Market Timing Schmarket Timing

[Animorph]

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Originally Posted by dallas27 I think the only exception(i hope you agree) is the "blood in the street" opportunities when the market is crashing big-time, a la housing crash. We all know it's coming back eventually, the trick is do have cash or equivalent at those times. Buffet calls it the soft pitch. But timing/opportunity could also be used. Sent from my iPhone using Early Retirement Forum

Absolutely, been there, done that, posted about it. But still, there's a problem of when. The market goes down 20%, how much of your cash goes in? 30%, 40%, 50% down, how much goes in? If it goes down 20% and you stay out, it could recover and you never get in. If it goes down 20% and you go all in, it could go -50% or more before it recovers.

I split my excess cash into five equal parts and invested in -5% increments from -20% down and lower in 2008-2009. Then I had to find a bit more to add at -45% and -50%. If it had continued down I would have been left to shifting from large caps to small caps or something similar. Almost did that too.

Anyway, all algorithmic, no judgment calls beyond the original setup, executed according to plan. The cash was stockpiled because I was retiring in late 2007 and wanted insurance against just such an event. If the market had continued up I would have just spent the cash before touching equities. Not something I would normally do during accumulation.

[Animorph]

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Originally Posted by Lsbcal I hope you do not think I'm being picky. I read several posts on Bogleheads saying it is easy to get fantastic backtesting results with several variables. But I've not seen a demonstration of this. I would really like to see a great backtest that covers several decades with fantastic results and maybe 5 variables.

Sorry, no examples. Repeated from various readings, and from curve fitting experience.

Say you get a rough match to S&P 500 total return using P/E10. Now maybe you can get a better match by also considering yearly profit margins, so you use that. Maybe using P/E with expected earnings doesn't help, so you can discard that. So if some guy is using five inputs you can assume each added input improved the fit.

So that guy could be claiming his 5 factor market timing scheme generated 1% better gains on average in back testing than a 3 factor baseline scheme or simple buy and hold. The problem is, he is likely just matching the past data more and more closely as he adds inputs to his scheme. He could get so he predicts at least a few of the past market crashes fairly accurately, which is all he has to do to look pretty good. 0.51 * price to book instead of 0.50 * price to book gives him a sell signal right on the peaks in 2007 and 2000. The more inputs he uses, the more he can fine tune the results. You could have perfect 20/20 hindsight with enough complexity.

That's a degree of accuracy that just isn't present in the market as it continues into the future. And why really complex schemes that work really well in back testing can completely fail when used to predict the future.

[eta2020]

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Originally Posted by NW-Bound You both made me look. Lemme see... On 7/30 when this thread started, the S&P was 1970. It is now 1972. I am up $5755. Add to that the $3202 that I spent in that interval of time, and I am up $8957. How's that for one-upmanship? In terms of percentage of portfolio, it's nothing, but hey, a $K is a $K. For short-term trading of just 2 or 3% of portfolio, if I can make a bit of extra money to help pay for gas for my motorhome, I am happy. I am leaving in 3 days to embark on that 2-month long and 9,000-mi trip to the Canadian Maritimes. Won't be posting here much when I am on the way.

Well when I wrote I am exactly where I was on 7/30 I meant within plus and minus 15k. I don't remember exact sum I had and since we are still working we probably added another 5-10k of income into the pile.

So maybe you beat me But IF market from here goes up OP will not beat me and I did zero work to get here.

[rayvt]

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Originally Posted by Lsbcal Sounds reasonable to me. To clarify just one point, you do a sell at 3% below SMA and then buy back at what point? Maybe 2% below SMA or do you have a wider band, maybe buy back when the price hits the SMA?

The last. Buy when it rises to the SMA.

IMHO, whipsaws are not a big deal, but mainly annoying and costing you trading costs, commissions, etc. I suspect that the bad ones and the good ones cancel out, since whipsaws are just like a relay chattering just as it it on the verge of flipping. Haven't backtested this, though.

[bob boag]

OP checking in.

Yeah I regret it down a couple grand

[Lsbcal]

Quote:

Originally Posted by bob boag OP checking in. Yeah I regret it down a couple grand

Maybe September will give you a reentry trade?

Where is that preying emoticon?

[eta2020]

OP by now I am about 60k-70k up from date when you sold. And as I said in addition I have no taxes to pay on any trades.

[robnplunder]

As long as the OP buys back at lower than what he sold on 7/30, he wins. It can still happen. The market isn't too far up from 7/30 levels and a correction can come at anytime for any reason. Economy growth rate isn't setting any new record. Stock prices is at relatively expensive level one may argue. Bob boag may still have the last laugh. Who can really tell?

[eta2020]

Quote:

Originally Posted by robnplunder As long as the OP buys back at lower than what he sold on 7/30, he wins. It can still happen. The market isn't too far up from 7/30 levels and a correction can come at anytime for any reason. Economy growth rate isn't setting any new record. Stock prices is at relatively expensive level one may argue. Bob boag may still have the last laugh. Who can really tell?

Well I should sell now ..... and if I do exactly same timing of going back to market as OP I will do even better.

But I never ever timed markets so I will pass that idea.

I am sure with hindsight 20/20 one can find clever exit and entry points and make killings in timing market.

[robnplunder]

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Originally Posted by eta2020 Well I should sell now ..... and if I do exactly same timing of going back to market as OP I will do even better. But I never ever timed markets so I will pass that idea. I am sure with hindsight 20/20 one can find clever exit and entry points and make killings in timing market.

I am not a market timer either. But I am secretly (well, not so much now) rooting for the OP to win. It took guts (be it reckless, dumb, brilliant) to do what he did and I want him to get rewarded for it. But if market keeps going up, that works for me even better .

[eta2020]

IMO people on this forum (including me) have no skills to do successful timing of market or individual equities. They may have a luck to it here and there with success.

We are nor Carl Icahns

But lets wait for OP to make posting on a day when he goes back into market.

[Totoro]

Side remark: Carl Icahn is a high stakes poker player, not a market timer. He pushes management of stagnant companies around to get off their asses and start delivering value. Very different.

I'm not sure there actually is a really rich market timer around. Can't think of a single succesfull one right now.

I'll just stick to a 50/50 allocation (roughly) right now. Heads (market up), I win! Tails, (market down), I win and get an excellent entry opportunity.

[LOL!]

So far ...
Market timing 0, Schmarket timing 1

[robnplunder]

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Originally Posted by Totoro I'm not sure there actually is a really rich market timer around. Can't think of a single succesfull one right now.

Maybe, someone like Putin is creating his own market timing opportunity. I am sure there are others who can, too.

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Originally Posted by Totoro I'll just stick to a 50/50 allocation (roughly) right now. Heads (market up), I win! Tails, (market down), I win and get an excellent entry opportunity.

Me, too, except I am 40/60, with part of 60 in aggressive bond funds (emerging market, e.g). My target is 8% yearly return over the long run and that should be enough to retire on.

[robnplunder]

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Originally Posted by LOL! So far ... Market timing 0, Schmarket timing 1

Don't you have your own market timing thread? The first few times I've seen your thread's subject line, I thought it was about "LOL" at market timers. I didn't know "LOL!" was a user name.

[LOL!]

Yes, it's a very successful market timing thread with tens of thousands of views.

[bob boag]

OP still on the sidelines. Good luck yall.

[pb4uski]

So far it has only cost you 1% or so (Total Stock index is up .97% since 7/30 with dividends reinvested). That is down a bit since 9/6 when it was up 2.28% from 7/30.

I hope it works out for you but I don't think it is the smart play. The most difficult part of market timing is knowing when to get back in.

[target2019]

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Originally Posted by bob boag OP still on the sidelines. Good luck yall.

Funny you mention that. Yesterday I researched the business cycle. Before, I was convinced we were heading to a recession in 2015. Now I am not as sure.

Are you using signal(s) to move back in?

[eta2020]

Quote:

Originally Posted by bob boag OP checking in. Yeah I regret it down a couple grand

OP you may do well given the way market goes......