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Dr. Doom

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Oct 23, 2008 1:56 am

Don’t ya guyz gots real jobs?
How come dere iz so many posts during da day?

Oct 23, 2008 2:27 am


  Regarding your idea to say, "What is your threshold before you go to cash?", what if the market is down 15% and you pull out, how do you decide to get back in?    I think there are some great long term trends that can be followed which provide long term signals.  Thanks Primo.[/quote]

Dang, I'd better talk to our broker/dealer about putting those threshold questions in our questionnaire. 

I'd get back in when the fundamentals are back in the market.  That's when equities and fixed income are behaving like they should - bonds are inversely correlated to equities and vice versa.  That's when the asset allocation I sold my client is supposed to work.  I also wouldn't probably pull out all the assets in the portfolio in the first place.  I'd leave bonds in there to get the dividends and just liquidate equities.   In a way, it's a drastic rebalancing with some timing involved for equities.
Oct 23, 2008 9:21 am

“That’s when equities and fixed income are behaving like they should - bonds are inversely correlated to equities and vice versa.”

  Is this what you meant to post?
Oct 23, 2008 12:16 pm

Unfortunately most clients risk tolerance is near sighted and based primarily on current market performance. Glad I keep their investment time horizon and long term objective in their file these days with the risk analysis!

Oct 23, 2008 3:59 pm

Agree, options writing a great way to go. With the vix through the roof the premiums are crazy. An options writing program can be introduced in several ways. First, as a low cost way of owning stocks, second, as an income program, and third as an insurance strategy. As well, it can used a way to get rid of unwanted stocks by writing calls against the position. Make some dough on the way out.

  Assest allocation has taken a serious hit in this market. For the sell from the chart types the problem is where are we on the chart, 1930 or is it 1932? Or are we in uncharted waters? Good luck getting anyone over 50 buying into market history theories. The charts are done. Unless you can give this group portfolio insurance they aren't going all in. Nor should they. DCA, to the extent that it is out of vogue, will make a big comeback as a risk management strategy.   As we speak the investing public is still stunned by recent events. It hasn't sunk in. When it does My belief is that the delivery mode for financial services will change. The advice for a fee biz is in serious trouble. That is, unless they can explain their inability to get their clients off the tracks before getting run over by the runaway bear train. I realize this may seem unfair to those who collect these fees, in that the future is unknowable. but ongoing advice is what you sold to the client. I fear, for this group, PUt is closer to right than wrong. The liability issue will force firms to pull back from the fee model if the lawsuits do come out of the wood work. Please understand I'm not trying to denigrate anyone here. Just that this could be an outcome. And this doesn't even look at the government coming in and added layers of regulation. Right now they've got bigger fish to fry, but make no mistake our day on the stove is coming.   The future of the financial services may look a lot like the past, commission per trade or fee for advice at point of sale, exactly the way other professionals bill for service, by the hour.   The point going forward: Have a strategy that makes sense from a risk management POV. How you deliver that strategy and how you charge for it is much less important than having a plan.