Letting the markets be free vs government intervention…
Hmmm…let me think…
Naw, give me free market capitalism every time.
At least in the past half century or so (maybe longer), we’ve never had free markets…so it’s kind of hard to know how they’d do. I’d certainly like to give it a try.
But any discussion that doesn’t start with the recognition that what we have had for decades is “crony capitalism”–supported by both sides of the isle–is misdirected from the start.
There is a big difference between “predicting” a market decline in advance and"recognizing" it a bit earlier than others. Or doing some index based trades based on probabilities.
True enough about the number of major tops and bottoms not being enough for really hard data. But I can’t wait 200 years, like every thing else in the stock market I have to decide based on incomplete data.
But some methodologies like momentum have been shown to work on data over 2000 years old (Roman grain prices)
No Buffett probably doesn’t do it. He doesn’t have to, he is a stock super-genius. I am not that smart . Furthermore he can’t do it, since most of companies are 100% owned by BRK. Even if they were not 100% owned ,this does not work when you have millions of shares to sell.
Just because YOU (not a specific you) can not do this doesn’t mean it can not be done. The fact that I can’t throw a 95 mph fast ball (or probably even a 70mph fast ball) does not mean that it can’t be done. If you have short weak arms but strong quick legs, run track or cycle rather than trying to be a baseball
pitcher.
There are lots of ways to be a good investor. But sadly even more ways to be a bad one. I know ,having sampled several of these bad ways myself…
I don’t expect to find a perfect way which is why I use a mix of methods including some buy and hold for companies where I have deepish conviction. Timing is not an either/or proposition.
I agree the market is “oversold” I would be very surprised if we don’t get a nice rally Tuesday morning. But I don’t put money on these short term events. It’s too hard on my nerves
One more link, because it’s an excellent post, and relevant to the discussion
http://thereformedbroker.com/2016/01/18/everyone-is-a-closet…
re that northmantrader link.
I quit reading after this statement
It’s a horrific bear market.
because that is not true in the US at least. A bear market is defined by most as 20% or more down. So we do not know that that this is bear market,only that so far it is compatible with a bear market. It could turn out to be a common 10% or 12% decline
As far as my methodology goes it will take another two weeks for the most reliable data (monthly) to kick in but it does not look good at the moment. If it is real bear two weeks won’t make a lot of difference, 400 point daily declines by definition can not persist too long.
A nice piece of confirmatory data (though I don’t know how to exactly quantify it without data mining) is that all the industrialized world stock markets are falling in tandem. The old idea of diversification abroad is mostly dead in this new internet connected world.
The smartest guys with the fastest computers and the best software have not successfully timed the market consistently.
So unless you have a direct line to the Almighty, then market timing is not for you.
The smartest guys with the fastest computers and the best software have not successfully timed the market consistently.
So unless you have a direct line to the Almighty, then market timing is not for you.
I’m not sure I agree. I read a few books on Bernie Madoff, and they talked quite a bit about what Wall Street money managers thought of him. And the answer was basically [wildly paraphrased] “I knew he was lying. Everyone knew he was lying. The returns he was offering weren’t possible with the strategy he was claiming. It just didn’t hold up to any scrutiny at all. I didn’t think it was a Ponzi scheme, I thought maybe it was insider trading or front running the mutual funds or something. But I knew he wasn’t 100% legit.”
But these same managers put their clients money in Madoff’s hands anyway. When asked why, they basically said “I had to. The very fact that he was offering higher than reasonably possible returns meant that I hadn’t to put my client’s money with him or my clients would go with a money manager who would put their money with him.” Even knowing, with virtual 100% certainty, that Madoff was a bad bet they still bet on him. Because “the money” wasn’t willing to sit on the sidelines and miss out.
The same thing goes with market timing. All of those guys with the fastest computers and the best software? Whether they can predict market timing is one thing, whether they can convince the “money” that they should pull out of the market when things are going great or to jump in when things look dismal is another story.
After all, if you believe that there’s no way that you can beat the guys with the best software and fastest computers, aren’t you basically espousing perfect market efficiency? That there’s no point in investing in SWKS because if it was such a great deal that the guys with the fastest computers would have figured it out already?
Personally, I’m not brave enough to be 100% cash myself. No matter what “indisputable” information I had I just would feel like I could never be 100% sure of my concerns. Just like I’d never put 100% of my money in one stock I’d never put 100% of my money in cash. But on two occasions I have said to myself, “you should take a strategic cash position”. Both times I was “right”. Meaning I did better than the S&P index. I didn’t time the perfect top or the perfect bottom, but I did get some money in cash in 2000 (getting back in in 2001) and some money in cash in 2007 (getting back in in 2009). Could I have time the market more accurately? Sure.
And, in response, to “how did you do it” question? I have no easy answer. As they say, if it were easy then everyone would do it. In 2000 I was in the tech industry and I just looked around and just had a front seat view to some of the craziness. In 2007 I had a potential customer named American Home Mortgage. I was pretty sure my company was going to win the business when AHM suddenly claimed bankruptcy. I already knew their business model pretty well, because of the work we were doing with them. And the more I researched their bankruptcy the more I realized that there was something systemic to be worried about."
Of course hindsight is perfect. But, when talking about market timing, I can’t help but think that there isn’t a lot different than saying to yourself “I think there is something fundamental that the market is doing to undervalue this stock. I’m going to buy now, because sooner or later the market will correct itself.” than “I think there is something fundamental that the market is going to overvalue the stock market in general. I’m going to set aside some money into cash now because sooner or later the market will correct itself.”
–CH
‘Timing the market’ does not have a definition; perhaps it should. Note that good investors time the market whenever they get the opportunity, which is very rare. (Buffett is doing it right now, with PSX.)
They do it in a certain way. A very long term view, plenty of cash and a sound knowledge of the market or sector concerned are all prerequisites.
The business of investing is not begun until an ending is in sight. (You can assume Buffett has taken a very informed view about the lowest oil can conceivably go.)
Investments will be made according to a program: on every pre-determined % fall in the subject right up to the point it ceases to fall, and thereafter on the basis of interval. (You can assume Buffett has a careful plan, based on his intended final maximum investment in PSX.)
The investor is prepared subsequently take no further interest in the investment until it plays out. While that might take years, the final annualized return should be satisfactory.
I have begun carrying out this scheme using two ETFs, one a combination of agriculture, mining and oil, the other materials. There are absolutely no other subjects and this is a rare moment. The last opportunity was the S&P500 08/09.
I hope my judgement is right!
I’d like to call your attention to the very real possibility that the world isn’t coming to an end this year, even though Mr. Market is going through one of his manic-depressive periods when he thinks so, and is pricing our stocks accordingly.
That’s the critical misconception right there - stock valuations are still WAY above historic norms (P/E-10, Hussman’s P/Peak-E,Price/Sales, Price/Dividend, Q ratio etc). “End of the world” valuations are about 50% down from here.
Mauser96. Respectfully, if you did read the article, he was actually making the point that it’s not all the doom and gloom that people are saying.
I think the arbitrary number of 10% for a correction and 20% for a bear market definitionally is idiotic. Stuff goes up and down, and Most large moves up retrace much more than 20%. So why not use what you see to make decisions on where to enter/exit positions?
And what you see can be a combo of company performance and stock price depending on your own style.
I like points of view that contradict my own, as it lets me consider where I may be wrong or missing something. Otherwise when groupthink becomes religious, it’s often too late by the time one starts thinking something may be worng.
mike
Just as the odds suggested, the markets are up this AM. It is early in the day but as I write this the number of points gained are so far unimpressive to me.
re the norrthmantrader post, patterns like “rounded top” that the starts with are exactly what I avoid. Because patterns are in the eye opf the beholder. Look at an ink blot and you will see pictures, but actually it s just an ink blot. It is not quantifiable
I really don’t care what people are saying about markets.
My systems were designed to block out that noise, suppress that lemming like tendency present in all of us, including me. In any case, what actually moves markets is what people/money do, not what they say. And I suspect anybody over 5 years old has figured out that people often say one thing but do another.
Sorry but I think definitions are important. Assuming you believe in the concept of bull and bear markets (not everybody does) you can not discuss them with others unless you agree on the names and terms… Like discussing the merits of several cars for sale but everybody discussing them uses different names for there car brand , and calls the colors by different names.
Like trend following Evidence based methodology depends on prices themselves , not the name of the market type
At this stage most systems are a variety of trend following.
http://research.cbs.dk/en/publications/uuid(2135e933-0f06-42…
Even though Saul started this board he does not own it.
And since the market based posts were in limited threads they are easy ignore.
But in deference to his wishes I will try to stop posting on markets. Even though there is massive evidence to suggest that the general market has more to do with stock priced than any merit of the individual stock.
And even though there is an equally large body of evidence that buy and hold leads to disaster in a minority of times . 1917 Russia for one.
And almost every socialist country south of the Rio Grande river My own family was a victim of this type of expropriation of assets, stolen without payment in the name of the people but mostly to the financial benefit of the politicians.
“Buy and Hold” left us with a few worthless pieces of paper
This has been a very interesting thread indeed. I know that some people seem to feel that they can play the timing the market game. I can’t. I don’t have the temperament for it.
Hi Saul,
I agree - this has been a very interesting and also educational thread. I have not been investing as long as you have (for full disclosure) and don’t believe I have been nearly as successful. I think one of the most important points that you make is - if I may paraphrase - Investor Know Thyself!
I am convinced that the system that you use works. I am equally convinced that it would not work as well for me. I also believe that some folks (probably fewer than make such claims) are successful at timing major market events, getting out near the tops and back in near the bottoms. I also know that this would not work for me. Knowing my temperament, I would horribly mis-identify both tops and bottoms, and decimate my portfolio repeatedly.
We take different approaches, but I believe folks can learn a lot here and appreciate your willingness to share your approach.
Danny
Selling things that were more stable and wouldn’t have much chance of a bounce when it turned around, and buying good companies that were falling without any good reason.
The crux of that statement is being able to tell which is which.
Back in 2008, several technical indicators would have taken you out in Sep 2008 and got you back in in April 2009.
Only in hindsight, as very few, if ANY, people actually did that.
Only in hindsight, as very few, if ANY, people actually did that.
But it’s up to the individual to act on what they see in real time. That is true for technicals, fundamentals, macro trends, and individual stocks.
The seeing is one thing, the acting on it is the hardest part… especially when what we see differs from what we want to see.
Last post on this topic out of respect for Saul’s wishes for the board, but I think that holds true for company analysis as well. Hardest part is removing your personal bias to ask “where may I be I wrong?” and to act accordingly if what you see differs from the thesis. Still working on that part myself
“Only in hindsight, as very few, if ANY, people actually did that.”
And you have documentation for that statement?? Because if you don’t it is an opinion not a fact. Because I know some that did, with at least some of their funds. The month leeway makes it easier .
I always try to keep in mind that while I can’t sing opera ,or throw 95 mph fast balls, or speak 3 foreign languages fluently , or understand some obtuse math, , that does not mean others can’t.
In any case one doesn’t have to get in or out at exact peaks and bottoms. Being off a month or even two will still give outsized gains. And even more importantly it reduces “rise” even more than it increases CAGR.
I put “risk” in quotes, it turns out to be very hard to define. Look at discussions on the MI board .Some of them over my head…But it doesn’t matter as long as you get the general idea .
So a question- If posters could pick a single Saul stock to buy at present levels ,which would it be?
Saul?
So a question- If posters could pick a single Saul stock to buy at present levels ,which would it be? Saul?
Hi Mauser, If I could just pick one, I guess it would have to be SWKS, but an awful lot would tempt me.
Saul
thanks Saul
I already own SWKS and plan to keep it with a 2 year more or less outlook.
I see nothing fundamentally different about the company from several months go. It seems cheap. Suppliers are normally cheap because they lack pricing power and can’t effectively use branding.
But this company seems to be offering value to manufacturers that they can’t easily get elsewhere.
The natural world is analog, the electronic world mostly digital so translators are in demand. Just like they are at the United Nations HQ building.
So it is part of my B&H strategic diversification
“Only in hindsight, as very few, if ANY, people actually did that.”
And you have documentation for that statement?? Because if you don’t it is an opinion not a fact. Because I know some that did, with at least some of their funds.
No, never said I had facts to back up my statement, or I would have put them in there, definitely just my opinion. But I also said “very few”, it’s a large market, there are always going to be some folks that hit a top or bottom call perfectly. It may have been a great call at that time, but could also have been luck (what’s the expression about a blind squirrel, or a broken clock). Without knowing if they’d been calling a bottom 5 times prior that didn’t materialize, we can’t know if it was luck or skill.
My point is that I feel (note, that means my opinion here) that a LOT more people lose money trying to time the general market ups and downs than the FEW that make money doing it.
You’re welcome to have a differing opinion…