Smart Investor Makeover: Is Now the Time to Jump Back in the Market?
There is no shortage of market timing advice.
Viewers of "Fast Money" and CNBC get a daily dose of conflicting opinions from financial pundits, each of whom is confident they can predict the direction of the markets.
Depending on which economist you are watching, this is either the beginning of the end of the recession or a sucker's "bear market rally."
What's an investor to do?
Check out the video below. It is the first of a series of Smart Investor Makeover videos. Please give me your feedback. I want to pull out all the stops to be sure that you don't become victims (again!) of the securities industry and the financial media.
The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein.
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Dan,
I liked your video and particularly the message. It appears that many of those posting comments are going to keep the financial advisors and brokers in business for a long time.
It may be a suckers rally but I've made 24% over the last 3 months. If things start to turn sour I can always pull out again. What are you going to do sit on the sidelines and get half a percent?
sucker's rally, no doubt about it. all the little retail guys jumping back in and the rug will be pulled out from them again!! usually the street has a run up over time (end of 01-02 recession spx ran up to 1500ish) but this time (because the fundamentals are simply horrible) they won't be able to hold it up too long so the smart money is getting ready to short and bang those who have been getting in of late.
the next big leg down is imminent....the banks, with the help of the government via the primary dealers and the cheerleading msm, have just suckered people via secondaries for a hundred billion and now they have their needed capital (it is not nearly enough btw, but a different subject altogether). Market is way overpriced, treasuries are a mess, and we are heading south. you would be crazy to go long with the spx in the mid 900s.....
good luck to all. disclosure: 60% of cash shorting financials and the broad market....ready to go 100% imminently.
"Come on folks! Jump back into the market! You know how it works. You give me, Mr. Corporation, your money. I gamble it for you. If I win, you get a few pennies back on your investment, while I keep the rest. If I lose, you lose your money, I ask for more but somehow also buy myself another new home this month. If you don't want to play, that's ok. I'll make the government give me your money!"
Sorry, but all the high drama of people running around throwing little pieces of paper on television (does anyone honestly believe the stock market works this way anymore?), all the abbreviations and acronyms, all the pomp and circumstance isn't bringing the masses. Nope, at least I hope not. I hope folks realize that the "stock market" is no better than than buying scratch it tickets or entering to win the Publisher's Clearning House Sweeps.
So what are you doing to invest in your future? Lottery tickets? Here's a plan, every payday buy a case of Alpo and put in storage. When you retire you may have to eat dog food, but at least it'll be premium grade dog food.
The market is too pricey with the S&P at a P/E over 20 - the historical norm is 14. There are perhaps bargains to be had, but overall the market is too pricey and so no, don't jump back in, imho, other than if you have a 20+ year time line and simply don't care what stocks do for the next 5 years.
Dan; all my money is tied up in cash, and cash is king..!
Now is no time for gambling...
Last Post... re my first post, the 5% is YTD. Also, I advocate no more than 10% in anything, but 25% in general categories, so cash might be MM, ST Govt Treasuries, and a stable fund. Bonds can be tips, us Gov't intermediat, Int'l bond, emerging mkt bonds, and LT corp (5% each)... the one segment that's tough to really split up is real assets, but I have 15% comm and 10% real estate (5% US / 5% int'l). For what it's worth.
Dan, I think your video message is fine (it would be good if you found a third position for your hands while you talked... you seem just a little stiff. Not meant as criticism, a really smooth delivery is tough to achieve.) I do take issue though with a pure buy and hold dogma. I do think that's the best thing to do for 99% of investors. But I think it's fair to address the acadmic studies that do show some investment strategies can empirically drive excess returns of 1 or 2 percent. The fact is, getting those returns is much harder than it looks, and the only ones of us who should try are the ones who really enjoy investing. Outperformance like you get in endowments is simply not replicable by individuals, and as you've noted in the past, the deck is stacked against individuals... investors or speculators/day traders (again, I think there are some niches where highly educated experts can thrive, but 99% of us non investment professionals would lose our shirts.) By acknowledging the other point of view, you make your case stronger.
I think your best bet is to be extremely diversified. If you were 60/40 last year with a hefty helping of intermediate gov't bonds in the 40, you didn't do so badly. I lost 13.7% myself, but my weighting was unconventional. In any case, I think now is a good time to simply balance your portfolio in quarters between Cash / Bonds / Equities / Commodities & Real Estate. Make sure you have plenty of non dollar currency exposure (Int'l stocks and bonds) - I think 50% is a good number. Make sure you are balanced between inflation (commodities, tips) and deflation (US Bonds, Cash). One reason I would advocate the asset class splits above is that I trust very little right now, even money markets, so i don't want more than 10% of my money in anything. Also, given that the banks are absorbig the stimulus like giant sponges, and wages are declining, I lean deflationary and Cash is a good place to be. Also, I like cash because volatility is so huge now, and I want to keep some of my powder dry. At some point I expect to be about 40% equities, 30% real assets, 20% Bonds (read "the Ivy Portfolio", but note that in a depression, most asset classes get hurt.) Asset allocation should shift depending on risk levels. Trillions of bailout dollars mean risk is high, and hence the conservative portfolio. Capital preservation is worth a bit of missed returns. Disclosure, am up 5% this
The market is a fraud, stay away. It is being artificially supported via backroom projects by Goldman acting for the Fed and Treasury. The market has not been allowed to drop to an equilibrium level so there is a large downside. Read the madness of crowds. The bigger problem will be when uber inflation hits, where do you place your money to avoid it becoming worthless.
correct and then some.
Propaganda to get the little guy back in. "You cant time the market" is just like "buy and hold". Both are obsolete when markets are inefficient. Do you think hedge funds, which make up 60% of the market, are not conducting market timing strategies? Come on Dan. Are suggesting that folks should not attempt to time the market, buy and hold too? This is completely the opposite of what 60% of the market is currently doing. Your advice is obsolete. The market has become a casino and the hedge funds are counting the cards. You are advocating that we just sit down at any table and put money down and stay there until we win. Great!
See Dan Solin's Profile
If hedge funds are "counting the cards", I am not sure you want to follow their example. Over 100 have imploded. See: http://hf-implode.com.
Your basic premise is flawed: Markets are not "inefficient." Efforts to "beat the markets" keep brokers and advisors in business and give financial pundits something to talk about. But the returns of investors suffer when they follow this advice.
We have lost interest and competence in building and producing. We have replaced this interest and competence with the thrill of watching a computer screen and punching in numbers to buy and sell.
Someday, instead of buying and selling, we will be bought and sold by managers from off shore.
Excellent stuff. Market timing is impossible except in the broad sense of fundamental analysis, a.k.a. fortune telling. I hear the funniest commercials on Bloomberg all the time with this guy saying saying he invented a computer program because he needed something that would tell him when to buy, when to sell, and how much a stock was really worth. The first time I heard it I almost fell out of my chair laughing. Might as well study alchemy.
I do not have to watch the video. i can tell you with certainty that it is not a good time for the small investor to go to market. Wait another year and then go for it. If you jump the gun you will be asking for round two of double trouble.
This post deals with an important topic yet so far there are only about 20 comments. This tells me that most people including those that have extraordinary expertise do not trust this market or present rally yet and do not know where we are headed for sure and what it will be like when we get there. I am betting that it is not on its way to "pie in the sky" yet and that is still just a bet. The usual indicators are somewhat skewed as the government is still doing their thing and we are not sure yet if we are being lied to.
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