Death of Beta-Centric Buy & Hold Long-Only Strat
Here’s what I predict the academic finance community will suddenly discover – if you re-run their ‘buy and hold’ recommendations using data since 1770 (thats when security market prices began being kept in the UK), you’ll find that a 'diversified porfolio of securities allocated among different asset classes produces returns .5% higher than cash".
1770=apples
2009=orangesC’Mon New. What happened in 1792 in England is completely relevant today.
Going back just to 1924, I have the holdings page of the first mutual fund - Mass Investors Trust (MFS). It had 4 categories: Banks & Insurance, Industrials, Railroads & Equipment, and Public Utilities. Of the 50 something holdings, maybe 10 still exist (now, some may still exist as other names, but I have no idea). You would recognize: Kodak, GE, GM, Standard Oil, Canadian Pacific, Union Pacific, and AT&T. Some of the utilities and rails have merged/sold, etc. Point is, what went on back then is of little consequence today.I had a mutual fund wholesaler tell me recently that ‘Buy and Hold is dead.’ (Not you, he added.) Buying and holding a mutual fund is different, he said, because there the managers are constantly moving around.
To illustrate (and he wasn't an AF guy), if you whip out your ICA guide, there's a page somewhere that shows the ICA has outperformed each individual stock in the Dow 30. If you'd been fortunate enough to hold the best of them for years, you still wouldn't have beaten the fund. I do think you need to go back three or four hundred years if you are studying investment return. It kills me when somebody says 'history tells us,' and then cites something from 20 years ago.1982-2007=apples with an awesome average equity return
everything else=orangesI had someone tell me buy and hold was dead simply because he made 10.5% on his account this past year channel trading AMAT while everything else was down 50%. Listening to his explanation was brutal.
Buy and Hold is a strange term. I mean, like someone said above, if you buy actively managed mutual funds, then you are really buying and holding only the funds your managers want to keep. So you are not really JUST buying and holding.
Now, some may say that this doesn't work either - only "market timing" works now. But who the hell can do that accurately? But if you buy quality and hold it, why would you sell it (except to monetize a large gain that you think cannot be replicated in that stock/bond)? Point is, investing is the process of buying discounted future cash flows. In it's simplest form, is that REALLY going to change? Is this REALLY the New Paradigm? (we know what happened the last time the "old economy" died). So I have heard asset allocation is dead. I have heard that "buy and hold" is dead. I'm going to start a Tulip bubble again.So, if buy and hold is dead, does this mean a return of the retail “commision” broker?
Buy and hold isn’t dead. Buy and ignore is dead.
Hey EDJ has built a large business on that premise…
Here’s what I predict the academic finance community will suddenly discover – if you re-run their ‘buy and hold’ recommendations using data since 1770 (thats when security market prices began being kept in the UK), you’ll find that a 'diversified porfolio of securities allocated among different asset classes produces returns .5% higher than cash".
Doug Kass crunched these numbers on Warren Buffett:
Wells Fargo: $6.3 billion lost on 290 million shares
American Express: $2.9 billion lost on 151 million shares
Coca-Cola: $2.1 billion lost on 200 million shares
Burlington Northern Santa Fe: $1.8 billion lost on 63 million shares
ConocoPhillips: $1.5 billion lost on 60 million shares
U.S. Bancorp: $1.5 billion on 73 million shares
Kass's bottom line: "All good things, it seems, in markets and life, must come to an end."
Over what time frame? That sounds a lot like someone saying their team is down by a touchdown after the opponent scored on their first possession, so they have obviously lost the game, the playoffs and any chance of the championship.
Perhaps Buffet’s looking at an investment horizon that is a tad longer than Mr’ Kass’ analysis, which presumably covers, what - a year or less?
The investment world is filled with geniuses like Kass who presumed to declare Buffett a bust. There were a ton of them during the tech bubble as well. Only time will tell, but given their respective long term track records of judgment and results, who are you more inclined to back?
I guess my point was that buying actively managed mutual funds is inherintly NOT buy and hold/buy and forget. That's what the managers are paid for doing. Now, if you just buy a couple individual stocks/bonds and then just leave them forever, you have a point. But the point of buying a mutual fund is so that someone else is doing the buying and selling for you. Now, if you are a true asset-allocation, style-box, index sort of advisor, then you might be inclined to shift your allocation strategy on a periodic basis. But in this day and age, with managed money/mutual funds being so prevalant, it's HARD to be a buy and hold investor. Even the most stable funds have security turnover every year.Hey EDJ has built a large business on that premise…
[quote=skeedaddy2] [quote=MinimumVariance] Here’s what I predict the academic finance community will suddenly discover – if you re-run their ‘buy and hold’ recommendations using data since 1770 (thats when security market prices began being kept in the UK), you’ll find that a 'diversified porfolio of securities allocated among different asset classes produces returns .5% higher than cash".
[/quote]Doug Kass crunched these numbers on Warren Buffett:
Wells Fargo: $6.3 billion lost on 290 million shares
American Express: $2.9 billion lost on 151 million shares
Coca-Cola: $2.1 billion lost on 200 million shares
Burlington Northern Santa Fe: $1.8 billion lost on 63 million shares
ConocoPhillips: $1.5 billion lost on 60 million shares
U.S. Bancorp: $1.5 billion on 73 million shares
Kass's bottom line: "All good things, it seems, in markets and life, must come to an end."
[/quote] It is virtually IMPOSSIBLE for someone like Buffett (buys equity) to NOT lose some equity value in a time like this. Regardless of what you own, if you are AT ALL diversified in equities, you have lost money.
I would advise Warren to diversify a little bit. He is too concentrated in financials and consumer cyclicals and has too much of his money tied up in single positions. Also, a man of his age should have more money in fixed income and I have a bar chart to show him that. Then I would offer him a credit card and ask if he wants to refinance his mortgage.
[quote=buyandhold]
I would advise Warren to diversify a little bit. He is too concentrated in financials and consumer cyclicals and has too much of his money tied up in single positions. Also, a man of his age should have more money in fixed income and I have a bar chart to show him that. Then I would offer him a credit card and ask if he wants to refinance his mortgage.
[/quote] That's a great idea; he's definitely too old to be in the market. I've recently heard about a product he may be interested in. It allows you to enjoy all of the upside of the market with no downside risk. Apparently, someone's figured out how to cheat capitalism. The best part is, there are NO fees! None, zero, zilch... What's 8% of $30 billion?[quote=Borker Boy]
That's a great idea; he's definitely too old to be in the market. I've recently heard about a product he may be interested in. It allows you to enjoy all of the upside of the market with no downside risk. Apparently, someone's figured out how to cheat capitalism. The best part is, there are NO fees! None, zero, zilch... What's 8% of $30 billion?[/quote] A couple things. First, you can't "enjoy all of the upside of the market" above a certain point. Get your facts straight. Second, it has been written that Warren Buffett has some of his money invested the same way as an index annuity...just with his amount of money, he doesn't need an insurance company to do it for him. Don't be jealous...[quote=MinimumVariance]Here’s what I predict the academic finance community will suddenly discover – if you re-run their ‘buy and hold’ recommendations using data since 1770 (thats when security market prices began being kept in the UK), you’ll find that a 'diversified porfolio of securities allocated among different asset classes produces returns .5% higher than cash". [/quote]
Money that once stayed put for three to five years can now get moved in three to five days or sooner.
"What's happening is people have learned that if you don't take a profit it goes away," says Kathy Boyle, president of Chapin Hill Advisors in New York. "Even somebody who's really biased towards buy-and-hold is giving up."
More than half the company’s in the Standard & Poor’s 500 have
beaten earnings expectations, yet the stock index has dropped over 8
percent. Probably the worst January in more than a generation.
Its times like these that separate the men from the boys.
[quote=skeedaddy2] [quote=MinimumVariance] Here’s what I predict the academic finance community will suddenly discover – if you re-run their ‘buy and hold’ recommendations using data since 1770 (thats when security market prices began being kept in the UK), you’ll find that a 'diversified porfolio of securities allocated among different asset classes produces returns .5% higher than cash".
[/quote]Doug Kass crunched these numbers on Warren Buffett:
Wells Fargo: $6.3 billion lost on 290 million shares
American Express: $2.9 billion lost on 151 million shares
Coca-Cola: $2.1 billion lost on 200 million shares
Burlington Northern Santa Fe: $1.8 billion lost on 63 million shares
ConocoPhillips: $1.5 billion lost on 60 million shares
U.S. Bancorp: $1.5 billion on 73 million shares
Kass's bottom line: "All good things, it seems, in markets and life, must come to an end."
[/quote] Isn't this what he owns through Berkshire?? I think his personal holdings are a lot fixed income and Berkshire..
GENTLEMEN: My look what I started.
The point is to HOLD, after buying, the WHOLE MARKET. Thats Jap real estate, cocoa futures, base metals, antiques, futures, the Zimbabwien S&P12 (theres only 12 companies in Zimbobwiea), FRA's, private equity, etc +stocks and bonds -- in PROPORTION to their respective weights in the sum total of all the worlds assets. As RELATIVE security prices change, the holdings weights are adjusted accordingly, thats passive mgt. buy-&-hold. If you elect to change the weights to your own liking / predictions -- that's active mgt. So whats wrong with this? It doesn't work during periods of systemic collapse -- a la NOW. Watch -- in the next year the whole focus of managing money will be on controlling asymetric tail risk. You heard it here first.Well, the smartest people in the world didn’t see last years crash coming, I sure couldn’t. But this time I’m not listening to the smartest people in the world. I’m making moves on what I see. There is only one way you can hedge a mutual fund, operated by some of the smartest people in the world, against loss … go to cash. I’ve been telling myself I would cash out when the Dow closed under 8000, so today I did. I hope I’m wrong. But if I am what’s the worst of it? a little missed upside? Buy and hold should be changed to “buy and hedge”
I cashed out client positions in mutual funds as a hedge. May sound stupid but I see a fifth leg down coming. I'm not letting their accounts get halved, again, buy the smatest people in the world. I have zero faith in "managed money" Again, if Im wrong no big deal.
I'm here for the long run.
I’m going to short the crap out of the S&P as well when it closes under 800 with a stop at 820, much of it with the cash from the mutual funds. The options positions are working very well. Maybe a bold move, maybe wrong. But I told myself “NEXT TIME” I would act in a decisive manner to what MY eyes see, not what others are telling me.
Are your eyes connected to your gut? Smart people tell me that there are more nerves in your gut than in your brain.
[quote=Gaddock]
I cashed out client positions in mutual funds as a hedge. May sound stupid but I see a fifth leg down coming. I’m not letting their accounts get halved, again, buy the smatest people in the world. I have zero faith in “managed money” Again, if Im wrong no big deal.
I'm here for the long run.
[/quote]So are you saying this is a 5 legged bear? I guess then it must be a male bear....or a mutant.
Gaddock,
If you are serious you made a huge mistake. The Dow is in a trading range, unfortunately you cashed out closer to the bottom than top of that range. 9100 is where you take the money out and put it back in at 7900. That being said, we have been experiencing a bottoming process on the Dow. The time to short the dow has passed at its current level.
Hope you all are right, I dont think so.
I concur with 007. And I told myself in November that when we got back to 9000 I was pulling clients (nervous ones anyway) half into cash. But did I???
No one has any idea and that should be the point of all this…
Gaddock isn't right or wrong... I have been buying stock on the massive dips riding them up 10-15% and cashing out, because I had been riding them then buying more when they went down, but they would go up and then back down... So like Gaddock, I told myself next time any of my holdings get up 10-15% I cash out and wait for the dip and buy again...And I did so and road that 4 day rally and then cashed out in mid morning when it was up..There is no other way to play this market right now...Sold the other half of them today. The jobs report Friday may break the rubber band. Cash is an asset class. I can make a lot of money with cash. It is far from sitting there idle. Again, those of you that think I’m wrong … I hope you are right. Worst thing that can happen is I miss a tiny bit of upside. In the mean time I use the cash to sell options against. My two triggers were 8000 & 9000 + or -. Now we have closed twice under 8000 this week. The next fear is the S&P closing under 800. The more times it does the more those number go from support to resistance.
I see deflation with m y own eyes and wallet.Gaddock’s comments are PERFECT.
Bears have total control and total confidence.
This is a once in a generation buying opportunity.
last 2 weeks are much like early 2003.
we are very near a monster up move (35-50%)
Today erased any remaining regret for no longer holding equity MF’s. There is no valid bailout plan and the range has a bearish tilt.
On the flip side there are still huge credits out there for February expirations. 2 and 3% trades allover the place. Not bad for a week and a half. BUT those credits are peoples fear. It appears to be increasing again. I'll be buying at the bottom.Look at some long term graphs on DOW, AA, IP, EK, GE and you will see we are in nothing near a once in a generation buying opp. These all look like 0 is on the table. Can add KO, PFE and 100's others with a little bit of looking.Gaddock’s comments are PERFECT.
Bears have total control and total confidence.
This is a once in a generation buying opportunity.
last 2 weeks are much like early 2003.
we are very near a monster up move (35-50%)
Look at some long term graphs on DOW, AA, IP, EK, GE and you will see we are in nothing near a once in a generation buying opp. These all look like 0 is on the table. Can add KO, PFE and 100's others with a little bit of looking. [/quote] Great buying opportunity. Craziness. Use every rally to sell clients from the market. I pulled 1/2 to cash from all traditional equity strategies for clients in 12/2007 - only wish I'd sold it all. If you follow statistical probability of economic recovery, this is entirely different than 2003. In 03 there were: Rising home values Easy access to credit High business confidence Lower and already moderated unemployment Today we have none of these. All rallies are fools rallies. Ideal asset allocation for today's market: 1/4 Equities - 60/40 US to International 1/4 Cash 1/4 Market Neutral (long/short - make sure you have a good formula-based model here; no emotions) 1/4 Gold - yeah, I'm crazy, but we just bought about $8 million of the GLD yesterday and statistical probability and Marco Economics tells me it's going to 150 (the etf) in the next 24 months (2,000 oz) Call me crazy if you want - my most aggressive clients only lost about 14% last year and are up ytd. P.S. - buy and hold was never a valid investment srategy. Take away years 1980 to 2000 and the remaining years of 1897 to current the market has gone up about the same as T-bills with quadruple the volatility. Mean reversion is taking place - markets are about as efficient when left to "the smartest people on Wall Street" as flipping a coin. Check out crestmontresearch.com for all the facts, not opinions.[quote=CDO Squared]Gaddock’s comments are PERFECT.
Bears have total control and total confidence.
This is a once in a generation buying opportunity.
last 2 weeks are much like early 2003.
we are very near a monster up move (35-50%)
Seems likely that more debt will be written off in the Great Leveraging. Corporate debt will be exchanged for equity, treasuries paid off for less than face value, municipalities and pensions walking away from commitments. I've always thought the gold bugs were cranks, but it's making more sense to own hard assets of any kind -- gold, timberland, oil reserves, equity in companies that have a tangible product.
Says the genius who's clients are down 45%. ...and likely to go down another 25-40% ...and lose all his clients Iceco1l - did you borrow too much for your home because of the evil banking system? Maybe your'e about to be unemployed? It's okay - JUST HANG IT THERE. Things always get better, now is not the time to get angry.You’re an idiot.
[quote=brandnewadvisor]
P.S. - buy and hold was never a valid investment srategy. Take away years 1980 to 2000 and the remaining years of 1897 to current the market has gone up about the same as T-bills with quadruple the volatility. Mean reversion is taking place - markets are about as efficient when left to "the smartest people on Wall Street" as flipping a coin. Check out crestmontresearch.com for all the facts, not opinions.[/quote] W.T.F!?brandnewadvisor reminds me of the brokers selling Putnam OTC in 1999/2000 because it worked the year before. Just another sign that we are very near the market bottom. Personally I expect a 25% pop to around 1000 on the s&p by year end.
Sorry, been out of the market by 1/2 for over a year. Before 2008, that is. My clients average returns for aggressive portfolios since 2005 inception of my RIA - 13.87% CAGR. 2008 we lost about 15%. I'm just trying to be helpful. If everyone wants to keep holding on in this market with no statistical evidence that the bottom is even close; be my guest. Expectations of a 25% "pop" are unfounded and would only represent a great opportunity to sell unless there have been material changes to the overall economy. There is plenty of evidence here: sloppy monetary policy, consumer spending, business confidence, TED spread, unemployment, etc. At least my suggestions are based on facts. The guys hawking OTC because of performance only were speculating. There were no real earnings or prospects of earnings. Those who followed statistics, like myself, never owned a single dotcom or otc fund. Just boring stuff that made money. Good luck with your swell investment strategy.brandnewadvisor reminds me of the brokers selling Putnam OTC in 1999/2000 because it worked the year before. Just another sign that we are very near the market bottom. Personally I expect a 25% pop to around 1000 on the s&p by year end.
correction:
My clients average returns for aggressive portfolios since 2005 inception of my RIA : 13.87% CAGR (that is a positive, not negative number). 2008 we lost about 15%.Yesterday was the coolest day I've seen in a long time. Two GREAT chances to get in and out in the same day. The longer we sit and breach support the better chance it has of becoming overhead resistance. Being in cash and scalping like a big dog lets me sleep very well. This time we wont be able to say we didn't see it coming. I'm thinking 650 ish will be the bottom. Considering the components of the DOW I think it's going to bottom in the mid 5000. It's going to bear a range bound grind down to it from here. Terrible for investing GREAT for trading.
More evidence of the same, S&P closed under 800; OUCH!. Still keep wishing I’m wrong but I’m looking like quite the hero to my clients at the moment. They are out of the MF’s and actually making money with cash.
Speaking of statistics; I’m not making a trade unless it’s a scalp with an 85% or better probability. Not going out past 60 days, time decay is a great friend. As I said before there are ‘2% ers’ all over the place on stock that we want to own with good solid dividends.
Sure wish I could see tomorrow's bar.gaddock--
sent you a pm...Was short via SH today and have had SKF four about 3 weeks. Buy and hold is really smart. We’ll now need all of the “magical” 25% “bounce” that Incredible Hulk is expecting to get back to 1,000. Might happen, but not soon - so why would anyone be in this market right now?
Well here we are at the end of the rubber band. Will it snap??
The MF's are down 6% from where I sold them on average. Sad .... I still hope I'm wrong.brandnewadvisor reminds me of the brokers selling Putnam OTC in 1999/2000 because it worked the year before. Just another sign that we are very near the market bottom. Personally I expect a 25% pop to around 1000 on the s&p by year end.
What's your reason for your expectation, Hulk? Do you think that earnings will be up by that much? If so, why?
A couple reasons. I’ll start with my gut, based on what feels like capitulation from personal client interactions. Despair in the media, on wall street, in DC, and on main street all point to a “low point” for me. I went out to eat at a nice restaurant and it was completely full. I wait in line on Thursday (not a weekend) at Best Buy that is 20 deep. I spent $40 on some computer cord. The world is not ending. People are still spending. Every time (as if I’ve seen more than the (2000-2002 mrkt) there is 0 hope to be found and the bears are smiling as if they can’t be wrong, then we are at/near the bottom. Investments cycle. The longs think we can’t be wrong, then we are wrong for awhile. The shorts begin to think they can’t be wrong, then they are wrong for awhile. My gut (whiich has been wrong) tells me we are there.
From a fundamental standpoint. I think companies throw everything and the kitchen sink in for writedowns on the first quarter and pushes s&p earnings to $50-$55 an annualized basis giving us a current pe near 13. I think by 3rd or 4th quarter, the writedowns are no longer there and with even a slight uptick from all this money their throwing into the system we see quarterly earnings closer to $65 annualized. Based on future expectations, what will be then current valuations and having the worst behind us, I think 15 is a resonable PE for the market we finally see the cash flow in from the sidelines pushing us to 1000 on the s&p.
I tell my clients I’m an eternal optimist. Unfortunately, I’ve been wrong the last decade, but I think the next decade looks very promising (see the optimism).
Feel free to shoot holes through my reasoning. I spend my days selling against the media, I might as well sell against other brokers too.
15 is a historically reasonable P/E only when there is earnings growth and economic expansion - something we had for about 50 years. That is not the case currently as the only way spending can rise is if it is from savings as there is no savings rate and no borrowing. This is all positive - just join the darkside and buy a short etf or put option. btw - since the date of my first post my allocation that people called me stupid for is up about 9%...market is down 9%.A couple reasons. I’ll start with my gut, based on what feels like capitulation from personal client interactions. Despair in the media, on wall street, in DC, and on main street all point to a “low point” for me. I went out to eat at a nice restaurant and it was completely full. I wait in line on Thursday (not a weekend) at Best Buy that is 20 deep. I spent $40 on some computer cord. The world is not ending. People are still spending. Every time (as if I’ve seen more than the (2000-2002 mrkt) there is 0 hope to be found and the bears are smiling as if they can’t be wrong, then we are at/near the bottom. Investments cycle. The longs think we can’t be wrong, then we are wrong for awhile. The shorts begin to think they can’t be wrong, then they are wrong for awhile. My gut (whiich has been wrong) tells me we are there.
From a fundamental standpoint. I think companies throw everything and the kitchen sink in for writedowns on the first quarter and pushes s&p earnings to $50-$55 an annualized basis giving us a current pe near 13. I think by 3rd or 4th quarter, the writedowns are no longer there and with even a slight uptick from all this money their throwing into the system we see quarterly earnings closer to $65 annualized. Based on future expectations, what will be then current valuations and having the worst behind us, I think 15 is a resonable PE for the market we finally see the cash flow in from the sidelines pushing us to 1000 on the s&p.
I tell my clients I’m an eternal optimist. Unfortunately, I’ve been wrong the last decade, but I think the next decade looks very promising (see the optimism).
Feel free to shoot holes through my reasoning. I spend my days selling against the media, I might as well sell against other brokers too.
Glad I was short again today, what a ride!
Your thoughts are as valid as anybodies. Everything I've been doing is a short term trade not an investment. I think if you're 'selling' you've been doing great. As for what you see around you I understand where you are coming from. What I've been seeing around me is significant deflation; food, fuel etc. That was the larger part of my decision to go to cash. You can now buy a nice steak dinner around here for less than $10. Gasoline in real dollars is a low as it's been in decades (I think) you can buy a brand new car for less than 10k with 0 APR. Look at the DOW chart and compare it to the chart in 1933 if you want to get some sweaty palms. As God is my witness I hope I'm wrong but I think we are going head south in a slow protracted bleed.Feel free to shoot holes through my reasoning. I spend my days selling against the media, I might as well sell against other brokers too.
OUCH!!! Worst close in 12 years. I’m a hero to my clients (at the moment) that’s not said with bravado.
15 is a historically reasonable P/E only when there is earnings growth and economic expansion - something we had for about 50 years. That is not the case currently as the only way spending can rise is if it is from savings as there is no savings rate and no borrowing. This is all positive - just join the darkside and buy a short etf or put option. btw - since the date of my first post my allocation that people called me stupid for is up about 9%...market is down 9%. [/quote] 15 PE? No way going forward. Who knows how low the "E" is going...but then the next shoe to fall will be the "P". And when that goes down in 2010-2013 we will really be in for a crap environment. Spend some time looking at the 70's charts, companies growing earnings from 1973 to 1980 and stock traded dead flat. That is usual action after this type of deal, first the E then the P gets hit.[quote=Incredible Hulk]A couple reasons. I’ll start with my gut, based on what feels like capitulation from personal client interactions. Despair in the media, on wall street, in DC, and on main street all point to a “low point” for me. I went out to eat at a nice restaurant and it was completely full. I wait in line on Thursday (not a weekend) at Best Buy that is 20 deep. I spent $40 on some computer cord. The world is not ending. People are still spending. Every time (as if I’ve seen more than the (2000-2002 mrkt) there is 0 hope to be found and the bears are smiling as if they can’t be wrong, then we are at/near the bottom. Investments cycle. The longs think we can’t be wrong, then we are wrong for awhile. The shorts begin to think they can’t be wrong, then they are wrong for awhile. My gut (whiich has been wrong) tells me we are there.
From a fundamental standpoint. I think companies throw everything and the kitchen sink in for writedowns on the first quarter and pushes s&p earnings to $50-$55 an annualized basis giving us a current pe near 13. I think by 3rd or 4th quarter, the writedowns are no longer there and with even a slight uptick from all this money their throwing into the system we see quarterly earnings closer to $65 annualized. Based on future expectations, what will be then current valuations and having the worst behind us, I think 15 is a resonable PE for the market we finally see the cash flow in from the sidelines pushing us to 1000 on the s&p.
I tell my clients I’m an eternal optimist. Unfortunately, I’ve been wrong the last decade, but I think the next decade looks very promising (see the optimism).
Feel free to shoot holes through my reasoning. I spend my days selling against the media, I might as well sell against other brokers too.
If you look at the dividend levels for the S&P it NOW makes the S&P appear expensive, hard to believe but true.
[quote=brandnewadvisor] This is all positive - just join the darkside and buy a short etf or put option.
btw - since the date of my first post my allocation that people called me stupid for is up about 9%...market is down 9%. [/quote] I feel sorry for those that think going short is somehow wrong ... I'll never get that. I sure would love to hear about the allocation model you are using.think they want to take out the low on the S&P here, if that does not trigger an end of the month phoney rally we are setting for a big leg down I think. Agree S&P is not cheap, dont know how people think it is. Dividends being cut a record rate, does not look good. Looking at some names, IP, AA, DOW, GE, WHR, X, BDK, INTC...list could go into the hundreds making 10-20 year lows.If you look at the dividend levels for the S&P it NOW makes the S&P appear expensive, hard to believe but true.
I had a guy run a Z Score on every listed stock
SCAAAAAAAAAAAAAARY !!!!!If if works like it's supposed to the fun has hardly begun.
[quote=brandnewadvisor][quote=Incredible Hulk]A couple reasons. I’ll start with my gut, based on what feels like capitulation from personal client interactions. Despair in the media, on wall street, in DC, and on main street all point to a “low point” for me. I went out to eat at a nice restaurant and it was completely full. I wait in line on Thursday (not a weekend) at Best Buy that is 20 deep. I spent $40 on some computer cord. The world is not ending. People are still spending. Every time (as if I’ve seen more than the (2000-2002 mrkt) there is 0 hope to be found and the bears are smiling as if they can’t be wrong, then we are at/near the bottom. Investments cycle. The longs think we can’t be wrong, then we are wrong for awhile. The shorts begin to think they can’t be wrong, then they are wrong for awhile. My gut (whiich has been wrong) tells me we are there. From a fundamental standpoint. I think companies throw everything and the kitchen sink in for writedowns on the first quarter and pushes s&p earnings to $50-$55 an annualized basis giving us a current pe near 13. I think by 3rd or 4th quarter, the writedowns are no longer there and with even a slight uptick from all this money their throwing into the system we see quarterly earnings closer to $65 annualized. Based on future expectations, what will be then current valuations and having the worst behind us, I think 15 is a resonable PE for the market we finally see the cash flow in from the sidelines pushing us to 1000 on the s&p. I tell my clients I’m an eternal optimist. Unfortunately, I’ve been wrong the last decade, but I think the next decade looks very promising (see the optimism). Feel free to shoot holes through my reasoning. I spend my days selling against the media, I might as well sell against other brokers too.
15 is a historically reasonable P/E only when there is earnings growth and economic expansion - something we had for about 50 years. That is not the case currently as the only way spending can rise is if it is from savings as there is no savings rate and no borrowing.
This is all positive - just join the darkside and buy a short etf or put option.
btw - since the date of my first post my allocation that people called me stupid for is up about 9%…market is down 9%. [/quote]
15 PE? No way going forward. Who knows how low the “E” is going…but then the next shoe to fall will be the “P”. And when that goes down in 2010-2013 we will really be in for a crap environment. Spend some time looking at the 70’s charts, companies growing earnings from 1973 to 1980 and stock traded dead flat. That is usual action after this type of deal, first the E then the P gets hit.[/quote]
Still feel the same way Fritz? You can come out of your bunker now. We are still 18 points away, but we are close enough for me to feel vindicated.
These guys are hiding under their desks right now. When they do return they will claim the bought in at Dow 7k.
You think that Ron??? The hiding under the table babble that is. Since I made several post before yours am I included in 'these guys'?? Because we both know your statement is bullsh*t. Why even say something you know is bullsh*t? Do you use bullsh*t in your sales pitch?These guys are hiding under their desks right now. When they do return they will claim the bought in at Dow 7k.
Well this posted started months ago before the market hit rock bottom so who knows who predicted what. I do know that when the Dow was at 7000 I made a post that all new money should go 100% equities and I was abused. I also see in here that you got out at 8k and although I may have missed it, I don’t see when you got back in. I was mainly addressing Fritz because the post before me was calling him out. You and I have discussed what you do and it is apples and oranges compared to what I do.
Just checking Ron. FYI I consider myself to be reactive not predictive.
I know what you do. We have talked about it at length. I am trying to get middle class / upper middle class people to a decent retirement, nor more no less. Having discretionary trading of options available for 50k IRA's just doesn't make sense.
[quote=Ron 14]
I know what you do. We have talked about it at length. I am trying to get middle class / upper middle class people to a decent retirement, nor more no less. Having discretionary trading of options available for 50k IRA's just doesn't make sense.
[/quote] That I agree with you 100%. That is a perfect candidate for a MF, CEF or even better a UIT. I guess one sets up a strategy that works for the kind of clients they attract. Accredited investors will usually want something very different.It has nothing to do with a strategy geared towards attracting a certain client. I have some clients with more than 500k. I don’t change my philosophy to “impress” them because they may want something different. They can buy into me and how I go about things or not. Many of my clients have 100k with me and their 401k has 500k in it at their current job. They understand the overall plan and we work together on it. You can ride on your high horse about “accredited investors” all day. I will take my 250 households with 400k ( im obviously not there yet) and manage them with very little stress.
I’m getting multi million dollar accounts referred to me due to performance and service. Again, your (general statement) strategy will get the clients it’s appropriate for.
Does the truth put me on a high horse? I want fewer larger clients. I love what I do and don't stress out about it. It's all mathematics. That's one large reason why I don't trade anything my clients trade as I don't want emotion involved.You can hide behind the emotion card all you want. If your performance is repeatable and you have confidence in it, there is no reason to have a single client besides yourself. Either way, I am sure you will do well and I am sure I will also. You don't believe a word I say anyways so its meaningless to go around in this circle again.
[quote=Ron 14]
You can hide behind the emotion card all you want. If your performance is repeatable and you have confidence in it, there is no reason to have a single client besides yourself. Either way, I am sure you will do well and I am sure I will also. You don't believe a word I say anyways so its meaningless to go around in this circle again.
[/quote] Ron ron ron ... "hide" You ever make a trade with your own money? WAIT! Let me answer CLEARLY NOT. IF you did you would understand. I have tried hypnotism, meditation, acupuncture and a few other things. I am simply incapable of removing my emotions from a trade I make with my own money that has any size to it. Guess what ... I'm human. Emotion will cloud your perceptions. I do not trade in anything I put my clients in for myself. Putting on a complex arb and DCA ing a weeks pay into a mutual fund are a million miles away from each-other Why do you think they say an attorney that defends himself has a fool for a client???? or a Dr. giving himself a proper diagnosis?I traded my own money for 7 years at the CME and CBOE.
In a word… Bullsh*t x 10.
Only to go knocking on doors for EDJ ???? HA! I know many pro traders. I prop traded for several years before going retail. They/I hire(d) neuro-linguistic programmers all the time for this very reason. The fact that you are oblivious to this makes the first sentence TRUE![quote=Ron 14]
I traded my own money for 7 years at the CME and CBOE.
[/quote] According to your own statement, if you were good at trading you wouldn't need clients. Can we take this admission to mean you weren't good at trading? That would explain your buy and hold mentality.[quote=Gaddock]In a word… Bullsh*t x 10.
Only to go knocking on doors for EDJ ???? HA! I know many pro traders. I prop traded for several years before going retail. They/I hire(d) neuro-linguistic programmers all the time for this very reason. The fact that you are oblivious to this makes the first sentence TRUE![/quote] I don't know how I can prove it to you, but I spent 10 years on the floor. 1 as a runner, 2 as a clerk, 7 as a trader. You don't need a series 7 to trade on the floor. Skills as a floor trader don't necessarily translate when it comes to being a financial planner and the experience doesn't count towards the CFP designation. EDJ was a place that allowed me some freedom and the ability to get sales training and my 7. It is two totally different games. The open outcry trading pits have declined dramatically, thus the combining of the CBOT and CME.[quote=Jebediah][quote=Ron 14]
I traded my own money for 7 years at the CME and CBOE.
[/quote] According to your own statement, if you were good at trading you wouldn't need clients. Can we take this admission to mean you weren't good at trading? That would explain your buy and hold mentality.[/quote] When I was trading I didn't have any clients besides backers who put up half of the money. If you don't make money you don't last to the next month on the floor. So 7 years would mean I did fairly well. That allowed me to transition to the advising business and it gave me a nest egg to draw on as I build my book.[quote=BioFreeze] [quote=Ron 14]
I traded my own money for 7 years at the CME and CBOE.
[/quote]...and now you're a baby broker in a bank branch.
[/quote] Ouch!!!!
S&P 500 <.SPX> RISES ABOVE 1,000 LEVEL; AT HIGHEST SINCE EARLY NOVEMBER, 2008 REUTERS
Please, hold your applause.
I’m calling a bottom.
When?
Hey, that's proprietary. Only me, Jones, and American Funds know that answer.
I'm calling a top.
[quote=iceco1d][quote=noggin]
I'm calling a top.
[/quote] +1 - But still staying invested as I was 3 weeks, 3 months, 13 months, and 23 months ago.[/quote]I take it back. I’m calling a middle…
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