Going to 100% cash

[Rich_by_the_Bay]

Audrey is a "last word" kinda gal.
Dex is a "last word" kinda guy.

In case you other readers couldn't tell .

PS: I think that rebalancing done regularly by some pre-determined, nonconditional algorithm or rules is not market timing since you do it regardless of prevailing market conditions or signals. Once you start skipping it sometimes and doubling up other times based on the market, you cross from rebalancing to AA.

But... I don't care what you call it.

 

[LOL!]

I will say that I like this thread (at least the original post) a lot better than when someone posts "I went all cash 6 months ago" because they rarely post that when it was a bad call. Dex is putting it out there up front.

I like this thread as well.

I hope Dex starts another one: "I'm going 100% into stocks!"

 

[Stevewc]

Oh come on dex get in the last word.
Go ahead and say, "Yes Mam"

That's how I do it at home.
I always get the last word in that way.
Steve

 

[Nords]

I like this thread as well.
I hope Dex starts another one: "I'm going 100% into stocks!"

I don't worry about people getting out of the market. Plenty of them everywhere.

I worry about when people declare that it's time to start getting back into the market.

 

[crispus]

News Headlines

This might add some fuel to the bail to cash fire.

I might be a fool, but I am sticking to my 50/50 mix of bond to equity index funds, and I hope that in the long run things will become positive again.

 

[dex]

Have no idea. Do angels really exist?

Oh wait - I married one, so they must exist.

Audrey

Are you sure? There has been a lot of chatter that he times the market behind your back and he is using a wiji board!

 

[traineeinvestor]

A quick google search shows that most "experts" are ofthe view that rebalancing is a form of market timing. Here is a short explanation: What Is Market Timing? | The Incidental Economist and a more detailed one: What Is Market Timing? | The Incidental Economist

Personally I think it is pretty clear that although rebalancing to a set formula is very different from changing allocations based on ad hoc expectations of future market movements, it is still a form of market timing. In brief, rebalancing is simply saying that when the relative values of two or more asset classes diverge by a sufficiently large margin, it is time to sell one and buy the other(s) - it's pretty hard to understand why this is not market timing. The fact that the rebalancing decision is made well in advance does not change anything.

 

[NW-Bound]

Well, I for one don't care if or what is called something.

But I am sure that when I do not make money with my recent market move, it just sucks!

 

[dex]

My question to Dex is: You appear to base your decision (at least in part) on a broad market technical analysis. Do you not apply this same type analysis to actual holdings because you only invest in funds (I think you mentioned this)? I am getting at whether you consider this a sky is falling scenario for all equities vs a general market decline that will pull down virtually all broad holdings although individual companies may prosper.

I don't understand the above. It sounds like a stock broker that would say we expect stocks to decline and are moving money into safe havens like food stores.

There have been times in the past where some parts of the economy & companies have done well while others have done poorly. If we were in a secular bull market it might be worth the time to research and take the risk. I think Investor Business Daily is a good place for that type of investing.

Since we are in a secular bear market I don't think it is worth the time or risk.

I am also curious as to whether you apply this reasoning to foreign equities. Are ADRs included in your technical analysis? Would this not show the whole picture because they trade on other non-US exchanges as well?

I have invested in China stocks in the past - oil & China Life. You can use technical analysis with the US information but you need to read news reports about them since they can be very volatile.

I think emerging markets will be a good investment in the future - stocks & bonds.

 

[dex]

I think we need a table so I can get under it with you.

I lived on Shawn Kwong Road in Happy Valley 10 years ago.

 

[ERD50]

I can tell you don't read my posts by that comment. Those that do; know 'everybody does it' is not something that concerns me at all.

I understand that from your other posts, but people aren't always consistent in all walks of their life (probably a good thing!). I was just commenting on the content of this thread.

I'm not saying that 'everybody does it' factored into your decision to market time. But it appears to me (and appearances can be deceiving, esp in this medium) that you're using the 'everybody does it' refrain to deflect the calls of 'market timer'.

I'll be honest, I just don't have the conviction to market time in any significant way. If you've got the conviction, I guess you have to go with it - what else could you do?

As they say, differences are what makes markets.

-ERD50

 

[dex]

I'm not saying that 'everybody does it' factored into your decision to market time. But it appears to me (and appearances can be deceiving, esp in this medium) that you're using the 'everybody does it' refrain to deflect the calls of 'market timer'.

I misunderstood - I don't mind being called a market timer (there are a few here; some even use the AA method). I really don't make that many changes in positions. And my getting the timing right is often off a bit - I get greedy. As I said, I wish I was out with the other who got out in April/May (?).

 

[NW-Bound]

As I said, I wish I was out with the other who got out in April/May (?).

Me too! Two hundred grands down the tube since late April! But I don't lose until I sell, right?

Well, I have been bullish, and pay the price. Still holding, not planning to sell nor buy.

 

[SunsetSail]

I don't understand the above. It sounds like a stock broker that would say we expect stocks to decline and are moving money into safe havens like food stores.

There have been times in the past where some parts of the economy & companies have done well while others have done poorly. If we were in a secular bull market it might be worth the time to research and take the risk. I think Investor Business Daily is a good place for that type of investing.

Since we are in a secular bear market I don't think it is worth the time or risk.

Ouch. I take that as a dig, but I won't take it personally. My main point was whether you are making this move because you think something will trigger a huge decline in equities, or it is just part of your normal investing strategy when you seen an opportunity through macro technical analysis.

I think the IBD 10 success factors are mildly useful, but I don't put much credence in the rest of it.

I have invested in China stocks in the past - oil & China Life. You can use technical analysis with the US information but you need to read news reports about them since they can be very volatile.

I think emerging markets will be a good investment in the future - stocks & bonds.

My point here was whether technical analysis still applies in the same way as the past given that the make up of the market is more international now so you are comparing apples to oranges in the analysis.

I am just curious and asking specific questions as to your thought process so I can hopefully learn something new or at least view another perspective. I am not trying to make a statement about whether it is right or wrong.

 

[dex]

Ouch. I take that as a dig, but I won't take it personally. My main point was whether you are making this move because you think something will trigger a huge decline in equities, or it is just part of your normal investing strategy when you seen an opportunity through macro technical analysis.

No dig intended.
No trigger.
More weight on the technical analysis.

My point here was whether technical analysis still applies in the same way as the past given that the make up of the market is more international now so you are comparing apples to oranges in the analysis.

I am just curious and asking specific questions as to your thought process so I can hopefully learn something new or at least view another perspective. I am not trying to make a statement about whether it is right or wrong.

Technical analysis is valid for international stock but you have the currency aspect. Recently the trend has been US stock market down - US$ up. So if that repeats it would be a good time to buy unheadged foreign stocks and bonds MFs.

 

[audreyh1]

Are you sure? There has been a lot of chatter that he times the market behind your back and he is using a wiji board!

He certainly market times with AAPL stock in his SEP-IRA where he makes no pretense of managing risk and likes to put all his eggs in one basket at times. He hasn't done too badly since 1995. That is the only stock he trades.

He very happily "delegates" running the rest of the investments to me.

Ouiji board? DH? No way - LOL!

Audrey

 

[Hamlet]

I think that stocks are likely to wildly outperform cash and bonds over the next 5-10 years.

I will continue to hold my asset allocation at 95% stocks.

 

[audreyh1]

Personally I think it is pretty clear that although rebalancing to a set formula is very different from changing allocations based on ad hoc expectations of future market movements, it is still a form of market timing. In brief, rebalancing is simply saying that when the relative values of two or more asset classes diverge by a sufficiently large margin, it is time to sell one and buy the other(s) - it's pretty hard to understand why this is not market timing. The fact that the rebalancing decision is made well in advance does not change anything.

I don't see how you can call something market timing if you are not using predictions to change your investment strategy. Predictions of which asset class will outperform in the near-term and therefore changing your investments to favor those asset classes is the essence of market timing.

If you are not acting based on near-term predictions, then you aren't market timing. If you are maintaining the same asset allocation across all market conditions, and consistently rebalancing according to a pre-determined formula, then you are not market timing.

Many AA investors have chosen their AA to target a certain short-term volatility versus potential long-term growth tradeoff. Occasional rebalancing is necessary in order to stay within that volatility/long-term performance range. Rebalancing is really about managing volatility.

Audrey

 

[audreyh1]

I think some of the confusion in AA may be that when a portfolio is out of balance from the target AA, some take that to mean that one class is "overvalued" while another is "undervalued" and take that as some kind of judgement call on the markets.

But that is not correct. There is no judgement call about relative valuations, hard as that may be to believe. It is simply that once the portfolio is significantly out of balance, the investor has deviated from his original volatility target, and needs to rebalance to return to that goal. AA truly does not care about valuations. Even about relative valuations.

Audrey

 

[HFWR]

Hmmm...

I'm in the "AA rebalancing is not market timing" camp.

Currently 40% stock index funds, 40% bond index funds, 5% REIT, 5% CCF fund, 10% cash. Rebalancing bands at 5/25%. Not likely to change soon, but never say never...

Watch CNBC to ogle Becky Quick, but take all talking heads, newsletters, pundits, soothsayers, naysayers, gurus, palm readers, and politicians with a grain of salt...

Is that a real poncho, or is that a Sears poncho?

YouTube - Frank Zappa-Cosmik Debris

 

[Purron]

Hmmm...


Is that a real poncho, or is that a Sears poncho?

Wow. Wish Frank was still round. Miss that guy.

 

[samclem]

Rebalancing to a predetermined AA is not market timing. At all. Even the poorly-written ""Incidental Economist" site referenced by TraineeInvestor implies this:

(Example 3) You have an investment plan that says you will rebalance on January 1 each year to maintain your planned asset allocation. Hangover or not, you do so faithfully each year. Ruling: not market timing.

Can there really be a difference whether the rebalancing is done on a particular calendar date or when the %s get sufficiently out of whack?

Market Timing: "Based to my analysis of future market conditions, XX asset will soon be going up in value, while YY asset will soon be going down in value. I'll sell my YY and buy some XX."

AA: "Based on my analysis of the historic individual performance of XX and YY and the historical correlation of their values and performance, I will attempt to keep my portfolio with set percentages of each. When the percentages get unbalanced from these desired ratios, I will rebalance them. (I might check every day, or once per year--it makes no difference for the purposes of this discussion). I will make no attempt to guess what the market will do next."

 

[easysurfer]

I think rebalancing with AA is more a passive approach and not market timing. An analogy, it's like re-tuning the dial on the radio for stations that drift. Whereas, non AA is more like actively searching the radio for a favorite station.

 

[DblDoc]

Rebalancing is a risk management strategy, It is NOT market timing. For those that believe it is post so on the Bogleheads board...and then duck.

DD

 

[NW-Bound]

I am a market timer! There, I have said it. However, I use AA to make sure that I do not risk too much, in case I turn out to be wrong.

Some pundits like Abby Cohen would advise people to vary the AA, based on her prediction of the market movement. For many, their reason is based more on the fundamental arguments, rather than on the technical side. Are they market timers? Of course they are. Are they right all the time? Of course not.