Posts filed under “Cycles”

The Truth About Market Timing

Yesterday in Barron’s, Mark Hulbert asked: “So, How Did the Market Timers Do?“:

“Now is a perfect time to ask these questions: With the stock market back to where it stood in October 2007, the last five-and-a-half years constitute an ideal laboratory in which to judge the success of market timing in the real world. Only after a full market cycle can we tell whether a timer can both get out at tops and get in at bottoms . .

The first lesson that emerges from the HFD data may be obvious, but is worth noting: No market timer called the market top in October 2007 and the bottom in March 2009, if by “called” we mean went completely to cash on Oct. 9, 2007, the exact day of the high, and got back 100% into stocks on March 9, 2009, the precise date of the bear market bottom.”

With all due respect to Mark, he’s doing it wrong.

The data overwhelmingly shows that no one is ever going to make a risk assessment that allows them to top tick on the way out going to 100% cash at the highs and bottom tick at the bottom, going all in. Forget the proverbial typing monkeys writing Hamlet; even a million fund managers over a million cycles might not generate one outcome of top and bottom ticking. And if it did, we know it would be purely random. Perhaps a fairer test to the Timers would be getting out within 10-25% of a peak and getting back in within the same parameters at the bottom. (Hulbert plays with the parameters for timing in the column, but none of the Timers does especially well).

Regardless, that one in a million-million trades misses the point. Individual investors should not market time, but they should be aware of other factors when they make capital commitments.

I prefer to employ Risk Analysis rather than engage in pure Market Timing.

Rather than making a low probability attempt to market time, there are quite a few things other things investors should at least be aware of, rather than attempt to jump in and out:

• What is the overall trend in the market — is it rising or falling or going sideways?

• Are Earnings rising or falling?

• Is my asset allocation percentages appropriate for the current secular cycle?

• How are stocks valuations? Measured by both a simple forward P/E and a longer term 10 year (i.e., Shiller CAPE), are stocks cheap or pricey?

• Am I taking advantage of mean reversion to rebalance my holdings based on asset class?

• Are interest rates rising or falling?

• What do the regular 5%, 10% even 20% pullbacks mean to your portfolio?

• Do I understand that my comfort level about market volatility and risk is typically inverse to present opportunities?

Most people are much better off if they simply do two things: Rebalancing their holdings on a regular basis and changing the tilt of their allocations on rare occasions (i.e., 70/30 to 60/40).

Focus on maintaining an intelligent balance of assets, and leave the martket timing to the newsletter writers. When they get it wrong, they lose subscribers. When you get it wrong, it crushes your retirement plans . . .



Market Corrections: Scott Adams Discovers Market Manipulation  (March 4th, 2013)

So, How Did the Market Timers Do?
Barron’s MARCH 12, 2013

Category: Apprenticed Investor, Cycles, Investing, Markets

Professor Sylla: More Dow Records to Come?

Richard E. Sylla, financial historian and professor of economics at NYU’s Stern School of Business, discusses the likelihood of a series of markets highs, the impact of the Fed’s ability to keep interest rates down, and the tendency for investors to buy high and sell low, in a big interview with WSJ’s Jason Zweig.


Category: Cycles, Investing, Markets, Video

Manufacturing Jobs 2003-2013

U.S. Employment Situation (February 2013) click for larger graphic     Bruce Steinberg puts the past decade (or 5) of Employment data into a bigger context, detailing in particular the impact of Manufacturing Jobs: “Manufacturing, which declined 16.6% or about 2,270,000 jobs, from January 2008 to January 2010, were up 4.3%, or about 500,000 jobs,…Read More

Category: Cycles, Data Analysis, Employment

U.S. Business Cycle: Yo-Yo Years

Source: Economic Cycle Research Institute

Category: Cycles, Think Tank

Investors Should Ignore Politics

Politics matters little to your investment outcomes. This has been a theme of mine for nearly forever. I discuss this in presentations all the time.  It was — literally  — my first column for the Washington Post. And yet the financial press simply cannot get enough of this stuff. They love a good narrative. While…Read More

Category: Cycles, Markets, Politics, Psychology

Most Long-term Charts of DJIA Are Wrong

Source: The Chart Store   Chartmeister Ron Griess explains why most of the charts of the Dow Industrials that include the 1st few decades of the century are wrong: “Dow Jones and Stockcharts both have it wrong. Wall Street has been doing it wrong for a long time. I remember Alan Shaw of Smith Barney…Read More

Category: Cycles, Digital Media, Investing, Really, really bad calls

DJIA vs S&P 500 P/E

Monthly chart portfolio of global markets Source: Merrill Lynch   The chart above, courtesy of the Merrill’s chief Technical Analyst, shows the relationship between long term secular bear markets and valuation as measured by price to earnings (P/E) ratio on a monthly chart. This is the primary reason I am unconvinced that the secular bear…Read More

Category: Cycles, Earnings, Investing

Explaining My Position on Secular Bear Markets

I hate seeing myself misquoted, misinterpreted, or just misunderstood.My prior explanations (see this and this) about how Secular Bear Markets reach their final denouement was apparently too subtle. Since nuance apparently gets lost on some people, so let me make this as clear as possible: 1. A Secular Bear Market began in March 2000. 2….Read More

Category: Cycles, Markets

Secular Bear Market “Hibernation”

“Just like a recession, they’re hard to define in real time. It’s much more obvious in retrospect . . . If you said that stocks could be up 10% or 20%, I’d say ‘sure.’ But that wouldn’t violate a more than a decade long period of chopping back and forth.” – Ed Easterling, Crestmont Research…Read More

Category: Cycles, Markets, Technical Analysis

The End Is Nigh… For the Secular Bear Market

On today’s “Chart Attack,” Fusion IQ CEO and Director of Research Barry Ritholtz discusses the end of the fourteen-year secular bear market. He speaks on Bloomberg Television’s “Street Smarts.”

Source: Bloomberg, Feb. 5 2013

Category: Cycles, Investing, Markets, Video