about sorry souls who lost boat loads and never forgave Brinker for not giving any future guidance for those who followed the call. It seems Brinker wants forget he made that call.

 

[haha]

I am not smart enough to be a timer and I don't trust anyone to make my decisions for me.

I have been fully invested for maybe 25 years and it has paid off well so far.

That is probably the best 25 year period ever. Let us hope it repeats.

Ha

 

[fluffy]

Here's a fairly thorough evaluation of the predictive powers of various market gurus: CXOAG Guru Grades

Looks to me an awful lot like a normal distribution around 50%

 

[FinallyRetired]

I don't think you can time the market year in and year out, but you can sense huge downturns and bail out. I did so in 2001 when I figured the bubble was bursting and it was going to turn ugly. I was a little late on the bubble burst but not late enough to avoid the really down times. I bailed prior to 911 and it was sad to see a down market being hit by that evil tragedy as well.

I got back in around 2004, again a bit late, but still made more than if I had held through all of that. I tried timing again over the next couple of years but it was clear the good pickings were done. So now I'm staying in, but with the option of bailing out if I sense another huge downturn. I may have been lucky the first time, but you gotta do what you gotta do.

 

[cute fuzzy bunny]

Lets look at this from a different perspective...out of the thousands and thousands of newsletter writers, at least some decent percentage...just from mass of luck...should have called for a pullout around 2000 and a reentry to equities by 2003.

Oddly, it seems that 2000 pullout calls werent that common, and many advisors had people getting back into equities well before the bottom, as brinker did with the QQQ call already mentioned.

By the way, check this page: QQQQ Bob Brinker's QQQQ Advice and results

This guy kept pretty good tabs on Brinkers QQQ advice...pretty interesting to read the non-revisionist play by play.

Out of a few thousand guys flipping coins to decide what to do...someone should have had better performance. Instead, everyone gravitates to the guy who had the best coin flipping luck.

But the marketing literature looks great when they pick a winning period, start a year later or stop a year earlier, compare themselves to an inequivalent risk level index, etc.

 

[Spanky]

It seems Brinker wants forget he made that call.

... and continue to subscribe his newsletter for a couple hundred of dollars per year.

 

[bosco]

Well, I've said it before and I'll say it again. I realize I'm swimming upstream against the approved forum doctrine.

I agree that it is very difficult to "beat the market" in absolute terms using market timing. But that is not always the goal. Sometimes the goal is to reduce risk.

If I can garner 80% of the additional gains above cash by being in the market 50% of the time, have I not come out ahead on a risk adjusted basis?

Timing is difficult due to the all or nothing approach. But many of those on this forum who speak negative about timing seem to engage in it themselves, but just call it something else. What do you call it when the market makes you nervous and you practice "asset allocation" at a time that is not on a predetermined schedule?

The bottom line, to me, is to find the system that allows you to sleep at night and that is a written-down plan. This helps keep emotion out of it. When I was practicing market timing (I no longer do), I stuck to systems that I had the algorithm for--don't like relying on gurus. I won't say it was wildly successful, but neither was it disastrous. I think I slightly underperformed the market, but was only in about 60% of the time or so.

Finally, there are reputable timers with long-term respectable results. One that I watch (but don't use) is

Mojena Market Timing

I am certainly NOT advocating market timing. But I don't believe that the bottom line of whether or not it works is if it beats the market. After all, a diversified portfolio with a dollop of bonds won't beat it either. What's the difference if you allocate using the time axis versus allocating versus the "asset class" axis? Either way is a method to attempt to smooth volitility and risk.

 

[kcowan]

...
Mojena Market Timing ...
But I don't believe that the bottom line of whether or not it works is if it beats the market. After all, a diversified portfolio with a dollop of bonds won't beat it either. What's the difference if you allocate using the time axis versus allocating versus the "asset class" axis? Either way is a method to attempt to smooth volitility and risk.

Thanks for this insightful observation Bosco. It made me think and I have to agree with you.

 

[JustCurious]

If I can garner 80% of the additional gains above cash by being in the market 50% of the time, have I not come out ahead on a risk adjusted basis?

No. My goal is NOT to earn a percentage of the market return that is higher than the percentage of time I spent in the market. You may be able to accomplish that goal, but it is a meaningless goal to me.

My goal is to earn the highest possible return consistent with my risk tolerance. Therefore, I would MUCH PREFER to get 100% of the market return by being in the market 100% of the time, than to get 80% of the market return by being in the market 50% of the time.

 

[JustCurious]

I am certainly NOT advocating market timing. But I don't believe that the bottom line of whether or not it works is if it beats the market. After all, a diversified portfolio with a dollop of bonds won't beat it either.

Not true. A diversified portfolio of 90% stocks from around the world and 10% bonds earned 11.28% over the last 10 years.
Indexfunds.com | Index Portfolio 80 Purple | Index Returns and Allocations

This compares to the return of the entire U.S. stock market of 8.25% over the same time period.

https://flagship.vanguard.com/VGApp...dId=0085&FundIntExt=INT&DisplayBarChart=false

If you can get the market return with no effort, and it beats market timing, then market timing is inferior.

 

[cute fuzzy bunny]

Oh dear...Mojena Market Timing. I used to watch that site back in the late 90's and had forgotten all about it. He used to use 90 day t-bills instead of money markets.

Basically, by jumping in and out of the S&P 500...sometimes with frightening regularity...his standard model eked out a small benefit over a buy-and-hold. His aggressive model severely underperformed.

In a nutshell, the linchpin to the whole 17 year performance benefit was getting the heck out of the market for most of the post 2000 drop. If you look closely at the buy/sell signals issued in the last 7 years, they almost universally called both buys and sells at the very wrongest time.

And thats without even broaching the subject of all those short term gains and losses and the tax implications.

But its a fine example of mechanical timing models...which fail to take into consideration the psychological influence on short term market movements.

 

[Ed_The_Gypsy]

Quote:
Originally Posted by Ed_The_Gypsy
I am not smart enough to be a timer and I don't trust anyone to make my decisions for me.

I have been fully invested for maybe 25 years and it has paid off well so far.

That is probably the best 25 year period ever. Let us hope it repeats.

Ha

You are probably right, Ha. I doubt that the next 25 will be as good. I will be happy with average.

I am figuring on moving some of it into TIPS for insurance as I get closer to endgame.

 

[Alex]

IMHO, (and the learned opinion of many others far smarter than me) market timing is a losers game. [FONT=Times New Roman, Times, serif]Let's hear what experts say about stock market forcasts and market timing:

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." Warren Buffet

"Forget about timing the market, it doesn't work. You'll lose money. Invest for the long haul and then sit back and wait--the market always goes up in the long-run." Paul Farrell, CBS Marketwatch

"Market-timing is bunk." Pat Dorsey, Director of M* Fund Analysis.

"There will always be someone predicting disaster and someone predicting great fortune. At one time or another, each will be closer to correct than the other. But it won't matter to you if you understand this and have invested responsibly. You have a long-term plan; stick with it." Peter Lynch

"Everyone wants protection from the bear. But it's best to get it through diversification, not by trying to outsmart the market in a game in which the deck is stacked against the investor." C.V.Sanders, Morningstar

"Transaction costs and taxes kill most active traders. That's why no market-timing letter beats buying an index fund and standing pat." Mark Hulbert

"The market timer's Hall of Fame is an empty room." Jane Bryant Quinn, Author, Columnist

"Market timing is an ineffective strategy for mutual Fund Investors." CDA/Wiesenberger

"Nobody but nobody, has consistently guessed the direction of the bond or stock market over any meaningf
[/FONT][FONT=Times New Roman, Times, serif]There will always be someone predicting disaster and someone predicting great fortune. At one time or another, each will be closer to correct than the other. But it won't matter to you if you understand this and have invested responsibly. You have a long-term plan; stick with it." Peter Lynch

"Everyone wants protection from the bear. But it's best to get it through diversification, not by trying to outsmart the market in a game in which the deck is stacked against the investor." C.V.Sanders, Morningstar

"Transaction costs and taxes kill most active traders. That's why no market-timing letter beats buying an index fund and standing pat." Mark Hulbert

"The market timer's Hall of Fame is an empty room." Jane Bryant Quinn, Author, Columnist

"Market timing is an ineffective strategy for mutual Fund Investors." CDA/Wiesenberger

"Nobody but nobody, has consistently guessed the direction of the bond or stock market over any meaningful length of time." John Markese, President, AAII Journal

"Among the 160 or so newsletters the HFD monitors, the market timing recommendations of only 10 have beaten the stock market over the last decade on a risk-adjusted basis." Mark Hulbert 1-18-01

"Over a 12.5 year period, 224 of 237 market timing newsletters went out of business." indexfundsadvisors.com

"I'm a strong advocate of buying and holding." Charles Schwab

"Buy and hold is a very dull strategy. It lacks pizzazz and doesn't inspire much admiration at cocktail parties. It has only one little advantage: It works, very profitably and very consistently." Frank Armstrong, Author

"For most investors the odds favor a buy-and-hold strategy." Carol Gould, New York Times

"Some people in the popular press talk about 'getting into' a bull market and 'getting out of' a bear market, but it is all marketing hype." Rick Ferri, Author

"Only liars manage to always be 'out' during bad times and 'in' during good times." Bernard Baruch

"It must be apparent to intelligent investors who if anyone possessed the ability to do so (market-time) he would become a billionaire so quickly he would not find it necessary to sell his stock market guesses to the general public." David L. Babson, famed investor

"If you buy--and then hold--a total-stock-market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run." Jason Zweig, Money magazine

"The facts suggest that successful market timing is extroardinarily difficult to achieve." Burton Malkiel, author of Random Walk

"If we haven't said it enough, we'll say it again: Market timing is dangerous." Barron's Guide to Making Investment Decisions

"Don't trade in and out of funds. Stay invested.-- Not only does buy-and-hold investing offer better returns, but it's also less work." Eric Tyson, author Mutual Funds for Dummies

"If I have noticed anything over these 60 years on Wall Street, is is that people do not succeed in forecasting that's going to happen to the stock market." Benjamin Graham"


[/FONT]

 

[megacorp-firee]

I am not smart enough to be a timer and I don't trust anyone to make my decisions for me.

I have been fully invested for maybe 25 years and it has paid off well so far.

Ed, the point that many make here is that if you time the market you are actually NOT smart.

 

[AltaRed]

The only 'game' I play is to take advantage of buying opportunities with some of my cash allocation. Not sure this ends up actually being beneficial or not because I end up carrying a larger than normal cash allocation (which produces drag) to take advantage of those buying opportunities.

 

[bosco]

lol

I make a point about asset allocation using time in the market rather than asset classes.

the "refutation" quotes a 90% equity, 10% bond portfolio.

Look, if you don't accept the concept of risk-adjusted returns, fine. But many others do, and Hulbert will include that as a sort criterion as well as total return.

I agree, Mojena's aggressive model is bogus. But his non-leveraged model "ekes" as CFB puts it, market returns by only being in the market maybe 2/3 of the time. Sounds like better risk-adjusted returns to me. And if you use it in qualified plans, tell me about all these horrible tax consequences. If tax consequences are so horrible, nobody should own mutual funds that distribute.

Like I said, I don't use it because I don't like the "all in" or "all-out" approach. I'll play texas hold-em if that's what I want. But I'm not willing to just write it off as a "fool's errand" when it does have some use and validity for some.

 

[bosco]

just to be clear, I realize that there are LOTS of bogus MT models out there. Data-mining seems to be the most prevalent. They are recognized by things like

"buy on the signal unless it's a Tuesday after a MACD crossover and the relative strength lags the R2k for more than 4 days in a row." etc.

I pointed out Mojena mostly because it (as far as I know--it's proprietary) is based on some fundamental econometrics. It falls badly on it's face when it tries leverage and shorting.

I'm just not so willing to write off a whole class of tools which could conceivably have a place when used in a disciplined manner. Especially since many of the people rejecting them down seem to do "undisciplined timing" in their own portfolios and calling it "rebalancing."

The disciplined manner was the part I always had a problem with. It's harder to not make money when others are making it--harder than not losing it when others are losing it. Timing doesn't suit me--I am happy setting it and forgetting it and rebalancing once/year. But that doesn't mean I think it's for everybody.

 

[haha]

The disciplined manner was the part I always had a problem with. It's harder to not make money when others are making it--harder than not losing it when others are losing it. Timing doesn't suit me--I am happy setting it and forgetting it and rebalancing once/year. But that doesn't mean I think it's for everybody.

Very good point here. I have been a market timer for over 30 years, successfully, due to a need to avoid large drawdowns imposed by being retired with a family to support and with modest resources.

I really don't care if someone else makes more money than me over some period, or over his lifetime really. I want to reach the distant shore safely and with good results relative to T-bills and CDs.

Actually I have done much better than this, but my goal has always been safety first, return second. I believe that one cannot find safety today in going out and buying anything readily available with any considerable duration. Some choices may be spectacularly successful; just not a priori "safe".

If I had to choose some new long investment now it would be TIPS, maybe between 5 and 10 years.

IMO the reason buy and hold has become the only respectable posture is that it is much better from the POV of mutual funds and various asset gatherers to have clients who will leave their money on deposit. So as opinion makers, they work to bring about acceptance of this approach. Likewise it is an easy sell with self directed investors because of what Bosco said above- it gives you what everyone else is getting at the time they are getting it. So you are safe from self criticism and criticism from you spouse and from ribbing from your friends.

Ha