Too Much Cash?

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Aug 10, 2009 5:07 pm

Nice B. I saw a few bond funds get beaten up too though.



In fairness to the length of the threads, I started this morning and then finished after being at a conference all day.

Aug 10, 2009 5:23 pm
Incredible Hulk:

If it's a tradable bear market rally, the question that has been asked multiple times is when to sell? Should you have sold in June? s&p 900? 1000? 1100?

Maybe the real quesion is whether you have even bought back in and participated in this "tradeable bear market rally?" If not, for your client's sake, I hope you do get the dip so your pride will be enough intact to put your clients back in.

 
Hey Hulk I could feed you trades all day long. My positions are market neutral for the most part. I would give you the symbol but FINRA could construe it as advice. If you think about it you should be able to figure it out who this trade is on.
 
Short sold ACME (as in Bugs Bunny's ACME) for $29.47
 
Bought the same amount of Calls for $2.45 35 strike.
 
Sold the same amount of Puts for $9.70, 35 strike.
 
When you smash them together your gain is $1.72 for a return of 4.9%. Trade ends on the third Friday of September I think the 15th.
 
NO MATTER WHERE THE STOCK GOES THE GAIN IS LOCKED IN AND PAID IN ADVANCE.
 
Another to think about is once you've averaged down a loosing position by selling puts and getting assigned. Once the equity is above the basis put (no pun intended) in a stop sell a put lower than the stop and sell calls on the amount of shares needed to average down. Any way the market goes you win. On expiration use a following stop and write the options again.
 
Market neutrality is the way to go IMHO.
 
Aug 11, 2009 3:24 pm

[quote=iceco1d]

 
Dude,

WTF?  Can't you see that we are in a 'secular bear?' I mean, it's SO clear. 
 
 
 
 
 
 
Perfect.
Aug 11, 2009 5:47 pm

If your buy and hold portfolio with a textbook allocation model with the oh so nice three layerers of fees is flat after a decade I would say that's pretty good indication.

Aug 12, 2009 10:03 am

I'm not sure who this comment is directed to, but it is an incorrect statement. The "textbook" middle of the road American funds portfolio is up roughly 45% in the last 10 years. Are you suggesting that the "testbook" allocation is 100% S&P 500? I can't argue with your previously mentioned trades, but you are sorely misinformed on "textbook" allocation model returns.

Aug 12, 2009 11:55 am
Incredible Hulk:

I'm not sure who this comment is directed to, but it is an incorrect statement. The "textbook" middle of the road American funds portfolio is up roughly 45% in the last 10 years. Are you suggesting that the "testbook" allocation is 100% S&P 500? I can't argue with your previously mentioned trades, but you are sorely misinformed on "textbook" allocation model returns.

 
Would you agree America Funds balanced fund is a fair example of a middle of the road textbook allocation model?
 
I would.
 
https://www.americanfunds.com/funds/details.htm?fundGroupNumber=11&fundClassNumber=0
 
After a decade of fees and that nice up front load they've gained a whopping...
 
Drum role please...
 
(((((((((((((((((((((((((((((((((((((((((((((( 3.69% ))))))))))))))))))))))))))))))))))))))))))))))))))))
 
x 12 = 45% give or take.
 
Wow!! I stand corrected. That allocation stuff really works!
 
What if you subtracted inflation?
 
hmmmmmmm
 
Given that $100 in 1999 would be $127.49 according to the CPI (I think those figures are fudged so the Feds don't have to increase SS more than they have) or just over 27%.
 
So;
 
45% - 27 = 18 for a annual return of (not even worth a drum roll) 1.8%
 
Imagine a C share after inflation OUCH!!!
 
Yeah  those models and academia have really knocked it out of the park.
 
 
Aug 12, 2009 12:09 pm
Gaddock:
Incredible Hulk:

I'm not sure who this comment is directed to, but it is an incorrect statement. The "textbook" middle of the road American funds portfolio is up roughly 45% in the last 10 years. Are you suggesting that the "testbook" allocation is 100% S&P 500? I can't argue with your previously mentioned trades, but you are sorely misinformed on "textbook" allocation model returns.

 
Would you agree America Funds balanced fund is a fair example of a middle of the road textbook allocation model?
 
I would.
 
https://www.americanfunds.com/funds/details.htm?fundGroupNumber=11&fundClassNumber=0
 
After a decade of fees and that nice up front load they've gained a whopping...
 
Drum role please...
 
(((((((((((((((((((((((((((((((((((((((((((((( 3.69% ))))))))))))))))))))))))))))))))))))))))))))))))))))
 
x 12 = 45% give or take.
 
Wow!! I stand corrected. That allocation stuff really works!
 
What if you subtracted inflation?
 
hmmmmmmm
 
 
 
Yes...that's correct, the performance (or lack thereof) of ONE below average fund proves that MPT and/or asset allocation cannot work.  Well done!
 
I'm sure I can easily find one advisor using technical analysis and options who lost money over 20 years...I guess that means that the whole theory is useless......really?
 
 
 
 
Aug 12, 2009 12:11 pm
Hey Kool-Aid:
Gaddock:
Incredible Hulk:

I'm not sure who this comment is directed to, but it is an incorrect statement. The "textbook" middle of the road American funds portfolio is up roughly 45% in the last 10 years. Are you suggesting that the "testbook" allocation is 100% S&P 500? I can't argue with your previously mentioned trades, but you are sorely misinformed on "textbook" allocation model returns.

 
Would you agree America Funds balanced fund is a fair example of a middle of the road textbook allocation model?
 
I would.
 
https://www.americanfunds.com/funds/details.htm?fundGroupNumber=11&fundClassNumber=0
 
After a decade of fees and that nice up front load they've gained a whopping...
 
Drum role please...
 
(((((((((((((((((((((((((((((((((((((((((((((( 3.69% ))))))))))))))))))))))))))))))))))))))))))))))))))))
 
x 12 = 45% give or take.
 
Wow!! I stand corrected. That allocation stuff really works!
 
What if you subtracted inflation?
 
hmmmmmmm
 
 
 
Yes...that's correct, the performance (or lack thereof) of ONE below average fund proves that MPT and/or asset allocation cannot work.  Well done!
 
I'm sure I can easily find one advisor using technical analysis and options who lost money over 20 years...I guess that means that the whole theory is useless......really?
 
 
That's why I only buy CD's for my clients.
Aug 12, 2009 12:18 pm
Hey Kool-Aid:
Gaddock:
Incredible Hulk:

I'm not sure who this comment is directed to, but it is an incorrect statement. The "textbook" middle of the road American funds portfolio is up roughly 45% in the last 10 years. Are you suggesting that the "testbook" allocation is 100% S&P 500? I can't argue with your previously mentioned trades, but you are sorely misinformed on "textbook" allocation model returns.

 
Would you agree America Funds balanced fund is a fair example of a middle of the road textbook allocation model?
 
I would.
 
https://www.americanfunds.com/funds/details.htm?fundGroupNumber=11&fundClassNumber=0
 
After a decade of fees and that nice up front load they've gained a whopping...
 
Drum role please...
 
(((((((((((((((((((((((((((((((((((((((((((((( 3.69% ))))))))))))))))))))))))))))))))))))))))))))))))))))
 
x 12 = 45% give or take.
 
Wow!! I stand corrected. That allocation stuff really works!
 
What if you subtracted inflation?
 
hmmmmmmm
 
 
 
Yes...that's correct, the performance (or lack thereof) of ONE below average fund proves that MPT and/or asset allocation cannot work.  Well done!
 
I'm sure I can easily find one advisor using technical analysis and options who lost money over 20 years...I guess that means that the whole theory is useless......really?
 
Tell me please what "theory" you are referring too? Who said "useless" not me Buckwheat. We were talking about a secular Bear market.
Aug 12, 2009 12:24 pm

Well you are saying asset allocation doesn't work because it hasn't for the last 10 years, arent you? That would make is useless, in your mind.

Aug 12, 2009 12:34 pm
Ron 14:

Well you are saying asset allocation doesn't work because it hasn't for the last 10 years, arent you? That would make is useless, in your mind.

 
Girls Girls .... chill.
 
I said the fact that it didn't work for the last decade is a fair indication that we are in a secular BEAR MARKET.
 
Jeees even the very thought makes you all want to burn a which.
Aug 12, 2009 12:37 pm
Ron 14:

Well you are saying asset allocation doesn't work because it hasn't for the last 10 years, arent you? That would make is useless, in your mind.

 
RON!!!! OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!!!!!!
 
"because it hasn't for the last 10 years"
 
YOU SAID IT NOT ME!!!!
 
Aug 12, 2009 12:38 pm

I couldn't care less if we are or we aren't. Ok, great, we are in a secular bear market and it started 10 years ago. If you don't see it coming before hand, which nobody did, it doesn't matter much.  Either way it doesn't mean asset allocation is dead.

Aug 12, 2009 12:39 pm

Nice try, but I was reframing your comments in question form, not making a statement.

Aug 12, 2009 12:42 pm
Ron 14:

I couldn't care less if we are or we aren't. Ok, great, we are in a secular bear market and it started 10 years ago. If you don't see it coming before hand, which nobody did, it doesn't matter much.  Either way it doesn't mean asset allocation is dead.

 
Show me where I said that. You're the one saying it again and again.
Aug 12, 2009 12:57 pm

Unreal! You know I don't think its dead. Do you believe in it or not ? I am making the assumption that you believe it is now an inept strategy.

Aug 12, 2009 1:02 pm

Ron ron ron,

 
You do know what they say about an 'assumption' don't you?
 
IMHO It's not the strategy that's "inept" 
Aug 12, 2009 1:25 pm
Ron 14:

I couldn't care less if we are or we aren't. Ok, great, we are in a secular bear market and it started 10 years ago. If you don't see it coming before hand, which nobody did, it doesn't matter much.  Either way it doesn't mean asset allocation is dead.

 
I would disagree that that nobody saw it coming (either the 2000 cycle or the 2007/8 cycle).  First, I am not saying I saw it - I was not even in the biz in 2000.  But there are some pretty standard technical strategies (the simplest being PE) that stand out.  Even if you tried to ride the last Bull market to the very bitter end, and lost some, you could have either (a) seen the stratospheric PE's, which were well documented - and I remember being an investor and being concerned, or (b) followed moving average theory and moved out as the market fell in 2000, thus avoiding the rest of the 3-year calamity (well 2.5 years or whatever).  There are other well-documented strategies (i.e. relative strength) as well, that I am not as familiar with.
 
My opinion is that asset allocation/MPT smooths out the returns during cyclical (bull and bear)markets, but does absolutely nothing to protect in a secular bear market.  The key is not having a crystal ball, but rather reacting to what is known.
 
For kicks, you should read Unexpected Returns from Crestmont Research (Ed Easterling).  Make sure you get the updated version.  I read the older version, and what was interesting is that they predicted what was coming.  Not that you would necessarily make adjustments to the degree that they do, but it teaches you something about taking profits and taking some money off the table when appropriate.
Aug 12, 2009 1:48 pm

I know a guy who is a big relative strength dude. I think he's full of crap. But it could just be him.



I agree asset allocation isn't dead. Neither is MPT. But they should be dead as the primary theories people use. Once again, if you believe everything you read and there is nothing to add, you are finished in any business.



There are plenty of valid strategies.



MPT is the easy way out for advisors. I'm just not sure what value is added. If it is, "I keep them from making mistakes", then you are a financial psychologist, not a financial advisor.



All of you talking about being in cash and "when to go to cash". If you are looking at valuations, you will naturally move to cash when they become to high.

Aug 12, 2009 2:30 pm
Vin Diesel:
 
 
this is nothing more than a -tradeable bear market rall.
 
 

 
 
 
perfect.
 
(Last time brokers had conversations like this........ 1982)