"You Can't Time the Market, But..."

You can't time the market. Period. End of story.

I've ridden the market up and down for the last 20+ years. Constantly in stocks. On average, about 10% per year. I'm ecstatic with that.

In my younger, arrogant days, I tried timing the market. Always got out just before it recovered. Idiocy.

Don't know if I'm part of the target here, but I did time the housing market, following economist Robert Shiller. I've been saying the stock market is too high for about 3 years and I thought that Trump's election would crash the market -- and I was dead wrong. I did pull some money out the market about a month ago, but that's really unusual for me.

If I had to do it all over again, I might try for a career in computational finance. Although it seems frustrating to try make predictions on something that seems to be based on mass psychology. That's how it appears to an outsider.

@mark94: "Constantly in stocks".

Did you follow MPT diligently regarding how much you are supposed to allocate to bonds or was it just stocks?

1. (a common special case of 7), and no I'm not saying it applies to mark, no idea what his allocations are): "You can't time the market but, I have almost everything in stocks, almost nothing in bonds. I know that's not what MPT says I should do, but the stock market just keep going up and up! And what's gonna happen when the Fed stop propping the bond market?"

You need to use the Juice spendingindex. When Juice is spending money and paying his cover to clubs with 100 dollar bills and being a baller means it is time to buy.

Now you know the secret.

1. "You can't time the market, but: I would never buy with a market order. Buy X at limit Y below the current market price. Also sell Z at limit Q above the current market price."

Just stocks, except for enough cash for a couple years of expenses. I have faith that stocks will always outperform in the mid to long run. I could afford a significant downturn without affecting my lifestyle

Okay, so mark94 is another hypocritical "can't time the market guy". He says you can't time the market PERIOD. However, you can know that it's better to buy and hold stocks than bonds. Try all you want to weazel your ways out of that contradiction mark94, but you're a market timer like it or not.

Dougster, I'm genuinely confused. I put my money in stocks and never change. How is that timing the market ?

How do you know it's the right time to be all in stocks if you can't time the market. LOL. What I think guys mean when they say you can't time the market could be said more accurately this way, it is vey difficult to buy the bottom and/or sell the peak. That to me represents a realistic approach.

Finally someone sounds like they actual understand investing. Thank you 25. I would guess that Doug makes $15 an hour and owes 16k on credit cards.

Okay, I found this definition and am willing to concede that by always being in stock, rather than some expert's definition of a balanced portfolio, I'm timing the market. At least under this definition. However, I still take it as a law of nature that stocks will outperform over the long term. Only slightly less certain than the law of gravity.

Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis.

I'm not sure exactly what they mean. I think it might just be "You can't time the market, well except for a rather long list of exception when you can". Or it might be "You can't time the market, well you can't time the market if you do it too frequently, but if you do it just once in a while, then sometime you can".

AFAIK, economist don't understand why stocks outperform bonds, at least David Friedman, (who you would think has the right genetics to understand if anyone could) didn't as of 2007:

daviddfriedman.blogspot.ca

The evidence is they do, however.

Some argue risk, but in stocks high risk actually, and very surprisingly, does not correlate to higher return.

Not clear to me if stocks will continue to outperform bonds going forward. Especially if robots and AI mean we are going to enter an era of long term deflation. But if you think it's clear stocks, I would say that is market timing.

IMO, the full expression is this : "You can't time the market [without compelling evidence that suggests the market should be going lower]." There is a flash game somewhere floating on the World Wide Web that picks a random 10 yr period of the historical S&P 500 index and allows the user to buy and sell once. That is the kind of timing that they are referring to, just looking at the chart and trying to use your "gut instinct."

However, with compelling evidence, I think the market can be timed.

Under Modern Portfolio Theory, the optimal investment mix is determined by how much risk an investor is willing to take. Given my situation and beliefs, I've been willing to accept an extremely high risk profile in search of maximum return. I'm ( nearly) fully invested in a few low-cost index funds that represent the entire US ( I don't want to take on currency and political risk of foreign stocks ).

This approach has served me well over the long term.

I believe in a good mix of high quality stocks, bonds along with some money invested in a few private ventures that return a decent yield and I personally look at all of my holdings every 5-9 weeks to check if the underlying fundemantal assumptions are still valid If I notice a large profit I'll reap some of that and diversify my holdings accordingly. BTW I always maintain a large enough cash stockpile to act on an idea, who's time has come. Other than that I believe in staying invested for the long term. @ Mark94 sounds to me like you are getting advice from a source that may not have your best interest at heart.

mark94: "I don't want to take on currency and political risk of foreign stocks "

This is getting just comical now. You are willing to put 100% in stocks and nothing in bonds, b/c you don't care about risk and can withstand a large draw down, so your rationalization goes. However, now way you want to take on currency and political risk of foreign stocks. Definitely saying now is a better time for US stocks vs bonds vs foreign stocks = market timing.

Okay, my name is Mark and I'm a market timer.

Whatever the label for my investor style, it's worked just fine for me for 20 years.

"Under Modern Portfolio Theory..."

You know, it's as if there's some set of magical equations that you can make a successful investor. Like there's some rational argument that governs the direction of the markets. In reality it's just the amalgam of a bunch of irrational human beings trying to make a buck. Stock market behavior belongs more in the realm of psychology; it's not like predicting the motion of Pluto around the Sun.

@Random: well it's a bit like Brownian motion. That is governed by laws, but is still random. Pluto moves much more deterministically around the Sun. A big difference with Brownian motion, however, is the game theory aspect: if you are a short term player in the market you have to think about how other players are moving and how they are thinking about how other players are moving. Whereas a particle in liquid just moves randomly as molecules bump into it.

I iz molecoolz.

@skifag: I guess people will just have to decide for themselves if I have established a track record and credibility when it comes to discussing the stock and now crypto-currency markets. And, then, they'll have to decide how much credibility you've established, by contrast, by calling both stocks and crypto-currencies a bubble and being wrong for some wrong: in both cases ever since we've had those discussions on TUSCL. In the case of stocks, for years.

One thing that is amusing, is that if I really am stupid, it's kind of funny that a stupid person has, objectively, done a much better job of analyzing both markets as you have.

Lol!

You can't time any of these markets, even though the present valuation is based on unsustainable levels of consumption and the combination of government tax cutting and unsustainable government spending levels. So though you cannot time it, it is clear that it is a Ponzi scheme. And Ponzi schemes always depend upon taking in a geometrically increasing level of new money. There just aren't more taxes available to cut in order to sustain that.

amazon.com

Sorry, I mean, just like mark94 sounds to be, I also am a white college educated male. I guess I should be screaming for my entitlement of a government subsidized upwards wealth transfer siphon, and patting myself on the back when it works out. But fact is, I have more important things to do with my life, and I believe they will yield far more money, though that money I will use very little of for myself.

SJG

Mister Bond - A Jazzy Cocktail Of Ice Cold Themes youtube.com

If it's a bubble that must mean cash will outperform in the medium to long term. So you are timing it. You are saying now is a better time to hold cash than stocks.

I am really surprised by how dumb you can be for someone who claims to be "college educated" SJG, and, especially, hinting that your background was in physics or engineering. If so, all this should be obvious to you. So you're either trolling or much dumber than I ever gave you credit for.

No one could predict the exact time when Carlo Ponzi's scheme would collapse either, but that doesn't mean it was a good idea to put money into it.

I am surprised at how shameless you are Dougster.

SJG

Ponzi only lasted a little over a year. People timed it by putting their money elsewhere. Other Ponzi scheme may or may not be shortable. If they are shortable and people find out, there is generally money to be made on the short side. Now the stock market is obviously shortable, so if it was a Ponzi scheme you could make money on short side, negating your claim that the market cannot be timed.

Think, SJG. Think.

@RandomMember,

"You know, it's as if there's some set of magical equations that you can make a successful investor. Like there's some rational argument that governs the direction of the markets. In reality it's just the amalgam of a bunch of irrational human beings trying to make a buck. Stock market behavior belongs more in the realm of psychology; it's not like predicting the motion of Pluto around the Sun"

You do realize that most human behavior is rational, and can be analyzed to predict for reasonable outcomes, the stock market is no different just assume that profit is always the motive and based on experience and other factors most intelligent beings that have had some training can formulate, whether a thing has value or not. If the motive is not profit you should be able to ascertain that, and don't invest where the desired outcome or objective differs from your own. In other words, there's nothing magical about investing,(or psychology) it just takes patience and discipline just like any other human endeavor, as such some are better at it than others, that's all.

"...most intelligent beings that have had some training can formulate, whether a thing has value or not."

Yeah, I get the point that you're making @25. Although I've lived through the dotcom crash (lost money) and the housing bubble (took advantage and bought a nice house in foreclosure) and in both cases the intrinsic value got wildly out of synch with the overall PE(market) or price-to-rent(housing). Collectively, human beings can act irrationally and it seems like psychology is sometimes the most important factor.

I guess these new hedge funds are relying more and more on AI and machine learning. It'll be interesting to see how the new trading algorithms hold up in the future.

@Random: I think I have more confidence in AI than most so I may be biased. My guess is that they will basically eliminate all the weaker players and then it will just be like equally skilled poker players trading chips around but losing to the rake (commissions).

Since they aren't creating anything of value (as SJG likes to, occasionally, remind us :-) ) that will just mean everyone will make the same as buy and hold. At which point people will less value in investing in them. At which point the best minds their will leave and start AI startups, looking to be the world's first trillionaire.

How long does that take? Well if Kurzweil is right about 2029 being the year a computer passes a Turing test, got to think it's going to be slightly before that.

^^ As you probably know, there are some really cool bootcamps in machine learning and data science. It's really tempting to drop everything to get involved. Applications to finance would be the most exciting.

I had a discussion with someone yesterday and they seemed pretty surprised by my belief that AI will soon be better than humans for "reading" human emotions. I just pointed out that it can't be anything magical that is going on, so if computers can beat us in other areas why not reading emotions (like fear and greed)? In the markets our cognitive biases often shine through, so it's arguably already that way in specialized domain.

"Computer here are a 100 charts which show historical examples of greed. Here are 100 charts which show examples of fear. Hear are 1000 which show boring market conditions. Where are we now?"

Random even irrational behavior is rational if you understand the cause herds behave a certain way for a reason. I never feel that I need to do something because that is what everybody is doing. I purchased my home well before the bubble started and if I were to sell I would easily triple my initial purchase, my business is in a buildiyi purchased in 2009 and I own several other buildings in the same block also worth much more than the initial purchase price which I paid for, again my stocks, bonds and other assets along with my business make money for me, so yes I get your point but assuming that you convert all assets to cash eventually the idea is to have a self perpetuating pile of assets that give you the means to live the way you want and cash won't get you there by itself.

@Dougster, are you accounting for future population growth rates in your projections? Was the growth in the stock market during the last 100 years largely due to an exponential increase in the human population? What would happen if the annual growth rate slowed down to just over 0%?

At the risk of sounding elitist, I think what matters most is the growth in the number of practicing STEM types. (Sorry, Nina and skibum, no it's not primarily lawyers. Even patent lawyers). Right now I see continued growth in that as countries outside the US and Western Europe get increasingly online and cranking out these types. Also, again, growth in robots could compensate for slowing growth in humans.

Or were you asking regarding real estate?

@Dougster & @ Futretrackstar , STEM education is well and good but someone has to perform all of the functions that crest a society & civilization, if there are no butchers, bakers or candlestick makers or strippers or the rest of us, how well do you think you'all are going to survive?
The future is good and I look forward to it but don't forget tip your bartender.

No, I wasn't saying only STEM matters. You are right, about the rest. Even divorce lawyers to a small extent. :-) It's just that STEM matters the most, IMO, at this point in history. Or as thought experiment: if you could magically double the number of people in an class of occupation in society, while retaining equal talent, which group would you choose if you were president? Willing to here different opinions. I could be wrong on this one, but STEM did jump first to my mind.

I graduated from NY Tech with training in computer sciences hated it 45 years ago, still hate being cooped up at a desk, I never would have done as well as I have if I hadn't found something to do with my life that I enjoy. If you find something that you enjoy like I did you will do well, making money is the reward you get for doing something well, not a means in and of itself.

Can't argue with that!

The financial industry is built with guys whom convince others that they are smarter with returns on investment products than what else an individual can find on their own. Too many lobbyists with financial sector pockets pushing this perception to keep working folks busy. This is where SJG probably got all of his anti-market sentiment, but he took it just way too far.

Congrats on your business and owning all that real estate, @25. You remind me of one of my cousins (and that's a compliment).

By the way, the government brought in more revenue since October '16, and the growth seems to be increasing.

The implications of money velocity usually signals good economic activity ahead. This usually means that rates will need to adjust, but how quickly nobody knows? Inflation is tame, and is hedge a portion of my portfolio with a basket of commodities(5-10%). No gold as a hedge, it's demand is decreasing, unlike copper and lumber and energy.

^^^BUY Silicon its used in computers, and strippers always need new titties !

I have put all my money into strippers' thongs. I can predict when they will go up or down.

I'm losing interest in markets beyond crypto-currencies. Maybe some kind of market crisis could change that. The other thing is that everyone (except SJG and skifag) has come to believe the themes I've been advocating for years. Genuine economic boom. All about AI and the shortening of the product cycle. People used to laugh and say they were ridiculous ideas, but not it's just accepted. I guess the final stage is when not only will they agree but try and claim they thought of it first. :-) Then we all know what happens in the markets once everyone finally realizes what was really behind the rally they were all so skeptical of.

If robots and AI are better investors than humans, that just shows that markets can be timed and analyzed quite well. It's that humans do poorly controlling their emotions about what they think will happen next instead of looking at fundamentals and technical conditions. Humans time the markets poorly overall unless they stay invested for many years. Even then a company's stock will need to be reviewed to check that company management is still doing a good job. I am aware of certain technical conditions with certain stocks that beat buy and hold by a lot. Trends can last a long time.

One of the ways Warren Bufftet likes to buy a stock is by selling put options on it at a lower price than it is currently trading. If the price drops, he collects the put premium and buys the stock. If the stock price doesn't drop, he still collects the premium. You just have to have the cash to cover 100 shares of the stock for each contract and be willing to buy the stock at a price that may be a lot less than the strike price selected.

I still believe we will have a large market drop. Im thinking 2018 or sooner. We do have Trump and republicans running things now and they can't agree on anything it seems. If we default on the national debt, maybe it won't matter.

Just when you think the markets will zig, it zags.

Further post industrialization, like with AI, means less jobs. We already are breaking the federal gov't trying to subsidize job creation.

The current situation is insanity.

The sooner it crashes, the less sever it is. So bring it down as quickly as possible.

SJG

Sorry, wasn't aware the federal government was breaking. Seems to be doing quite well. Just maybe not in your PSYCHO mind.

Public policy is to try and expand the economy and create jobs. This is pushing us to the breaking point.

Once all of this speculative economy crashes, then we can get down to sustainable living.

Simply expanding capitalism benefits no one.

sustainable world that meets human needs youtube.com

SJG

Oh-noes!

Sounds like ABSOLUTE GLOBAL ECONOMIC DOOM!

No, you used to say that about Steve229 too.

No, the sooner the crash the softer it is. And ending this Ponzi economy, which is so big that its believers drive our elections and that both parties have to serve them, is the best thing possible for there to be a beautiful world before us.

So bring the crash on, just don't walk under high rises.

SJG

Grace Potter and Joe Satriani cover Cortez the Killer youtube.com

Copper hits 3 year highs, and Alcoa blows out #'s and rises 4%. Both commodity plays, and safe ones at that, to hedge against inflation. Stop buying gold for protection or a hedge, its value as a commodity has decreased markedly. Nobody uses it much anymore compared to aluminum, copper, or even silver. I reiterate that 5-10% of a portfolio should own these commodity based products, and maybe even more if you're so inclined to hedge safely against upcoming pricing pressures. This will play out big over the next 5-10 years. A REIT can do the same, but maybe as a compliment to your hedges.