Question for market timers--Bear Market Bottom?

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Question for market timers--Bear Market Bottom?

Postby Taylor Larimore » Fri Mar 13, 2009 8:34 pm

From MSNBC:

A sharp rebound in bank shares and easing worries about the economy pushed stocks to their best week since late November.


If you are a market timer sitting in cash, waiting for the bear market bottom, is now the time to jump back into stocks? If not now, when?

http://www.msnbc.msn.com/id/3683270/
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Postby UKbloke » Fri Mar 13, 2009 8:41 pm

I'm not a market timer but I do have a purchase scheduled for tuesday... It's on my investment plan so I will stick to it, but it'd like to see some profit taking on monday!

So market timers, this is NOT a bottom! Don't go long! :)
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Postby Adrian Nenu » Fri Mar 13, 2009 9:33 pm

There is no way of knowing or timing a market bottom.

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Postby SP-diceman » Fri Mar 13, 2009 10:14 pm

Wow.

Just because its associated with "market timing".

Being in cash now sounds like a bad idea.


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Postby diasurfer » Fri Mar 13, 2009 10:41 pm

.
I don't get this insistence that market timers have to accurately pick the exact bottom to justify market timing.

On September 17, there was a Bogleheads poll showing that the overwhelming majority predicted the market was going to fall a lot further. And yet almost no one wanted to get out "because how would we know when to get back in?" "You have to be right twice!".

Well, considering that the S&P500 was about 1200 then, how about ANY day since then. I unfortunately was not one of those Bogleheads who though it would drop much further.
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Postby cloudeleven » Fri Mar 13, 2009 10:50 pm

I sold all of my stock holdings in January 2008 (when the S&P 500 was around 1400) and have been entirely in cash/Treasuries since then. Instead of trying to pick the EXACT bottom (because I don't know), I would rather wait until the S&P 500 closes above an important level. I want to see some real recovery happen first. I don't mind missing out on some of the upside given I've missed the entire downside from 1400 until now.
Last edited by cloudeleven on Fri Mar 13, 2009 10:58 pm, edited 2 times in total.
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easily another 10% up still within defined bear

Postby susa » Fri Mar 13, 2009 10:56 pm

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Postby woof755 » Fri Mar 13, 2009 10:59 pm

I don't really like that chart. I disagree with the use of blue--should have been orange, maybe.
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Postby DP » Fri Mar 13, 2009 11:01 pm

Hi,
If you are a market timer sitting in cash, waiting for the bear market bottom, is now the time to jump back into stocks? If not now, when?


Taylor, for a Boglehead you seem unusually interested in market timing, having started more threads on the subject then anyone it seems.

Certainly not right now. For the long term I'll wait until the total market index crosses above it's monthly 12 month simple moving average. For now we're in a bear market, at least until there's evidence to the contrary, and the market is severely overbought in the short term - this is an excellent shorting opportunity! The SPY closed at 76.09 today. Let's see where it is 1 week from now.

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Postby woof755 » Fri Mar 13, 2009 11:08 pm

DP wrote:Hi,
If you are a market timer sitting in cash, waiting for the bear market bottom, is now the time to jump back into stocks? If not now, when?


Taylor, for a Boglehead you seem unusually interested in market timing, having started more threads on the subject then anyone it seems.

Certainly not right now. For the long term I'll wait until the total market index crosses above it's monthly 12 month simple moving average. For now we're in a bear market, at least until there's evidence to the contrary, and the market is severely overbought in the short term - this is an excellent shorting opportunity! The SPY closed at 76.09 today. Let's see where it is 1 week from now.

Don


12 months, 200 days, pyramid up--just b/c you have a plan doesn't mean there's logic to it. Taylor is trying to keep the pressure on the folks who are claiming they called the top...so they can't come back 6, 12, or 18 months from now and say they called the bottom.

I think he's inspired to do this because those chest thumping posts are as annoying as they are disingenuous.
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Postby cloudeleven » Fri Mar 13, 2009 11:22 pm

woof755 wrote:12 months, 200 days, pyramid up--just b/c you have a plan doesn't mean there's logic to it. Taylor is trying to keep the pressure on the folks who are claiming they called the top...so they can't come back 6, 12, or 18 months from now and say they called the bottom.

I think he's inspired to do this because those chest thumping posts are as annoying as they are disingenuous.


Um, the point is not to nail "the top" or "the bottom," the point is to see the warning signs that a bear market may be coming and get out as close to the "top" as possible (and there were MANY warning signs this time, including the inverted yield curve and the S&P 500 close below the August 2007 low). Same thing with the bottom - the point is not to get in at the exact bottom, but near the bottom after seeing signs of recovery. I've avoided 46% of this decline so far (from roughly 1400 to today's close), so it has worked pretty well in this bear market.
Last edited by cloudeleven on Fri Mar 13, 2009 11:29 pm, edited 3 times in total.
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Postby Adrian Nenu » Fri Mar 13, 2009 11:22 pm

There is no need to try to time the market bottom. You just start DCAing back into stocks when you see tons of gloom & doom articles in the media and public sentiment towards the market is low (flght to quality panic). And it helps if the market is down 50%. You will never get the bottom exactly right so this is one of the few times when DCA is useful.

How do you end up with money to invest during bear markets? You have to have a conservative asset allocation during bull markets when everyone is drunk and happy and think the party will last forever. Or use the inverted yield curve.

http://www.ny.frb.org/research/capital_ ... ycfaq.html

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Postby woof755 » Fri Mar 13, 2009 11:28 pm

cloudeleven wrote:
woof755 wrote:12 months, 200 days, pyramid up--just b/c you have a plan doesn't mean there's logic to it. Taylor is trying to keep the pressure on the folks who are claiming they called the top...so they can't come back 6, 12, or 18 months from now and say they called the bottom.

I think he's inspired to do this because those chest thumping posts are as annoying as they are disingenuous.


Um, the point is not to nail "the top" or "the bottom," the point is to see the warning signs that a bear market may be coming and get out as close to the "top" as possible (and there were MANY warning signs this time, including the inverted yield curve and the S&P 500 close below the August 2007 close). Same thing with the bottom - the point is not to get in at the exact bottom, but near the bottom after seeing signs of recovery. I've avoided 46% of this decline so far (from roughly 1400 to today's close), so it has worked pretty well in this bear market.


Congratulations. You are a brilliant investor. Unfortunately, 99% of people have no idea what you are talking about. And a year from now if something fails you and you miss 75% of the run-up, we won't be hearing from you admitting your gaffe.
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Postby SP-diceman » Fri Mar 13, 2009 11:37 pm

diasurfer wrote:
I don't get this insistence that market timers have to accurately pick the exact bottom to justify market timing.

On September 17, there was a Bogleheads poll showing that the overwhelming majority predicted the market was going to fall a lot further. And yet almost no one wanted to get out "because how would we know when to get back in?" "You have to be right twice!".

Well, considering that the S&P500 was about 1200 then, how about ANY day since then. I unfortunately was not one of those Bogleheads who though it would drop much further.


Exactly diasurfer.

If they moved out of the market.
They could just buy Monday.
(or last December or last September)
They don't need to find the bottom.

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Postby Derek Tinnin » Fri Mar 13, 2009 11:57 pm

Adrian Nenu wrote:There is no need to try to time the market bottom. You just start DCAing back into stocks when you see tons of gloom & doom articles in the media and public sentiment towards the market is low (flght to quality panic). And it helps if the market is down 50%. You will never get the bottom exactly right so this is one of the few times when DCA is useful.

How do you end up with money to invest during bear markets? You have to have a conservative asset allocation during bull markets when everyone is drunk and happy and think the party will last forever. Or use the inverted yield curve.

http://www.ny.frb.org/research/capital_ ... ycfaq.html

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From Vanguard...

https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/commentary/article?File=IWENewsYieldCurve

However, Vanguard's economists and money managers say the speculation may be a case of Chicken Little raising undue alarm, as yield-curve changes historically have been far from perfect in predicting economic cycles. And other factors now play a role, making the yield curve an even less reliable crystal ball.
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Postby VictoriaF » Sat Mar 14, 2009 10:48 am

Derek Tinnin wrote:From Vanguard...

https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/commentary/article?File=IWENewsYieldCurve

However, Vanguard's economists and money managers say the speculation may be a case of Chicken Little raising undue alarm, as yield-curve changes historically have been far from perfect in predicting economic cycles. And other factors now play a role, making the yield curve an even less reliable crystal ball.


Derek,

Thank you for a reference.

I wish Vanguard were using more precise language than "Chicken Little" and "crystal ball." When financial publications replace formal speech with colloquialisms, the substance of their message is also suspect.

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Postby bill99 » Sat Mar 14, 2009 11:05 am

I don't get it.

If it was so easy to see this bear market coming, why didn't most active fund managers get out of the way? Or even partly out of the way?
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Postby Adrian Nenu » Sat Mar 14, 2009 11:44 am

However, Vanguard's economists and money managers say the speculation may be a case of Chicken Little raising undue alarm, as yield-curve changes historically have been far from perfect in predicting economic cycles. And other factors now play a role, making the yield curve an even less reliable crystal ball.


http://www.ny.frb.org/research/capital_ ... ycfaq.html

http://www.vanguard.com/international/h ... rtedEN.htm

- maybe their opinion has changed after 2000-2003 and 2008-?, both of which have been predicted by the inverted yield curve. In the first one, we had massive tech and dot-com bubble and in the second we had huge RE bubble with MBS defaults rising and major financial institutions going belly up. Ride it out if you can but what if you underestimated risk and have too much equity exposure, and can't sleep well at night and can't afford losses?

So you have a choice: ignore the inverted yield curve and stay in the market with increasing risk, then lose maybe 30%, 40%, 50% or reduce equity, pay some taxes and earn 3% - 4% safely and sleep well at night during the recession and bear market.

- or, if you don't believe any of this stuff and don't want to be bothered with market volatility, market/economic timing, rebalancing, whatever, use the Zivi Bodie strategy and have a little equity exposure with the rest in TIPS mostly. Good strategy, especially for retirees.

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Postby Adrian Nenu » Sat Mar 14, 2009 11:53 am

However, Vanguard's economists and money managers say the speculation may be a case of Chicken Little raising undue alarm, as yield-curve changes historically have been far from perfect in predicting economic cycles. And other factors now play a role, making the yield curve an even less reliable crystal ball.


- I forgot to mention: ironically, the article is dated 10/18/2005 and shows the yield curve starting to flatten. The yield curve inverted in late 2006, just as concerns and doubts about MBS bonds' viablity and RE bubble started to show up. Things got worse in 2007 and we already know the rest of the story.

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Postby superlight » Sat Mar 14, 2009 11:56 am

I am a "behavioralist" index investor. I buy indexes, and lean towards mechanistic rules (value averaging) because I don't trust myself or markets.

That said, I'm comfortable letting my "monkey boy' brain duel a bit with my "mister Spock" side. When I say "moderation in all things" sometimes that is to rein in panic, and sometimes it is to rein in logic. Neither side is going to be right all the time. (should I picture a little money on one of my shoulders and a Spock on the other? like the angels and devils?)

Mr. Spock said "lump-sum into the market" in June 2008. Monkey boy was frightened, and he was right.

... right now I think Spock and the monkey agree ... get in but don't rush.
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Postby SP-diceman » Sat Mar 14, 2009 11:56 am

bill99 wrote:
I don't get it.

If it was so easy to see this bear market coming, why didn't most active fund managers get out of the way? Or even partly out of the way?


Many are not allowed to.
(they have rules about allocations)

In the tech bubble of 2000 the fidelity Magellan fund
manager was worried.

He started moving more assets to fixed income.

Customers stating to complain about its underperformance.

To address the problem.
The manager was replaced by another so that he could
"fix" the problem.

Of course he rebalanced into stock right at the 2000 top.


Thanks
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Postby Harold » Sat Mar 14, 2009 12:08 pm

VictoriaF wrote:I wish Vanguard were using more precise language than "Chicken Little" and "crystal ball." When financial publications replace formal speech with colloquialisms, the substance of their message is also suspect.


I know what you mean. But the Buffett letters are riddled with folksy sayings, and they're filled with excellent financial insights.
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Postby Adrian Nenu » Sat Mar 14, 2009 12:18 pm

Mr. Spock said "lump-sum into the market" in June 2008. Monkey boy was frightened, and he was right.


- if you lump-sum and buy & hold, then you have to get the asset allocation right and account for events such as the 1973-1974 and 2000-2003 bear markets.

Tolerable Loss x 2 = Equity Allocation

Such an event happened in 2008.

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Postby richard » Sat Mar 14, 2009 12:30 pm

Derek Tinnin wrote:https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/commentary/article?File=IWENewsYieldCurve

However, Vanguard's economists and money managers say the speculation may be a case of Chicken Little raising undue alarm, as yield-curve changes historically have been far from perfect in predicting economic cycles. And other factors now play a role, making the yield curve an even less reliable crystal ball.

Yield curves work rather well in predicting recessions. Unfortunately, there is no evidence they work for market timing. Evidence being quantitative data, not hand waving references to increased risk. At least the 200 day moving average crowd posts charts, etc.
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Postby soaring » Sat Mar 14, 2009 12:30 pm

Adrian Nenu wrote:
- or, if you don't believe any of this stuff and don't want to be bothered with market volatility, market/economic timing, rebalancing, whatever, use the Zivi Bodie strategy and have a little equity exposure with the rest in TIPS mostly. Good strategy, especially for retirees.
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Exactly...bold emphasis from me. A strategy too many retires missed IMO or maybe just didn't relate at the time.

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Postby Adrian Nenu » Sat Mar 14, 2009 12:47 pm

Yield curves work rather well in predicting recessions. Unfortunately, there is no evidence they work for market timing. Evidence being quantitative data, not hand waving references to increased risk. At least the 200 day moving average crowd posts charts, etc.


http://www.ny.frb.org/research/capital_ ... ycfaq.html

- so what happens to earnings, dividends and stock prices during a recession? Sure stock market returns can end up positive but at what risk compared to bonds and CDs. Have to look at the downside possibility, especially in light of the ongoing bear market with a 50% decline. How can anyone look at the evidence on the inverted yield curve as a recession predictor and summarily dismiss it as a risk management tool?

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Postby Orion » Sat Mar 14, 2009 1:10 pm

During this crash, I found that nominal treasuries did a lot better than TIPS, but I did buy more TIPS when they got cheap.
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Postby JW Nearly Retired » Sat Mar 14, 2009 1:17 pm

Maybe we have seen the bottom or maybe not. This is still a young bear market. Some market timers would advocate waiting for some objective signal that it's really over. For example, as indicated by the green line crossing the red line on this chart. If history is any guide this is a more reliable signal then just personal judgement. If you are waiting for the crossing, it looks still months away at best.

Where were the market timers at the time the "get out" signal was given? I don't know. There may have been a few but no one, including me, much listened.
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Postby ken250 » Sat Mar 14, 2009 1:36 pm

I'm waiting for the S&P to go back up to 1550, then I'll be committing my cash reserves near the top...since it doesn't matter whether we buy low or high.

Actually, I've been value averaging over the last 18 months and have been buying between 1.5x and 2.0x the number of shares I was buying more than 18 months ago. My portfolio is also yielding about 5.5%, so every quarter I'm reinvesting the dividends and interest near the lows on even more shares. It isn't necessary to hit the bottom exactly, as long as you're getting more shares for your $$$ you're doing ok.
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Postby Bulldog Bond » Sat Mar 14, 2009 2:34 pm

I am not a market timer, so when I saw the signs of a coming recession in 2007, I expected to simply ride it out.

Something ominous happened in Jan 08 when a rogue trader in Europe roiled the markets. The S&P went down 12% from mid-Dec 07 to mid Jan 08.

This level of market fragility, I believed, meant that something far worse than a simple recession was coming. I was unwilling to live through the agony of another bubble collapse, so I sold all my domestic equities in Jan 08. Mistakenly, I believed that this would be a USA-only event and held on to my international equities until Oct 08 (that cost me some money).

I am clearly money ahead at this point. I am happy with my decision and have a strategy to get back into the market.

The necessary condition: The average S&P 500 value for the month must be 20% above the average in the "bottom" month. My belief is that will not occur until June 2010.
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Postby Robert The Bruce » Sat Mar 14, 2009 2:34 pm

Adrian Nenu - How can anyone look at the evidence on the inverted yield curve as a recession predictor and summarily dismiss it as a risk management tool?


I can see where an inverted yield curve indicated you should lighten up on stocks but it does not seem to give a buy signal. The yield curve is steep right now - is that a signal?

Also, the inversion is a bit of a blunt instrument. My look at the data shows the yield curve inverted in July 2006. In hindsight that was a good call but did anyone really get out in 2006 and stay out for the next 16-18 months?
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Postby BlueEars » Sat Mar 14, 2009 2:36 pm

JW Nearly Retired wrote:...
Where were the market timers at the time the "get out" signal was given? I don't know. There may have been a few but no one, including me, much listened.
JW

I would not have listened either but there is a reason why a market timer would be ill advised to declare his sell signal to be a long term indicator. This is because all of the trend techniques are subject to false positives or whipsaws which have to be tolerated. A sell signal does not guarantee an extended downturn but would be seen as insurance should one develop. Generally the timer pays for that insurance by underperforming buy-hold in other periods, like sharp upturns.
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Postby newbogleuser » Sat Mar 14, 2009 2:41 pm

cloudeleven wrote:I sold all of my stock holdings in January 2008 (when the S&P 500 was around 1400) and have been entirely in cash/Treasuries since then. Instead of trying to pick the EXACT bottom (because I don't know), I would rather wait until the S&P 500 closes above an important level. I want to see some real recovery happen first. I don't mind missing out on some of the upside given I've missed the entire downside from 1400 until now.


Interesting post.

From many of the Bogle users here, it seems they should shun on this behavior and would have suggested you never withdrew $ from your portfolio, allowed yourself to lose 40% of your net worth, 'dollar cost average down,' etc.
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Postby JW Nearly Retired » Sat Mar 14, 2009 2:52 pm

Les wrote: I would not have listened either but there is a reason why a market timer would be ill advised to declare his sell signal to be a long term indicator. This is because all of the trend techniques are subject to false positives or whipsaws which have to be tolerated. A sell signal does not guarantee an extended downturn but would be seen as insurance should one develop. Generally the timer pays for that insurance by underperforming buy-hold in other periods, like sharp upturns.

Very true. However, usually about every 25 years timing pays off big. Only 8 years since the last time. Most of us don't have the patience to keep it up that long. I think we might give some credit to those who do.
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Postby meckaneck » Sat Mar 14, 2009 2:59 pm

IMHO we are in the midst of a bear market "sucker's" rally and all this bull talk and bear bottom is complete nonsense.

The next technical test for the SP500 is the 780 level which coincides with the 2000-2002 low, if we are successful in breaking this level than perhaps this bear rally can get up to the 875 level or so. At that point I would hedge your long positions, one that I use is SDS and SRS.
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Postby spam » Sat Mar 14, 2009 3:26 pm

I bought plenty of equities last week when the dow was in the 6000's. It does not matter to me if this is a major bear market rally, or the beginning of a new bull market. I will be selling a few shares if or when the dow reaches 8000.

I feel that IF the recent low as not the bottom, that the real one will come in 3 to 6 months. I expect the low to be near 6200 for the dow if it is tested again and fails..

That is my plan, and I am sticking to it.
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Postby Adrian Nenu » Sat Mar 14, 2009 3:38 pm

can see where an inverted yield curve indicated you should lighten up on stocks but it does not seem to give a buy signal. The yield curve is steep right now - is that a signal?

- that's the hard part, getting back in. The bottom cannot be timed so starting to DCA when negative sentiment is highest is an option. It's a judgement call. The other option is to wait until economic indicators turn positive, then DCA back in. You will miss some of the upside if you wait until the economy picks up.


Also, the inversion is a bit of a blunt instrument. My look at the data shows the yield curve inverted in July 2006. In hindsight that was a good call but did anyone really get out in 2006 and stay out for the next 16-18 months?


- according to the Fed studies I posted, the yield inverts about 6-18 months prior to the recession. It inverted in early 2000 and late 2006 giving ample warning of impending recessions. You don't have to get out ASAP as soon as the yield inverts but can DCAD (dollar cost average down). Maybe start with the tax advantaged accounts to avoid paying capital gains taxes and adjust taxable accounts later if needed. Depends on what asset allocation you are comfortable with to ride out the bear market.

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Postby Adrian Nenu » Sat Mar 14, 2009 3:48 pm

can see where an inverted yield curve indicated you should lighten up on stocks but it does not seem to give a buy signal. The yield curve is steep right now - is that a signal?


- that's the hard part, getting back in. The bottom cannot be timed so starting to DCA when negative sentiment is highest is an option. It's a judgement call. The other option is to wait until economic indicators turn positive, then DCA back in. You will miss some of the upside if you wait until the economy picks up.

Also, the inversion is a bit of a blunt instrument. My look at the data shows the yield curve inverted in July 2006. In hindsight that was a good call but did anyone really get out in 2006 and stay out for the next 16-18 months?


- according to the Fed studies I posted, the yield inverts about 6-18 months prior to the recession. It inverted in early 2000 and late 2006 giving ample warning of impending recessions. You don't have to get out ASAP as soon as the yield inverts but can DCAD (dollar cost average down). Maybe start with the tax advantaged accounts to avoid paying capital gains taxes and adjust taxable accounts later if needed. Depends on what asset allocation you are comfortable with to ride out the bear market.

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Postby spam » Sat Mar 14, 2009 4:52 pm

that's the hard part, getting back in. The bottom cannot be timed so starting to DCA when negative sentiment is highest is an option. It's a judgement call. The other option is to wait until economic indicators turn positive, then DCA back in. You will miss some of the upside if you wait
until the economy picks up.


Why not look at the sentiment Indexes? Capitulation is an emotional and fear driven event.

<snip>

Quote: Might this bear market nevertheless bottom out without capitulation taking place? To gain insight into this question, I analyzed all bear market bottoms since 1965, using the definition used by Ned Davis Research, the institutional research firm.

I then analyzed the behavior of four different sentiment measures on the occasion of those bottoms (if data were available): In addition to the HSNSI, I focused on (1) the well-known survey of newsletter sentiment conducted by Investors Intelligence, (2) the survey of individual investors conducted by the American Association of Individual Investors, and (3) the CBOE's Volatility Index (.VIX), which reflects expectations of future volatility among options traders, and which is often referred to as an "investor fear gauge."

Incredibly, I found that, on average across these past bear markets, sentiment hit its lowest point 15 calendar days prior to the actual day of the bottom. That's impressive -- very few other market-timing indicators come this close.

<snip>

Full story: https://news.fidelity.com/news/article. ... ing-stocks

AAII index: Brief Description http://tal.marketgauge.com/dvmgpro/UGui ... art=AAIISR

Current application / analysis

This is a quote from: http://www.tradersnarrative.co....-2332.html AAII

But the most fascinating and historic reading comes to us from the AAII weekly survey. The latest American Association of Individual Investors (AAII) data shows what can only be describe as total and utter capitulation. As of Wednesday (March 4th, 2009) 70% expected the market to continue to fall, while only 19% continue to see better times ahead.

The only data point from the AAII survey that approaches this level of gloom is back in October 19th, 1990 when a paltry 13% of respondents were bullish and 67% were bearish. End Quote

Capitulation would be the only predictor of a market bottom that I can think of.
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Postby tutaloo » Sat Mar 14, 2009 6:10 pm

xx
Last edited by tutaloo on Tue Jan 18, 2011 5:30 am, edited 1 time in total.
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Postby Derek Tinnin » Sat Mar 14, 2009 6:28 pm

Rhetorical question...

Over the course of your investment lifetime, can you expect to consistently capture return while following a strategy that consistently seeks to avoid the risk that drives expected return?
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Postby sambuca08 » Sat Mar 14, 2009 6:59 pm

There is no easy, obvious money going forward. To prove it by taunting market timers to look foolish is just as disingenuous as saying it's a sure thing to capitalize on what worked for the Boomers (and now seems to be a fools errand (i.e. diversified + stock-heavy portfolios forever outperform)). Noone knows what the next generation would see outsized profit from. It may be TIPS or muni's or equity bets on advances in bio- and nano-tech (e.g. I keep hoping to get that movie moment where someone tells me to invest in 'plastic'), but if the financial sector that buoyed the recent bubble is non-existant in the ensuing boom, then maybe VTI is a poor choice. Maybe the future of stable, superior performance in the market is specification, as opposed to broad exposure. So who cares if one person calls the top or bottom, as opposed to calling the right sector (i.e. renewables, or even energy in general). Or maybe emerging markets are the indisputable heavyweights, as 'The World is Flat' predicted.... Lots to think about, but we are in a time of transition, not a time of returning to what used to be. Personally, I love it 'cuz I'm young, but I know I'll really hate it in 30 years (and that's not because I hope to retire early, it's just because I hope to retire peacefully).
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Postby Electron » Sat Mar 14, 2009 7:08 pm

Taylor,

Are you interested in short, intermediate, or long term market timing signals?

The great 1982 Bull Market is over and many of us have been conditioned by that market and also the great stock market run from 2003-2007. We may not see markets that rewarding for a very long time to come.

We may now be in a difficult trading range market similar to 1966-1982 as one example. The rules in a secular bear market are very different from what we have experienced in 1982-2000 and 2003-2007.

Some analysts see market lows in the 400-600 range for the S&P 500. The low could be several years from now. These views are based on valuations reached in past bear markets and earnings estimates for the S&P 500 companies.

Investors Business Daily just published a chart within the last week that showed a long term uptrend line starting in 1930. The uptrend line is drawn using the major stock market lows in the decades that followed. That uptrend line does intersect the 400-600 area in the S&P 500 for the immediate period ahead.

Barron's is a good read every week for comments on this overall subject.

If you are looking for a long term low similar to 1982, that could be a decade or more in the future. That is why I mentioned short, intermediate, and long term signals. I think if one wants to time the market, they really have to think shorter term. We may get a rally and then head back down to lower lows. We'll be at the mercy of the news and we may also have higher inflation to deal with.

Your question actually brings up the futility of market timing since it is so difficult. The alternative is a properly designed portfolio with appropriate asset allocation that is rebalanced according to some rule set.

Regards, Kent
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Re: Question for market timers--Bear Market Bottom?

Postby ddb » Sat Mar 14, 2009 7:11 pm

Taylor Larimore wrote:From MSNBC:

A sharp rebound in bank shares and easing worries about the economy pushed stocks to their best week since late November.


If you are a market timer sitting in cash, waiting for the bear market bottom, is now the time to jump back into stocks? If not now, when?

http://www.msnbc.msn.com/id/3683270/


Taylor, why do we never see these types of posts from you after bad weeks? I remember you made a similar post at the end of November after a very excellent week. Of course, things are much lower now than they were BEFORE the start of that good week!

I don't disagree with your view on sticking to a plan, but it seems in poor form to only come out of the woodwork with these types of posts after sharp run-ups.

- DDB
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Postby deepdrive » Sat Mar 14, 2009 7:11 pm

Yo Adrian, no need to always be so condescending. We get it. You're retiring at 45. You know everything. Your rules of thumb are law. Still, maybe tone it down a notch, eh?
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
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Postby meckaneck » Sat Mar 14, 2009 7:26 pm

As Adrian has so eloquently pointed out several times on this forum, for those investors that chose to head the warnings (inverted yield curve, cross below 200 DMA) and took action to preserve their capital than they are way ahead of any buy hold rebalance strategy. I respectfully disagree with those that dismiss active management as using the yield curve and 200 DMA are indeed useful metrics in one's overall portfolio construction.

Buy hold rebalance is no longer for me as obvious bubbles will always exist, most recent examples: technology, real estate, oil, financials...

On a side note for those that advocate broad based index investing, the EFA is approximately 19% Japan, why does one want exposure to this country?
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Market Timing

Postby Taylor Larimore » Sat Mar 14, 2009 8:38 pm

Taylor, why do we never see these types of posts from you after bad weeks?


I started this thread because now is a good time to show the difficulty of trying to time the market.
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Postby woof755 » Sat Mar 14, 2009 8:42 pm

Derek Tinnin wrote:Rhetorical question...

Over the course of your investment lifetime, can you expect to consistently capture return while following a strategy that consistently seeks to avoid the risk that drives expected return?


FTW


:wink:
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Re: Market Timing

Postby baw703916 » Sat Mar 14, 2009 8:52 pm

Taylor Larimore wrote: I started this thread because now is a good time to show the difficulty of trying to time the market.


Well, I would say with some confidence that at the end of 2015, $10,000 invested in TSM next week will be worth about twice as much as $10,000 invested in TSM during October, 2007.

A 50% off sale is good enough for me (provided it was something I was going to buy anyway). :-)

Best wishes,
Brad
Most of my posts assume no behavioral errors.
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Re: Market Timing

Postby meckaneck » Sat Mar 14, 2009 8:58 pm

baw703916 wrote:
Taylor Larimore wrote: I started this thread because now is a good time to show the difficulty of trying to time the market.


Well, I would say with some confidence that at the end of 2015, $10,000 invested in TSM next week will be worth about twice as much as $10,000 invested in TSM during October, 2007.

A 50% off sale is good enough for me (provided it was something I was going to buy anyway). :-)

Best wishes,
Brad


Simply because the market has declined 50% does not mean it will not decline another 50%. One's equity risk remains the same. Personally I would not get fully invested back into equities until the market regains its 200 DMA.
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