Markets look great, again

Our accounts have been doing great as well... We have been reviewing allocation strategies for our clients and have been taking some profits in certain areas, such as multi-cap growth and emerging markets. Better to sell out 80% of the gains over/above the allocation percentage and redeploy into other areas. We are still keeping about 110% of the value in these areas but have begun moving the excess profits into areas such as short term paper and money markets.

Our clients appreciate the prudence we are taking and agree that with the indexes approaching record levels and the increasing uncertainty, that realizing some profits may be a good short term strategy....

Sounds good to me. Don’t you feel bad for those clients locked into a 60/40

fixed income/equities mix? Ouch!

The Dow has a bit more to go if I remember right…I think it peaked around 11,700…

Don't get your clients too excited, with the current market trends. Remember, part of our job is to manage client expectations. If you feed your client too much optimism, they'll become hooked on that drug. Then when the market and their account, takes a hit, they'll acat their money out of there.

Historically speaking, depending on which type of S&P earnings you go by, i.e., operating, core, or as reported, the most we can hope for, over the next 10 years, is an annual return of approximately 6-8%. This is a trend that goes back as far as the early 1900's. Of course, things could be different this time. (Yeah, right)

Keep in mind, that an annual return of 6-8% doesn't mean smooth sailing. You could have a bear market for a majority of those 10 years and the market then make it up on the backside. Of course, by then, you will have lost the account.

I agree with blarmston, that taking some profits now is a prudent thing to do.

[quote=doberman]I agree with blarmston, that taking some profits now

is a prudent thing to do.

“Buy the rumor…sell the news!”

[quote=doberman] the most we can hope for, over the next 10 years[/

B], is an annual return of approximately 6-8%. [/quote]



Minus taxes and management fees? Might as well buy pre-refunded Munis

or stay in money market and call it a day. Right?



Man, if you came to me with that pitch I definately wouldn’t sign the ACAT.

You’re a good man and you like my jokes. Still friends?

skeedaddy:
Man, if you came to me with that pitch I definately wouldn't sign the ACAT.
You're a good man and you like my jokes. Still friends?

-----------------------------------------

Still friends? You bet. You could call me a wacked-out nut job. And as long as you said that, with a smile on your face, I'd give you my kidney if you needed it. Disagreements are prevalent in this business and everybody is right, at some point in time.

Who's to say what the market's going to do? (Past performance is not...blah, blah) Personally though, I'd put more stock in 80 years of market trends than some optimistic, overqualified bean-counter any day of the week. 

Besides, if you're dealing with the wealthy, they're more interested in preserving wealth than growing it. As a result, I am more apt to get an acat, than someone promising growth to the moon.

The biggest favor you can do for yourself and your practice, is to focus on selling the process of investing. Versus, if you put "investment returns" front and center of your sales pitch. If those returns are disappointing, your client will leave you.

Whereas, a broker with a distinctive "process of investing" will weather the market downturns with fewer outgoing acats. Why? Where else is that client going to find a broker who does as much due diligence on their investments?

[quote=Indyone]The Dow has a bit more to go if I remember right...I think it peaked around 11,700...[/quote]

The S&P 500 still has a long way to go.

I was really, really busy on Friday…selling out of of positions that is.  Always trust your insticts and stick to your disciplines. 

Man, talk about speaking too soon. I just got royally spanked in less than a

week. This has been brutal. Straight wholesale selling. Did anything go up

today?

skeedaddy:

Man, talk about speaking too soon. I just got royally spanked in less than a week. This has been brutal. Straight wholesale selling. Did anything go up today?

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Yea, the price of gas and the price of just about everything else.  

Tuesday, I was approached by 2 beggars asking for gas money.

One approached me as I was filling-up. This guy had already parked his car at the pump and was rolling around in his wheelchair to all the pumps, asking for money. The other guy hit me up on the street. I never gave them money, since I couldn't tell the huskster from someone truly in need.

I guess my forehead was stamped,"Ask Me For Gas Money".

It’s all about value. This ain’t a bull mkt., what we experienced was a rally (cyclical bull) in a secular bear mkt. History of bull mkts is that they start from MUCH lower valuations than what we have experienced. Go ahead and talk about PE ratios lower than 3-4 yrs ago. Still not low enough to qualify. Maybe single digits before we start secular bull again. Yeh, I know the argument of the “fed model”. If we use this valuation method then we are hostage to interest rates. (Now about those “poor saps” that use a 60/40 allocation.)

The market is pulling back and seems that it is likely to continue,
which I think is pretty healthy at this point.  I don’t believe in
secular bull or bear markets…money can be made in both.  IF you
bought the index at the peak, rode it down and came back up you would
have a balance of X.  If you had a 60/40 mix implemented a the
peak, rebalanced on the way down and on the way back up you balance is
X+++++. It is just short term view vs long term view. 

[quote=Revealer]It's all about value. This ain't a bull mkt., what we experienced was a rally (cyclical bull) in a secular bear mkt. History of bull mkts is that they start from MUCH lower valuations than what we have experienced. Go ahead and talk about PE ratios lower than 3-4 yrs ago. Still not low enough to qualify. Maybe single digits before we start secular bull again. Yeh, I know the argument of the "fed model". If we use this valuation method then we are hostage to interest rates. (Now about those "poor saps" that use a 60/40 allocation.)[/quote]

Perfect. No bull market has EVER commenced with a P/E higher than 11. In addition, the average gain in up years is higher in a BEAR market than a bull market.

I’m considering using overbought/oversold as trigger points. Which means I

should be buying right now, but it takes a strong stomach. Let’s see how

things develop.

If that is all you are using to determine when to buy you are not making the best decisions.  Really.  If you are going to start to use technicals you need to learn how to use more than just that.

[quote=remotecontrol]

[quote=Revealer]It's all about value. This ain't a bull mkt., what we experienced was a rally (cyclical bull) in a secular bear mkt. History of bull mkts is that they start from MUCH lower valuations than what we have experienced. Go ahead and talk about PE ratios lower than 3-4 yrs ago. Still not low enough to qualify. Maybe single digits before we start secular bull again. Yeh, I know the argument of the "fed model". If we use this valuation method then we are hostage to interest rates. (Now about those "poor saps" that use a 60/40 allocation.)[/quote]

Perfect. No bull market has EVER commenced with a P/E higher than 11. In addition, the average gain in up years is higher in a BEAR market than a bull market.

[/quote]

Fair enough.  How does one make money in this market then?

"Fair enough.  How does one make money in this market then?"

Employing a diversified portfolio to weather any pullbacks, while allocating a small percentage to tactical non-correlative asset classes to potnetially add return. Also, by taking advantage of rather attractive cash yields right now.

There are many ways to do it.  It is much easier if you manage fee based stock accounts. 

One way is to scan for stocks that had good relative strength over this past several days.  If you understand charts also check that out for stocks that had the good rs.  If the over-all chart is good and RS has been good and, "if you like fundamentals it has good fundamentals," that may be a good buy right now.  You need to get on board with the operators on Wall Street.   Figure out where the big money is flowing.  THis, in very brief, is how you do that.

Secondly, use stop losses.

Thirdly, learn to short stocks. 

Last, consider RYDEX inverse funds and the Prudent Bear fund.

If you operate a commision based business all this is difficult to do.   Watch the BKX.  This puppy is sitting right on top of its 50 day moving average.  If that drops below that, watch out because the market is really going to puke.   

One other thing, if you are considering RYDEX or BEARX you are too late as of right now.  Watch the importent indexes though because this market could leg down again. If it does you will have advance warning and there is where you could take advantage of these mfds.

Man am I glad I am not at EDJ telling my clients to just hang in there.  This is where I pick up referrals and grow my biz.  I love it.  

[quote=Malcolm] If that is all you are using to determine when to buy you

are not making the best decisions. Really. If you are going to start to use

technicals you need to learn how to use more than just that.[/quote]



I appreciate your point, a good one. But I’m neither “starting” to use

technicals, nor only relying on OB/OS. Rather, suggesting an overlay

technique in addition to RS, VA Pct, Money Flow and moving avgs. I’m simply

bringing up the subject to explore anyone’s experiences. Thanks.

[quote=Mike Damone][quote=remotecontrol]

[quote=Revealer]It's all about value. This ain't a bull mkt., what we experienced was a rally (cyclical bull) in a secular bear mkt. History of bull mkts is that they start from MUCH lower valuations than what we have experienced. Go ahead and talk about PE ratios lower than 3-4 yrs ago. Still not low enough to qualify. Maybe single digits before we start secular bull again. Yeh, I know the argument of the "fed model". If we use this valuation method then we are hostage to interest rates. (Now about those "poor saps" that use a 60/40 allocation.)[/quote]

Perfect. No bull market has EVER commenced with a P/E higher than 11. In addition, the average gain in up years is higher in a BEAR market than a bull market.

[/quote]

Fair enough.  How does one make money in this market then?

[/quote]

You need to find something that consistently outperforms the market in good and bad years. I've been using a UIT strategy since Oct of 2002 that is up 84% compared to 50% on the S&P 500, as of today.

C’mon Remote.  I have an ETF/Mutual fund strategy for small
accounts that, if tracked 50% back on the S & P 500, is up more
than 90%.  How?  Owning a little small cap, emerging markets,
international, along with everything else including 42% bonds and
cash.  I rebalance 2 times a year. 



UIT’s with all of there tax problems in non-IRA’s when markets pop
up?  Mutual funds are bad enough, but UIT’s are just plain
cruel. 



A little harsh, I don’t mean to throw a spear at you, but beating the S&P over the last couple of years has not been hard.

You could’a beat the S&P for past 5 yrs. with BONDS. Don’t pick out mkt. lows (Oct '02) for comparisons, use entire cycles. (Don’t use the mantra about stocks returning blank % for past 77 yrs. or whatever Ibbotson uses,) how many of us have a 77 yr horizon??

I use them in a VA, mostly. I go back to Oct. 2002 because that’s when I started using the VA. I’ve got real numbers going back to 2000 in the perspectus, but I’m not gonna claim something that I didn’t achieve, personally.

I've got something that I believe in and it has delivered. If you guys wanna piss on what I do, go ahead. I'm happy and you won't change my mind about anything.