Market Timing

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investingforbank
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Market Timing

Post by investingforbank »

How does market timing relate in terms of supply and demand of products? For instance, if someone has a GPU, would it be market timing if they decided to sell it now before (in their mind) prices eventually fall because the price is currently inflated due to supply shortages? Essentially, is recognizing good and bad times to buy and sell certain products market timing?
retiredjg
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Re: Market Timing

Post by retiredjg »

What is a GPU? And why are you investing in it?
02nz
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Re: Market Timing

Post by 02nz »

retiredjg wrote: Sat Jul 31, 2021 4:34 pm What is a GPU? And why are you investing in it?
Graphics processing unit = computer graphics card. Pricing is insane at the moment because of semiconductor shortage and demand for GPUs for mining cryto.
coachd50
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Re: Market Timing

Post by coachd50 »

I don't think the term "market timing" as used on the bogle heads forum applies to individual products, and maybe not even individual stocks. I think it is more directed at trying to make decisions based on predicting what the entirety of financial markets will do.

I do not believe "market timing" has anything to do with a situation where you had an extra GPU that are right now selling for much higher than their "normal" value because of a shortage.
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investingforbank
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Re: Market Timing

Post by investingforbank »

coachd50 wrote: Sat Jul 31, 2021 4:35 pm I don't think the term "market timing" as used on the bogle heads forum applies to individual products, and maybe not even individual stocks. I think it is more directed at trying to make decisions based on predicting what the entirety of financial markets will do.

I do not believe "market timing" has anything to do with a situation where you had an extra GPU that are right now selling for much higher than their "normal" value because of a shortage.
Couldn't this same thing be applied to commodities trading, however? If there is a shortage of GPUs and there is a shortage of wood, what makes the GPU seller better than the person shorting the wood etf?
coachd50
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Re: Market Timing

Post by coachd50 »

investingforbank wrote: Sat Jul 31, 2021 4:38 pm
coachd50 wrote: Sat Jul 31, 2021 4:35 pm I don't think the term "market timing" as used on the bogle heads forum applies to individual products, and maybe not even individual stocks. I think it is more directed at trying to make decisions based on predicting what the entirety of financial markets will do.

I do not believe "market timing" has anything to do with a situation where you had an extra GPU that are right now selling for much higher than their "normal" value because of a shortage.
Couldn't this same thing be applied to commodities trading, however? If there is a shortage of GPUs and there is a shortage of wood, what makes the GPU seller better than the person shorting the wood etf?
Technically, shorting the wood is a bit of a different action because of the leverage involved correct? You would be selling lumber and then hoping it drops to buy it and make a profit. If it doesnt...
I took your question to be someone actually possessing a GPU and wondering if now would be a good time to sell it due to the high prices.

Regardless, general bogelhead philosophy and action would not be looking to trade specific sector ETFs, but just buy and hold broadbased (such as total market) index funds. Therefore market timing generally refers to actions regarding that. Right?
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investingforbank
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Re: Market Timing

Post by investingforbank »

coachd50 wrote: Sat Jul 31, 2021 4:42 pm
investingforbank wrote: Sat Jul 31, 2021 4:38 pm
coachd50 wrote: Sat Jul 31, 2021 4:35 pm I don't think the term "market timing" as used on the bogle heads forum applies to individual products, and maybe not even individual stocks. I think it is more directed at trying to make decisions based on predicting what the entirety of financial markets will do.

I do not believe "market timing" has anything to do with a situation where you had an extra GPU that are right now selling for much higher than their "normal" value because of a shortage.
Couldn't this same thing be applied to commodities trading, however? If there is a shortage of GPUs and there is a shortage of wood, what makes the GPU seller better than the person shorting the wood etf?
Technically, shorting the wood is a bit of a different action because of the leverage involved correct? You would be selling lumber and then hoping it drops to buy it and make a profit. If it doesnt...
I took your question to be someone actually possessing a GPU and wondering if now would be a good time to sell it due to the high prices.

Regardless, general bogelhead philosophy and action would not be looking to trade specific sector ETFs, but just buy and hold broadbased (such as total market) index funds. Therefore market timing generally refers to actions regarding that. Right?
Would Bogleheads advise people to hold off on buying a house now due to high prices?
coachd50
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Re: Market Timing

Post by coachd50 »

investingforbank wrote: Sat Jul 31, 2021 4:46 pm
coachd50 wrote: Sat Jul 31, 2021 4:42 pm
investingforbank wrote: Sat Jul 31, 2021 4:38 pm
coachd50 wrote: Sat Jul 31, 2021 4:35 pm I don't think the term "market timing" as used on the bogle heads forum applies to individual products, and maybe not even individual stocks. I think it is more directed at trying to make decisions based on predicting what the entirety of financial markets will do.

I do not believe "market timing" has anything to do with a situation where you had an extra GPU that are right now selling for much higher than their "normal" value because of a shortage.
Couldn't this same thing be applied to commodities trading, however? If there is a shortage of GPUs and there is a shortage of wood, what makes the GPU seller better than the person shorting the wood etf?
Technically, shorting the wood is a bit of a different action because of the leverage involved correct? You would be selling lumber and then hoping it drops to buy it and make a profit. If it doesnt...
I took your question to be someone actually possessing a GPU and wondering if now would be a good time to sell it due to the high prices.

Regardless, general bogelhead philosophy and action would not be looking to trade specific sector ETFs, but just buy and hold broadbased (such as total market) index funds. Therefore market timing generally refers to actions regarding that. Right?
Would Bogleheads advise people to hold off on buying a house now due to high prices?
Again, (and maybe I am wrong) "Bogleheads" are people who subscribe to John Bogel's thoughts on investing in financial markets. Other financial matters don't really fall under that label as you can see from reading the forum.
Last edited by coachd50 on Sat Jul 31, 2021 5:30 pm, edited 1 time in total.
retiredjg
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Re: Market Timing

Post by retiredjg »

Seems to me if you have an item that you no longer need and can sell it for a good price, you should sell it. GPU...old Mustang...farmland...it does not matter what it is.

Market timing is about the stock market. This has nothing to do with the stock market.
fwellimort
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Re: Market Timing

Post by fwellimort »

Market timing is difficult in markets in which there's too many professionals that do it for a living and there's almost infinite liquidity during trading hours.

This is not the case of GPUs. Your competitors/buyers are not those that make a living swapping GPUs among each other continuously.
Even the stock market is not efficient. Don't expect markets like GPU to be efficient at all. Sometimes the trends are quite predictable because the buyers are everyday customers who are relatively price inelastic.
Financologist
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Re: Market Timing

Post by Financologist »

investingforbank wrote: Sat Jul 31, 2021 4:46 pm
coachd50 wrote: Sat Jul 31, 2021 4:42 pm
investingforbank wrote: Sat Jul 31, 2021 4:38 pm
coachd50 wrote: Sat Jul 31, 2021 4:35 pm I don't think the term "market timing" as used on the bogle heads forum applies to individual products, and maybe not even individual stocks. I think it is more directed at trying to make decisions based on predicting what the entirety of financial markets will do.

I do not believe "market timing" has anything to do with a situation where you had an extra GPU that are right now selling for much higher than their "normal" value because of a shortage.
Couldn't this same thing be applied to commodities trading, however? If there is a shortage of GPUs and there is a shortage of wood, what makes the GPU seller better than the person shorting the wood etf?
Technically, shorting the wood is a bit of a different action because of the leverage involved correct? You would be selling lumber and then hoping it drops to buy it and make a profit. If it doesnt...
I took your question to be someone actually possessing a GPU and wondering if now would be a good time to sell it due to the high prices.

Regardless, general bogelhead philosophy and action would not be looking to trade specific sector ETFs, but just buy and hold broadbased (such as total market) index funds. Therefore market timing generally refers to actions regarding that. Right?
Would Bogleheads advise people to hold off on buying a house now due to high prices?
This boglehead would suggest that price is a consideration in any purchase in relation to alternatives.

Renting becomes a more attractive alternative when sale prices increase.

So no decision is made in a vacuum.

Regarding stock purchase/sale decisions, bogleheads rebalance based on the relationship between stock and bond values. When one goes up in relation to the other a rebalance becomes appropriate based on the investor's target allocation.
Financologist
Doctor Rhythm
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Re: Market Timing

Post by Doctor Rhythm »

GPUs aren’t commodities, and commodities aren’t stocks. One difference is that you would predict their prices to behave differently over time.

You expect the price of your GPU to fall in the long term. I don’t think anyone today is willing to pay the original retail price for a 2001-era chipset. Thus, it doesn’t make sense to hoard chips and sell them when the time is right, unless you have special knowledge about the future.

Commodities are expected to hold their value in the long term but not increase it. Some people hold them as an inflation hedge. But to my simpleton understanding, trading in commodities is a bit of a zero sum game with a lot of market timing.

Hopefully, the stock market will grow relative to inflation. Timing the stock market by selling (or delaying purchase) because you think prices will fall isn’t expected to yield benefits.
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JoeRetire
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Re: Market Timing

Post by JoeRetire »

investingforbank wrote: Sat Jul 31, 2021 4:28 pm How does market timing relate in terms of supply and demand of products? For instance, if someone has a GPU, would it be market timing if they decided to sell it now before (in their mind) prices eventually fall because the price is currently inflated due to supply shortages? Essentially, is recognizing good and bad times to buy and sell certain products market timing?
It depends on what you mean by "certain products".

In this forum the "market" in "market timing" is the stock market. It's not the supermarket or the appliance market. Buy and sell GPUs whenever you choose.

For that matter buy and sell stocks whenever you choose. If you think the price of VOO will eventually fall because the price is currently inflated due to shortages, then sell all you like. It may be market timing, but why do you care what it's called?

Don't feel the need to justify your preference for market timing by using a contrived GPU analogy.
Just remember: it's not a lie if you believe it.
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Eagle33
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Re: Market Timing

Post by Eagle33 »

According to Boglehead wiki Market timing is
Market timing refers to act(s) of investing based on the condition of the market as opposed to personal characteristics.[notes 1] For example, adjusting one's asset allocation toward greater fixed income holdings because the bond market has lost value recently and there is an expectation of a bond market recovery would be an act of market timing. On the other hand, adjusting one's asset allocation toward greater fixed income holdings because it is in one's asset allocation plan to do so (e.g., as one ages), is not an example of market timing.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
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windaar
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Re: Market Timing

Post by windaar »

Market timing is not possible ever. Others will always know more than you. Or less than you. If anyone knew all the time they would have all the money in the world.
Nobody knows nothing.
Arby
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Re: Market Timing

Post by Arby »

There are 3 cases where market timing worked for me but these cases were/are (almost) sure things.

1) Before fair pricing of mutual funds became common, I was able to buy into foreign funds on days that the USA market jumped dramatically after foreign markets closed. Or sell foreign funds on days when the uS markets tanked in the afternoon.

2) When interest rates dropped dramatically on new brokered CDs, I was able to buy some brokered CDs on the secondary market with interest rates substantially higher than market.

3) The currency conversion rate on my USA debit card uses a stale price for a 24 hour period. On days that the baht drops dramatically I can withdraw funds in Thailand using the old stale price.

But other than these special cases I don't know more than the market.
reln
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Re: Market Timing

Post by reln »

investingforbank wrote: Sat Jul 31, 2021 4:28 pm How does market timing relate in terms of supply and demand of products? For instance, if someone has a GPU, would it be market timing if they decided to sell it now before (in their mind) prices eventually fall because the price is currently inflated due to supply shortages? Essentially, is recognizing good and bad times to buy and sell certain products market timing?
Technically yes. But, market timing is only a bad strategy in an efficient market. Presumably (I don't know), the market of used GPUs is not as efficient as the global stock market so timing it can be a good strategy.
MadAsgardian
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Re: Market Timing

Post by MadAsgardian »

You're basically asking if it's marketing timing to wait until the prime rib is on sale at the grocery store. Selling an item is selling an item. Dumping your VTSAX for NVDA because there's a run on video cards due to the current chip shortage/crypto craze would be marketing timing.
dboeger1
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Re: Market Timing

Post by dboeger1 »

If your goal is to make a short term profit because something you own happens to be more valuable now and you're fairly confident that the root causes behind this condition are temporary, then sure, you can do that both for products and individual stocks, no difference. Is selling a GPU going to fund your retirement 30 years from now? Probably not. Is the natural trend for GPU prices up over time? No, not at all (note I'm talking about how tech is deflationary in the sense that products quickly become obsolete; the price of newly launched GPUs may go up over time, but the value of any given GPU most certainly goes down quite rapidly over time). That makes it hard to compare the value of trying to time the stock market in one's 401k to trying to sell off a single GPU during a shortage. The time horizons are quite different, and the mechanisms by which companies appreciate in value over time most certainly differ from the mechanisms by which GPUs depreciate rapidly.

Selling a GPU at a profit is a single profit-generating transaction. It is not a permanent investment. If you wanted to continue to grow your retirement portfolio over many years by selling GPUs, the way to do it would be to innovate and sell newer and better GPUs every year, which is exactly what companies like Nvidia and AMD do, and why they're worth owning. When we talk about market timing, we're not referring to the act of profiting from meeting market demand; that's what profitable companies do every day, and we expect them to adapt to changing market conditions. Instead, the phrase market timing generally refers to selectively participating in the market based on market conditions. In other words, if AMD and Nvidia decided to pause their GPU business any time the market took a dip, they would be market timing. Likewise, if you decided to sell out of stocks entirely any time the market dipped, you would be market timing. The act of selling a GPU at a profit is not market timing, but business as usual.

By that definition, stock picking isn't really market timing (this point gets debated here from time to time), but more akin to adapting your own personal enterprise to market conditions in a sense. The reason stock picking doesn't work is not due to market timing, but rather because people are notoriously bad at stock picking and it also suffers drag due to trading costs and taxes.
esteen
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Re: Market Timing

Post by esteen »

no, to me this has no relation to the term market timing.

The rise in GPU prices is, as you mentioned, a supply issue due to manufacturing constraints & demand pressures. A GPU is a physical product with utility - people want it because they want to use it, not because they hope it will spew out dividends and/or be sold later to someone at a higher price.

Market timing is a phrase used here in reference to the financial markets, not every market.
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arcticpineapplecorp.
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Re: Market Timing

Post by arcticpineapplecorp. »

1. you don't know anything anyone else does. if there's a shortage, prices go up and you will not get ahead of that.
2. to benefit you have to predict or somehow know/guess before others do. case in point:

this guy has 17,700 bottles of sanitizer he procured before everybody else did (back in March 2020). Did that help him? Read on...

https://www.google.com/search?client=fi ... +sanitizer
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
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grabiner
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Re: Market Timing

Post by grabiner »

Arby wrote: Fri Aug 06, 2021 12:30 pm 2) When interest rates dropped dramatically on new brokered CDs, I was able to buy some brokered CDs on the secondary market with interest rates substantially higher than market.
Does this actually work? I would expect brokered CDs to behave like bonds; when interest rates fall, existing bonds at higher coupon rates trade at a premium which gives them the same yield to maturity.
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Arby
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Re: Market Timing

Post by Arby »

grabiner wrote: Fri Aug 06, 2021 8:38 pm
Arby wrote: Fri Aug 06, 2021 12:30 pm 2) When interest rates dropped dramatically on new brokered CDs, I was able to buy some brokered CDs on the secondary market with interest rates substantially higher than market.
Does this actually work? I would expect brokered CDs to behave like bonds; when interest rates fall, existing bonds at higher coupon rates trade at a premium which gives them the same yield to maturity.
It worked for me. These trades were made in very early March 2020 on the Fidelity platform when interest rates dropped dramatically and the stock market was in free fall. Perhaps the dollar amounts were too small to attract institutional traders. My memory is a bit hazy but there were some really good deals.
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