U.S. stocks in freefall

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Uncle Pennybags
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Thu Aug 27, 2015 11:22 am

broadstone wrote:But wait, I thought Bogleheads didn't buy single stocks?
It falls under the 5% discretionary (wild & crazy) money.

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Re: U.S. stocks in freefall

Post by nisiprius » Thu Aug 27, 2015 11:39 am

broadstone wrote:Wednesdays gain will provide false security. It's the calm before the storm (downward).
Was this "the calm before the storm" or "the end of the storm?"
Image
Was this "the start of the real storm" or "just a dip?"
Image
Was this "the calm before the storm" or "the end of the storm?"
Image
Was this "the start of the real storm" or "just a dip?"
Image
Was this "the calm before the storm" or "the end of the storm?"
Image
Was this "the start of the real storm" or "just a dip?"
Image
Was this "the calm before the storm" or "the end of the storm?"
Image
Ah.
Image

You may be sure that at every time during that time period, people were vigorously expressing opposite opinions with total confidence.

For extra credit, do you recognize the time period? (Hint: when did this thread begin?)
Last edited by nisiprius on Thu Aug 27, 2015 2:58 pm, edited 1 time in total.
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C8H18Engineer
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Re: U.S. stocks in freefall

Post by C8H18Engineer » Thu Aug 27, 2015 12:10 pm

My guess is 2011 - November - I seem to recall the series of rather large up/down during that time.

I'll wait for a few more to guess...

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Re: U.S. stocks in freefall

Post by EyeYield » Thu Aug 27, 2015 12:18 pm

broadstone wrote:Wednesdays gain will provide false security. It's the calm before the storm (downward).

That sounds like a prediction, but offers no specifics. Could you clarify? What time will the calm end and the storm start? In one hour, tomorrow, Monday, on the anniversary of Black Monday in October, when?

More importantly, how long will the storm last, before the calm returns? Or will the calm EVER return?

And most important of all, how will this cycle affect my buy and hold forever portfolio through 2020? 2030? 2040?
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Re: U.S. stocks in freefall

Post by Scott Teresi » Thu Aug 27, 2015 12:33 pm

I personally don't see a major catalyst (like a recession) in the economic data that would cause a bear market the size of 2000-2002 or 2008-2009. Normally by now it might be about time for the business cycle to end, after things get naturally overextended, but the depth of the financial crisis meant it may take longer before that happens again. Foreign economies, especially China, seem more precarious, but I don't think a financial crisis elsewhere in the world typically brings the U.S. into a recession. The Fed raising rates may put a damper on financial leverage so could be the cause of a contraction, but the time frame that this plays out in could take years.

Anyway, that said, we'll have a bear market eventually, whether now or later, but my investments don't require anyone to make that call. Nobody is able to predict recessions or bear markets. (If you can, send me your track record, and I'll gladly pay you!) I do however have two risk-management rules that can get triggered as they happen, without any thinking/forecasting required (a 12-month moving average for 20% of my equities, and a 30%-market-drop buy rule for 10% of them). So I don't need to have any particular expectations from one day to the next.

Scott

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Re: U.S. stocks in freefall

Post by Thebigc » Thu Aug 27, 2015 1:57 pm

This is going to be an interesting close. Rally off?

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Re: U.S. stocks in freefall

Post by Grt2bOutdoors » Thu Aug 27, 2015 2:08 pm

Thebigc wrote:This is going to be an interesting close. Rally off?


Dead cat bounce?
Shorts covered oil today, oil up 9.64% - so much for "no demand" "demand destruction" "EOWAWKI", "etc. etc.".
Capitulation hasn't occurred yet, look for that to happen shortly after all the hedgies and traders return back from Hamptons, Riviera, Europe, Bali, Tahiti, their mega yacht that retail investors paid for, etc.
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Re: U.S. stocks in freefall

Post by amoeba » Thu Aug 27, 2015 2:32 pm

lack_ey wrote:
Leeraar wrote:
Scott Teresi wrote:HomerJ and Backpacker,

From the studies I've read, following a moving average (or cross between two moving averages) has generally reduced volatility/standard deviation (to about 70% of market risk) but historically provided close to the same return over time, using as much data as is available (e.g. going back 100 years, testing in other countries' markets, testing in other broad asset classes, etc., etc.). ...

Scott

This is a fallacy. Sampling a signal does not change the signal. If you own something, you face exactly the same risk as everyone else who owns it. That you used some scheme to dampen the variation in your purchase prices over time is irrelevant.

L.

How so? If you are out of the market a percentage of the time, you will see less of the market's risk. You will see the same for the periods in which you're invested, but on the whole less over the long run. Under some relatively reasonable definitions and measures of risk such as volatility and unexpected loss of purchasing power (not to mention other related metrics like a regression on market beta), a mechanical in-and-out market timing strategy will be less risky than being 100% long all the time.

Let's say you're invested in stocks 70% of the time and in cash 30% of the time with all your money. It will have a different profile and characteristics, but it is not vastly different from being invested 100% of the time in 70% stocks and 30% cash. In any case, I think it is difficult to describe either as being as risky as 100% stocks all the time.

The real concern is giving up too much upside, especially in less directional markets, and transaction frictions (especially taxes, if in a taxable account, which would be a real killer).



This can't be correct. In order to prove so, take it to the extreme. Compare the risk profile of being in 100% stocks 1 day out of the year and in cash 364 days vs the risk profile of having 1/365th of your portfolio in stocks and 364/365th in cash. Its pretty clear that case 1 is much more risky. In fact one could argue that reduced time in market actually increases risk hence why most recommend a long time horizon if investing in stocks.

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Re: U.S. stocks in freefall

Post by dbCooperAir » Thu Aug 27, 2015 2:40 pm

Uncle Pennybags wrote:How nice, "U.S. stocks in freefall" is a regular "Lake Wobegon". :wink:


Garrison Keillor claims he is going to retire, again! Maybe that could be used in some kind of timing metric :wink:
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Re: U.S. stocks in freefall

Post by packet » Thu Aug 27, 2015 2:48 pm

..........
Last edited by packet on Thu Aug 27, 2015 6:02 pm, edited 1 time in total.
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Re: U.S. stocks in freefall

Post by Thebigc » Thu Aug 27, 2015 2:51 pm

Grt2bOutdoors wrote:
Thebigc wrote:This is going to be an interesting close. Rally off?


Dead cat bounce?
Shorts covered oil today, oil up 9.64% - so much for "no demand" "demand destruction" "EOWAWKI", "etc. etc.".
Capitulation hasn't occurred yet, look for that to happen shortly after all the hedgies and traders return back from Hamptons, Riviera, Europe, Bali, Tahiti, their mega yacht that retail investors paid for, etc.


Yeah shorts just booked loses, now it's going up again. There is always a demand for oil, but supply is still to high, still probably do a leg down. I booked some prophits today to set up some powder. May have been a little early. Sold some Netflix, sold some Baby B's, sold my short bonds which I generally just use for this purpose. Probably sell some Apple in early September if it goes up. I hate selling Netflix, it's the best. Man I sold like 10-20 minutes to soon. Still expecting to use it this fall on some good deals. 308? What the heck? Boo, booo, stupid market. 319.

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Re: U.S. stocks in freefall

Post by autonomy » Thu Aug 27, 2015 2:58 pm

We should start a new thread called "US stocks rollercoaster bounce"

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Re: U.S. stocks in freefall

Post by lack_ey » Thu Aug 27, 2015 3:26 pm

amoeba wrote:
lack_ey wrote:
Leeraar wrote:
Scott Teresi wrote:HomerJ and Backpacker,

From the studies I've read, following a moving average (or cross between two moving averages) has generally reduced volatility/standard deviation (to about 70% of market risk) but historically provided close to the same return over time, using as much data as is available (e.g. going back 100 years, testing in other countries' markets, testing in other broad asset classes, etc., etc.). ...

Scott

This is a fallacy. Sampling a signal does not change the signal. If you own something, you face exactly the same risk as everyone else who owns it. That you used some scheme to dampen the variation in your purchase prices over time is irrelevant.

L.

How so? If you are out of the market a percentage of the time, you will see less of the market's risk. You will see the same for the periods in which you're invested, but on the whole less over the long run. Under some relatively reasonable definitions and measures of risk such as volatility and unexpected loss of purchasing power (not to mention other related metrics like a regression on market beta), a mechanical in-and-out market timing strategy will be less risky than being 100% long all the time.

Let's say you're invested in stocks 70% of the time and in cash 30% of the time with all your money. It will have a different profile and characteristics, but it is not vastly different from being invested 100% of the time in 70% stocks and 30% cash. In any case, I think it is difficult to describe either as being as risky as 100% stocks all the time.

The real concern is giving up too much upside, especially in less directional markets, and transaction frictions (especially taxes, if in a taxable account, which would be a real killer).



This can't be correct. In order to prove so, take it to the extreme. Compare the risk profile of being in 100% stocks 1 day out of the year and in cash 364 days vs the risk profile of having 1/365th of your portfolio in stocks and 364/365th in cash. Its pretty clear that case 1 is much more risky. In fact one could argue that reduced time in market actually increases risk hence why most recommend a long time horizon if investing in stocks.

I stress some more that they're not at all equivalent, especially not in the extremes. In fact, I wrote, "it will have a different profile and characteristics, but it is not vastly different." But okay, let's look at this. There are something like 251 trading days in a year.

Case 1: 100% stocks for one day, 100% cash the rest.
Case 2: 0.398% stocks, 99.602% cash all the time.

For case 1, the return is just cash for the year except that one day plus the return of stocks for a day (so the expected value is something like 0.03% for that day, insignificant). For that one day, stock daily standard deviation is something like 1.25%, though the distribution isn't quite normal and tails are a bit fat. So it's the return of cash plus whatever it is stocks do on a randomly selected day. Let's say cash has a return of 0.5%. So the overall expected value is 0.528% with a standard deviation of 1.25% for the year.

For case 2, the return in a year of the stocks is let's say 7.5% to be consistent with the 0.03% before, with a standard deviation of 16% for that yearly return. So the expected value is 0.528% with a standard deviation of 0.064% for the year.

For reference, 100% stocks all the time would have an expected value of 7.5% with a yearly standard deviation of 16%, using the above numbers. That's actually a nicer Sharpe ratio than in practice, but forgive me for picking dumb numbers. At least it's ballpark reasonable.

So yes, case 1 is a lot riskier than case 2. When you take it to the extremes, it becomes more significantly different. It's also a lot less risky than 100% stocks. The probability that you lose say 5% on the year is much, much higher with 100% stocks.

The main point was that reducing stock exposure by being out of the market dampens risk in some meaningful ways. You also lower your returns, and the risk-adjusted return may or may not be favorable. If randomly selecting days to be out of the market, you'd expect returns to be lower too. Now, if you have a market-timing strategy that generates alpha over the long run (on average picks better days to be out of the market than would be gotten by chance), then the risk-adjusted returns and returns would be better than just picking random days to be out. Or if you want to call it momentum or trend following rather than alpha, be my guest.

Now, frequently when people do most market timing, they may be generating negative alpha, doing worse than random timing.

On a related note, if you DCA cash into the market over a period, as many suggest people do, this is just a scheme that shifts between cash and stocks over a certain period, that doesn't attempt to have any kind of clever alpha-generating timing. It is well known to be less risky and volatile than lump summing in. It is also known to have worse expected returns than lump summing. That's what you should expect from holding cash instead of stocks at some points.

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Re: U.S. stocks in freefall

Post by Hodor » Thu Aug 27, 2015 3:48 pm

So why did the stock market drop over 3% between 2:00 and 3:00 today, and then promptly reverse the decline in the next hour? So glad I'm not a day trader.

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Re: U.S. stocks in freefall

Post by Leeraar » Thu Aug 27, 2015 3:48 pm

lack_ey wrote:On a related note, if you DCA cash into the market over a period, as many suggest people do, this is just a scheme that shifts between cash and stocks over a certain period, that doesn't attempt to have any kind of clever alpha-generating timing. It is well known to be less risky and volatile than lump summing in. It is also known to have worse expected returns than lump summing. That's what you should expect from holding cash instead of stocks at some points.

It actually turns out this is not true, at least not on a risk-adjusted basis.

If you look at the actual historical data for DCA, you will find that since, on balance, you are 50% in cash, your expected return is halved, as is your volatility. The Sharpe Ratio for lump sum is approximately

SL = (10%-Rf)/20%

and that for DCA is

SD = (5%-Rf)/10%

Pick any reasonable number for Rf, the safe rate of return (3%, anyone?), and you will see that lump sum has the better risk-adjusted return, at least by this metric.

In the previous post I made, I was simply pointing out that some believe you can calculate Standard Deviation from the prices you paid, so if you have some sort of a purchase strategy based on the moving average, you are lowering your risk. This is not true.

L.
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Re: U.S. stocks in freefall

Post by Thebigc » Thu Aug 27, 2015 4:41 pm

Hodor wrote:So why did the stock market drop over 3% between 2:00 and 3:00 today, and then promptly reverse the decline in the next hour? So glad I'm not a day trader.


Because the shorts had to book loses and that created a buying opportunity, so people purchased. Some of the hedges are also moving from funds to individual stocks. I took some prohhits myself but missed out on like 200 bucks, still not a big deal considering I have had Netflix since 2009, I was planning on taking prophets at some point, I need a new car. My personal car is pushing 11 years, but if the market moves another leg down in the next couple of months I will buy back in, and try and hold off a couple more years on the car, just going to wait till October. Want to see what the Fed is going to do or not do and I want to keep an eye on oil. Lots of people are buying the dip, I did too, but I still want to be set if it dips again in the near term, if not I get myself a car. It's a win win for me.

Almost forgot, Hodor.

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Re: U.S. stocks in freefall

Post by backpacker » Thu Aug 27, 2015 4:59 pm

Thebigc wrote:
Hodor wrote:So why did the stock market drop over 3% between 2:00 and 3:00 today, and then promptly reverse the decline in the next hour? So glad I'm not a day trader.


I took some prohhits myself but missed out on like 200 bucks, still not a big deal considering I have had Netflix since 2009, I was planning on taking prophets at some point, I need a new car.


It would be great if there were a way to take the prophets out of the market. We would have less speculation and more real profit. Alas, judging from CNBC, the prophets are there to stay. :wink:

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Re: U.S. stocks in freefall

Post by broadstone » Thu Aug 27, 2015 5:16 pm

nisiprius wrote: Was this "the calm before the storm" or "the end of the storm?"


Definitely the calm before the storm. You will see a bounce upwards / downwards before the real correction happens.

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Re: U.S. stocks in freefall

Post by lack_ey » Thu Aug 27, 2015 5:18 pm

Leeraar wrote:
lack_ey wrote:On a related note, if you DCA cash into the market over a period, as many suggest people do, this is just a scheme that shifts between cash and stocks over a certain period, that doesn't attempt to have any kind of clever alpha-generating timing. It is well known to be less risky and volatile than lump summing in. It is also known to have worse expected returns than lump summing. That's what you should expect from holding cash instead of stocks at some points.

It actually turns out this is not true, at least not on a risk-adjusted basis.

And I purposely didn't mention risk-adjusted returns here. So this was just a matter of us talking about two different things. (I prefer lump sum for reasons you mentioned and others.)

Leeraar wrote:In the previous post I made, I was simply pointing out that some believe you can calculate Standard Deviation from the prices you paid, so if you have some sort of a purchase strategy based on the moving average, you are lowering your risk. This is not true.

Then I think again we were talking about two different things, though I'm not sure how one was supposed to get this interpretation. Scott Teresi basically said some market timing model moving in and out would "reduce[d] volatility/standard deviation" and then you said it was a "fallacy" because "you face exactly the same risk as everyone else who owns it."

If nothing else, you get lower risk from being less net invested when averaged over time, which is broadly the same concept as applies for DCA. On a risk-adjusted basis? Depends on if the timing moves help or not.

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Re: U.S. stocks in freefall

Post by Steven in NC » Thu Aug 27, 2015 6:11 pm

The fact that most seem to want to buy points to this being more of a correction than an extended bear market. My observation fwiw.

How managed is Vanguard Total Stock Market? Any stock picking at all during times like this? Or just steady as she goes?

Thanks.

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Re: U.S. stocks in freefall

Post by Thebigc » Thu Aug 27, 2015 6:23 pm

backpacker wrote:
Thebigc wrote:
Hodor wrote:So why did the stock market drop over 3% between 2:00 and 3:00 today, and then promptly reverse the decline in the next hour? So glad I'm not a day trader.


I took some prohhits myself but missed out on like 200 bucks, still not a big deal considering I have had Netflix since 2009, I was planning on taking prophets at some point, I need a new car.


It would be great if there were a way to take the prophets out of the market. We would have less speculation and more real profit. Alas, judging from CNBC, the prophets are there to stay. :wink:


Yeah I saw it, to lazy to fix it, I'll find a way to live with myself. Me and Marcus, anyway anyone see that 3.7 growth the US just layed down. Danm, I want international again why?

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Re: U.S. stocks in freefall

Post by JoMoney » Thu Aug 27, 2015 6:26 pm

Steven in NC wrote:...How managed is Vanguard Total Stock Market? Any stock picking at all during times like this? Or just steady as she goes?

Thanks.
The idea behind index funds is that they don't pick stocks, their goal should be to track an index.
The indices that are being tracked on the other hand may actually have selection criteria that causes some stocks to be included or excluded in the index. In some instances, the index may involve people 'picking' or making decisions on whether or not a stock fits the goal of the index.
Changes in an index constituents usually happen on some periodic date, and not over short periods based on market fluctuations like what occurred recently. If you want someone to be stock picking and trying to make decisions when to get in/out of which stocks, an index fund is not the way to do it.

I would be very upset if my index fund decided to off the rails and not track the index. Personally, I don't think I'd have my money in a mutual fund that didn't have the kind of accountability to a standard that an index fund offers.
Last edited by JoMoney on Thu Aug 27, 2015 6:29 pm, edited 1 time in total.
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Re: U.S. stocks in freefall

Post by Steven in NC » Thu Aug 27, 2015 6:29 pm

JoMoney wrote:
Steven in NC wrote:...How managed is Vanguard Total Stock Market? Any stock picking at all during times like this? Or just steady as she goes?

Thanks.
The idea behind index funds is that they don't pick stocks, their goal should be to track an index.
The indices that are being tracked on the other hand may actually have selection criteria that causes some stocks to be included or excluded in the index. In some instances, the index may involve people 'picking' or making decisions on whether or not a stock fits the goal of the index.
Changes in an index constituents usually happen on some periodic date, and not over short periods based on market fluctuations like what occurred recently. If you want someone to be stock picking and trying to make decisions when to get in/out of which stocks, an index fund is not the way to do it.


Very informative post. Thank you.

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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Thu Aug 27, 2015 6:36 pm

JoMoney wrote:I would be very upset if my index fund decided to off the rails and not track the index.
Could a fund legally do that without changing the prospectus?

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Re: U.S. stocks in freefall

Post by JoMoney » Thu Aug 27, 2015 6:48 pm

Uncle Pennybags wrote:
JoMoney wrote:I would be very upset if my index fund decided to off the rails and not track the index.
Could a fund legally do that without changing the prospectus?

I believe the prospectus usually comes with a warning, stating that is one of the risks.
Vanguard Total Stock Market Index Fund Summary Prospectus wrote: https://personal.vanguard.com/pub/Pdf/s ... 2210100231
• Index sampling risk, which is the chance that the securities selected for the Fund, in
the aggregate, will not provide investment performance matching that of the Fund’s
target index. Index sampling risk for the Fund should be low.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Fri Aug 28, 2015 12:28 pm

OMG; the market is in stability!! I don't know what to do. This is a "black swan" that no one could have predicted. :confused

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Re: U.S. stocks in freefall

Post by Grt2bOutdoors » Fri Aug 28, 2015 12:47 pm

Uncle Pennybags wrote:OMG; the market is in stability!! I don't know what to do. This is a "black swan" that no one could have predicted. :confused


OMG - Major oil company equities are up 10%+ in two days, guess they didn't get the newsflash about the impending collapse of oil prices (those are up 10% in a day's time) or that the industry is in major decline or that "it is different, this time". :oops: That is a "black swan" that no one could have predicted. :mrgreen: Guess, Rex and company didn't get the message. :P
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Re: U.S. stocks in freefall

Post by Valuethinker » Fri Aug 28, 2015 12:59 pm

Grt2bOutdoors wrote:
Uncle Pennybags wrote:OMG; the market is in stability!! I don't know what to do. This is a "black swan" that no one could have predicted. :confused


OMG - Major oil company equities are up 10%+ in two days, guess they didn't get the newsflash about the impending collapse of oil prices (those are up 10% in a day's time) or that the industry is in major decline or that "it is different, this time". :oops: That is a "black swan" that no one could have predicted. :mrgreen: Guess, Rex and company didn't get the message. :P


I am guessing there is a short squeeze going on in oil?

I do not think the energy industry is out of the woods yet, on oil prices.

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Re: U.S. stocks in freefall

Post by Thebigc » Fri Aug 28, 2015 1:40 pm

Valuethinker wrote:
Grt2bOutdoors wrote:
Uncle Pennybags wrote:OMG; the market is in stability!! I don't know what to do. This is a "black swan" that no one could have predicted. :confused


OMG - Major oil company equities are up 10%+ in two days, guess they didn't get the newsflash about the impending collapse of oil prices (those are up 10% in a day's time) or that the industry is in major decline or that "it is different, this time". :oops: That is a "black swan" that no one could have predicted. :mrgreen: Guess, Rex and company didn't get the message. :P


I am guessing there is a short squeeze going on in oil?

I do not think the energy industry is out of the woods yet, on oil prices.


No it's not, it never is, and there is some short covering out there, but not a ton they got killed the last two days. No mostly it was that supply was down and SA is at war. Wars are expensive and it just escalated today, so there is speculation that they will have to slow production and increase prices. Some are calling for an emergency meeting of OPEC. Prices can go up, prices can go down, nobody knows. Oil is up about 20% from it's lows, and traditionally we are heading into a volatile week. Now even though Oil is up big today the Dow is down, it's the Fed, it was the Fed before and it will be the Fed after. They either need to hike or back away and stop taking about, to much speculation according to Jack Bogle who talked about the market on CNBC today. Talked about 2000 which was a tech bubble, and 2008 which was the mrotgage crises and this he says is speculation but thinks the market fundamentals are sound, but stocks are a little over valued. Nothing really sever but to much speculation.

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Re: U.S. stocks in freefall

Post by Johno » Fri Aug 28, 2015 1:44 pm

lack_ey wrote:
Leeraar wrote:In the previous post I made, I was simply pointing out that some believe you can calculate Standard Deviation from the prices you paid, so if you have some sort of a purchase strategy based on the moving average, you are lowering your risk. This is not true.

Then I think again we were talking about two different things, though I'm not sure how one was supposed to get this interpretation. Scott Teresi basically said some market timing model moving in and out would "reduce[d] volatility/standard deviation" and then you said it was a "fallacy" because "you face exactly the same risk as everyone else who owns it."

If nothing else, you get lower risk from being less net invested when averaged over time, which is broadly the same concept as applies for DCA. On a risk-adjusted basis? Depends on if the timing moves help or not.

Yes, and I don't understand what actual contrary point was being attempted or how it's relevant. Assuming randomness, your total risk is obviously less if you have less money in stocks on average over time. I don't see why anyone would take this obvious statement to directly imply anything about 'risk adjusted return' or being in and out somehow changing the underlying volatility of stocks, or that being 100% in stocks 50% of the time is the same as being 50% in stocks 100% of the time. None of those three latter interpretations respond to anything anyone said, as far as I can see in the thread, nor relevant to the actual question. Which is, not whether you reduce risk by having a given stock allocation only part of the time (and none the rest of the time): you obviously do. It's how much return you give up when out of a market with a presumed positive expected return over time.

Scott Teresi's original statement, true AFAIK, is that 'studies show' at least for particular strategies that there have been (tense is important) particular rules which seem to reduce risk by getting out of stocks periodically, without giving up much if any return. Those come with the caveats I mentioned about statistics of the past and the unknown future process of returns, but as you rightly pointed out it's fallacious to dismiss any and all findings based on those caveats since they also apply to the buy and hold investor to come up with an expected return for just staying in the stock market. And as we've been around and around so many times, it would make no sense to invest in stocks if you really had no idea of an expected return.

But as with the tangent on how to define 'success' in trading'*, too much of the emphasis might be on expected value rather than risk. So for example even if one has true trading skill, that IMO/IME if so will be a relatively marginal advantage over randomness. Therefore randomness will still have a big effect on results, therefore risk management is key. There's a whole literature on the topic of how much to bet even assuming we know the expected return of the bet is in the bettor's favor, which we don't really know about trading rules which have worked in the past. IOW even if we accepted that the statistical tests of the past sufficiently certainly established the risk v return advantage of getting out of the stock market when it drops below 200SMA, there's still obviously the risk of that strategy being a loser in any given downturn, and actually we don't know the relationship of the future distribution of returns to the past one: it's really not a slot machine payout setting. But we don't know a lot of things, including whether buy and hold stock owning will be a good investment in decades to come.

But all things considered, I would actually accept the position 'those caveats make me reluctant to use technical indicators to swing my whole position back and forth', while noting that's quite a bit different than saying 'technical analysis is nonsense' which the same poster previously said.

*I would stick with the definition success=making money, and it's step 2 of any discussion whether the success was luck or skill. Success= 'certified non-luck success' is a convoluted concept practically speaking IMO. Maybe it works for people who make dozens of directional decisions per day, but less so for 'macro' people who use various indicators to try to pick major trend inflection points only every so often, or those who do anything really complicated. And again if their money in the bank from trading is found 93% rather than 95% statistically likely to not be the result of chance, why should they care? The 'success means non luck success' side assumes there's a single certain universally relevant definition of 'not due to luck', but there isn't.

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Uncle Pennybags
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Fri Aug 28, 2015 3:08 pm

But what should I do NOW?? Buy, sell or hold? :confused
The inquiring algorithm wants to know?


Should I listen to this guy?

Jack Bogle: How to handle the market's wild ride

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Re: U.S. stocks in freefall

Post by GoldenFinch » Fri Aug 28, 2015 6:38 pm

Uncle Pennybags wrote:But what should I do NOW?? Buy, sell or hold? :confused
The inquiring algorithm wants to know?


Should I listen to this guy?

Jack Bogle: How to handle the market's wild ride


Uncle Pennybags, I had some cash from a real estate transaction that occurred on July 16th. I immeddietly put 1/3 into bonds, I then let the cash sit there thinking I would dollar cost average the rest into total stock market over three months. The dip, I mean crash, happened, so I bought on Friday, Mon. and Tues. I still have 1/3 left. Because I am as clueless as everyone else I will certainly dollar cost average the rest weekly over the next three months. Seriously, who knows and why do some of us (me) micromanage?

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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Fri Aug 28, 2015 9:38 pm

GoldenFinch wrote:Seriously, who knows and why do some of us (me) micromanage?
After one year of carefully balancing and watching over my funds I am now at 0%. Onward and upward, or down, or sideways; I'll be there. :?

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Re: U.S. stocks in freefall

Post by sharpjm » Sat Aug 29, 2015 11:56 am

GoldenFinch wrote:
Uncle Pennybags wrote:But what should I do NOW?? Buy, sell or hold? :confused
The inquiring algorithm wants to know?


Should I listen to this guy?

Jack Bogle: How to handle the market's wild ride


Uncle Pennybags, I had some cash from a real estate transaction that occurred on July 16th. I immeddietly put 1/3 into bonds, I then let the cash sit there thinking I would dollar cost average the rest into total stock market over three months. The dip, I mean crash, happened, so I bought on Friday, Mon. and Tues. I still have 1/3 left. Because I am as clueless as everyone else I will certainly dollar cost average the rest weekly over the next three months. Seriously, who knows and why do some of us (me) micromanage?

There hasn't been a stock market crash in quite awhile.

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Re: U.S. stocks in freefall

Post by oneleaf » Sat Aug 29, 2015 12:01 pm

It seems the general consensus among the financial media and among investors on other forums is that this correction is not over. Which, to me, is a contrarian indicator that it is, at least for awhile.

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Uncle Pennybags
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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Sat Aug 29, 2015 4:29 pm

sharpjm wrote:There hasn't been a stock market crash in quite awhile.
If by "crash" you mean 1929 I agree. A 90% drop in the DOW :shock: doesn't happen often.

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Re: U.S. stocks in freefall

Post by Browser » Tue Sep 01, 2015 7:58 am

Futures are lining up for a 400 point haircut on the DOW at the open. Poor dip buyers getting whipsawed again!
Last edited by Browser on Tue Sep 01, 2015 8:21 am, edited 1 time in total.
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Re: U.S. stocks in freefall

Post by minesweep » Tue Sep 01, 2015 8:20 am

Déjà vu all over again?

Mike

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Re: U.S. stocks in freefall

Post by Browser » Tue Sep 01, 2015 8:33 am

Just crossed 400+ down 3 minutes after the open.
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Re: U.S. stocks in freefall

Post by rixer » Tue Sep 01, 2015 9:25 am

Of course. I just made a sizable purchase yesterday.. :oops:

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Re: U.S. stocks in freefall

Post by Grt2bOutdoors » Tue Sep 01, 2015 9:32 am

rixer wrote:Of course. I just made a sizable purchase yesterday.. :oops:


Join the crowd, I think the market is selling off to take the money of those who get paid 2x a month - in it goes, out it goes into their pockets. Let's see how it plays out on the 16th of the month. :twisted:
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Re: U.S. stocks in freefall

Post by Pizzasteve510 » Tue Sep 01, 2015 9:48 am

Why do we keep quoting the Dow? Most analysts agree the Dow is for the news and a metric based on only a few industrial stocks is not a good market indicator. Can we at least switch to quoting the S&P 500 or Russell 2000 or a vanguard fund? We should start teaching people to use the right metrics and set a better example.

Thanks

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Re: U.S. stocks in freefall

Post by surfstar » Tue Sep 01, 2015 9:49 am

This "freefall" seems to involve quite a few ledges and uphills along the way!

;)

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Re: U.S. stocks in freefall

Post by VictoriaF » Tue Sep 01, 2015 10:05 am

Pizzasteve510 wrote:Why do we keep quoting the Dow? Most analysts agree the Dow is for the news and a metric based on only a few industrial stocks is not a good market indicator. Can we at least switch to quoting the S&P 500 or Russell 2000 or a vanguard fund? We should start teaching people to use the right metrics and set a better example.

Thanks


Most news organizations quote the Dow and it serves as an easier reference. I remember when Dow was at the 18k level, but the corresponding S&P500 level is not in my active memory. My heuristic is to pay attention to the Dow and divide it by 10 to estimate the corresponding S&P500 value. Ultimately, I care about my own assets. If the Dow and S&P500 are down approximately 2%, as they are at the moment, then my U.S. stock holdings are down 2% at the moment.

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Re: U.S. stocks in freefall

Post by linenfort » Tue Sep 01, 2015 10:13 am

What Victoria said. Also, it just doesn't have the same oomph when we say the S&P dropped 35 points compared to a three hundred-fifty point drop by the Dow.
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Re: U.S. stocks in freefall

Post by flyingaway » Tue Sep 01, 2015 10:21 am

I am starting to like this thread.

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Re: U.S. stocks in freefall

Post by flyingaway » Tue Sep 01, 2015 10:24 am

rixer wrote:Of course. I just made a sizable purchase yesterday.. :oops:


Yesterday was my automatic 401k contribution date. The bright side is the fund prices are cheaper than they were at the end of last month.

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Re: U.S. stocks in freefall

Post by cfs » Tue Sep 01, 2015 10:53 am

Bullish on America.

Warrent Buffett is STILL Bullish on America. While others are in panic mode running to the hills and selling, he is busy buying. He was last sighted in one of the isles of the US Market, with his shopping cart, picking the products that are selling at big discount. Are you Bullish on America? - or - Are you betting against America (and against Warren Buffet)? As I have said before, I would not bet a Greek Drachma or a Venezuelan Bolivar against this man.

And now is time for me to close here and find something productive to do, such as taking care of my LUng distance workout.
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Re: U.S. stocks in freefall

Post by Browser » Tue Sep 01, 2015 11:01 am

If your time horizon is forever - as is Buffett's - you should probably always be buying. But in the real world that the rest of live in, we have spending liabilities that must be met within a much shorter timeframe, so we must pay attention to markets and act accordingly.
We don't know where we are, or where we're going -- but we're making good time.

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Re: U.S. stocks in freefall

Post by feh » Tue Sep 01, 2015 11:07 am

flyingaway wrote:
rixer wrote:Of course. I just made a sizable purchase yesterday.. :oops:


Yesterday was my automatic 401k contribution date.


My contribution date is the 1st of the month. :D

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