[2020] A little stock market sense

[bnoble]

It’s not a matter of if, it’s a question of when.

I've never once regretted betting that predictions of the form "We'll just reinvent the world" take at least twice as long as the person making the prediction suggests.

As a related aside, I thought this article gave a very plausible explanation for what is going on. Short version: money that the well-to-do can't spend on vacations has to go somewhere.

Why Markets Boomed in a Year of Human Misery (Published 2021)

It wasn’t just the Fed or the stimulus. The rise in savings among white-collar workers created a tide lifting nearly all financial assets.

www.nytimes.com

 

[Brett]

I've never once regretted betting that predictions of the form "We'll just reinvent the world" take at least twice as long as the person making the prediction suggests.

As a related aside, I thought this article gave a very plausible explanation for what is going on. Short version: money that the well-to-do can't spend on vacations has to go somewhere.

Why Markets Boomed in a Year of Human Misery (Published 2021)

It wasn’t just the Fed or the stimulus. The rise in savings among white-collar workers created a tide lifting nearly all financial assets.

www.nytimes.com

that's part of it. government loan programs to businesses and stimulus money, increasing tax breaks for corporations and shareholders, efficiency in tele-commuting.
Plenty of explanations.

 

[jabberwocky]

I'm not a fan of the uninsured cryto's because of the ability of others to hack and steal it. Every year you read about multiple thefts of billions of dollars of these. When the most sensitive and protected cpu systems in the USA can be hacked what chance does a person with a $1000 cpu on a shared system have ?

Bill

The thefts you typically read about are cryptos being stored with an exchange. Security on an exchange is only as good as the weakest link in their system (usually a human).

In theory, if you treat your Bitcoin properly and in its own wallet that you control, it should not be possible to steal your bitcoins without you letting someone know your private key (just like you should never let anyone know the PIN for your bank card). Your private keys should not be stored online or in any system connected to the internet (mine reside on a couple of encrypted USB drives - two copies made for backup purposes and stored separately from each other).

It’s okay to buy Bitcoin on an exchange, but you really should move it to your own personal wallet that you alone control. They are free to set up and can be done in seconds. If an exchange won’t allow you to transfer out to your own wallet, then you need a different exchange.

As an aside, with BTC prices going up I decided to turn my Antminer S9 back on (I shut it down in May after the halving occurred since it became cheaper to buy BTC on an exchange at that point).

 

[Brett]

Lessons From a Crazy Year In Financial Markets

https://www.wsj.com/articles/lessons-from-a-crazy-year-in-financial-markets-11609410602

Markets don’t perfectly reflect the economy

It pays not to try to time the markets

Forecasts are just forecasts

The tech trade is only getting bigger

 

[Ironwood]

There is usually a little buying early in the new year as portfolio managers buy things they didn't want showing up on Dec 31 portfolio summaries, but watch out as sentiment can change on a dime! And I think that will happen early this year. I'm more invested than I probably should be, and I can get out fairly quickly if I have to, but not if we have a day with the DOW opening down 1000 and the S & P down 300.

 

[rapmarks]

I have a lot of money in cash right now. I will reinvest after January 6 and a few days after Inauguration Day.

 

[dioxide45]

And the black market will trade in gold/silver. There will always be a market for invisibility. Cash serves it now, despite all the Federal regulation to try and stop it, but when cash disappears, metals will, once again, take over. . . .

Will you ever be able to go and buy something with a lump of gold or silver? Can I walk into a Costco one day with some gold and buy some toilet paper? I doubt it. Currency is only worth what other people think it is and perhaps the labor that goes into creating it. In the past, the value of the dollar was backed by gold. Now it is backed by nothing. Even in times of armageddon, what would I need with gold or silver. I want something from someone else, I need to be able to give them something of value they would want. Perhaps that is labor or something else of barter, but I doubt it will be gold or silver.

 

[bogey21]

Will you ever be able to go and buy something with a lump of gold or silver?

The answer is most likely "No". On the other hand when I sell to the gold and silver dealers I use locally they pay me in cold hard cash that theoretically I can buy things with. This is why I keep my gold and silver in small units, 1/10 oz for gold and 1 oz for silver...

George

 

[davidvel]

Lessons From a Crazy Year In Financial Markets

https://www.wsj.com/articles/lessons-from-a-crazy-year-in-financial-markets-11609410602

Markets don’t perfectly reflect the economy

It pays not to try to time the markets

Forecasts are just forecasts

The tech trade is only getting bigger


View attachment 30707

View attachment 30706

Is there a graph that a t shows how much more you would have made if you invested x amount on the 5 and 10th worst days? That would help better compare whether one should "time" the market.

 

[geekette]

Is there a graph that a t shows how much more you would have made if you invested x amount on the 5 and 10th worst days? That would help better compare whether one should "time" the market.

There are such things around, but, it still remains a look back with forward being a crapshoot for us all.

While I would stipulate that it is not impossible to be successful in market timing strategies, it could be very difficult to do it reliably, since 'the market' is not reliable. The ideal of rock bottom buy and tip top sell is elusive for most mere mortals, but diligent homework could get a person close. Most people, if they really tried, could buy "low enough" and sell "high enough" to decide for themselves that 'market timing' works, at least on whatever timeframe they used.

I do not embrace it as a strategy and never will. However, holding long term generally bakes the Higher into things. Not always, it depends on when you take the readings, and on the success of the company. One doesn't have to be decades-long patient but it sure doesn't hurt.

 

[Brett]

Is there a graph that a t shows how much more you would have made if you invested x amount on the 5 and 10th worst days? That would help better compare whether one should "time" the market.

The first column on the graph would be the same (fully invested all the time).
Of course missing the worst days of the stock market would increase the yield and investing an amount on the exact worst day and selling on the exact best day would also be a winning ticket

 

[easyrider]

In the past, the value of the dollar was backed by gold. Now it is backed by nothing.

The USD is supported by many things. The value of gold is that gold is a tangible storage mechanism of wealth that keeps up with inflation and increases in value over time.

The reason why the USD will always be the fiat currency and has nothing to do with how many USD's are printed or the value of the USD. The main reason is that weapons, gold, oil, technology and commodities are mainly priced with USD's throughout the world. I doubt that will change anytime soon. The U.S. $100 note is the most sought out currency in existence in the world. Over 80% of all USD's are $100 notes.

Bill

 

[Ralph Sir Edward]

Will you ever be able to go and buy something with a lump of gold or silver? Can I walk into a Costco one day with some gold and buy some toilet paper? I doubt it. Currency is only worth what other people think it is and perhaps the labor that goes into creating it. In the past, the value of the dollar was backed by gold. Now it is backed by nothing. Even in times of armageddon, what would I need with gold or silver. I want something from someone else, I need to be able to give them something of value they would want. Perhaps that is labor or something else of barter, but I doubt it will be gold or silver.

First off, I said the black market, not the white market.

Consider. Are stocks money? How about Bonds? Real estate? Old Masters etchings? All of them have value, and can be exchanged (with varying levels of liquidity), for "money".

What I am saying, for transactions that are currently being paid for "under the table" in cash, will not be "under the table" in some form of digital currency (because there is NO "under the table" with digital currency - everything has an audit trail). When cash goes away "under the table" will not go away, as long as there is an economic incentive for such transactions. There will be a new medium of exchange for such transactions, something with a history of invisiblity, and of maintaining value over time, and a relatively low exchange transaction cost. That will be metals.

 

[Ralph Sir Edward]

The answer is most likely "No". On the other hand when I sell to the gold and silver dealers I use locally they pay me in cold hard cash that theoretically I can buy things with. This is why I keep my gold and silver in small units, 1/10 oz for gold and 1 oz for silver...

George

George, I have found that gold 1/4 oz has a much better exchange rate that 1/10 oz, without much more value. (12% vs. 25%). I have also found better bid/ask spreads with 90% "junk" silver. But to each his/her own. . .

 

[bogey21]

George, I have found that gold 1/4 oz has a much better exchange rate that 1/10 oz, without much more value. (12% vs. 25%). I have also found better bid/ask spreads with 90% "junk" silver. But to each his/her own. . .

All my silver are 1 oz .999 mint condition coins. I am thinking about adding some common date Morgans to my stache...

George

 

[CO skier]

From a post on March 14, 2020:

Well, I for one am glad your prediction did not come to fruition.

I'm also glad I have been fully invested in the market.

This all just strengthens my belief that no one can really predict what the markets are going to do in the short or even medium term.

Kurt

I think it was Yogi Berra who was attributed to famously saying, "It's tough to make predictions, especially about the future."

One of the benefits of market timing is that it takes much of the emotion and angst out of investing. Who could have predicted the Fed would pump 3 TRILLION dollars into the economy (where much of it made its way into mutual funds)? After the Fed action the markets stabilized, and when it did at a level more than 10% above the lows, I exercised the plan posted on March 12th and bought back into QQQ with the click of a button on April 9th. Buying into the market at the time went against my instincts, but market timing requires discipline.

I sold everything with a click of a button, then dollar cost averaged into QID over two days. Sold the QID today at the click of a button for a 39% gain in less than two weeks -- no reason to get greedy. Now I will sit in cash until this selloff reaches the 40% mark, and start to dollar cost average back into the market for the upside swing. If the market does not sell off to the 40% level, I will get back into the market when it moves upward 10% on low volatility from the lows. Mutual funds do not have that luxury.

 

[CO skier]

Lessons From a Crazy Year In Financial Markets

https://www.wsj.com/articles/lessons-from-a-crazy-year-in-financial-markets-11609410602

Markets don’t perfectly reflect the economy

It pays not to try to time the markets

Forecasts are just forecasts

The tech trade is only getting bigger


View attachment 30707

View attachment 30706

I remember first seeing a bar chart about "missing the best days of the stock market" in 1994, when the company I was working for transferred the 401K plan management to Vanguard Funds. Even as a 30-something, I could see the fallacy in the chart, because it is distorted. It was much like a timeshare presentation where only positives are presented. So I raised my hand and asked, "What would the returns have been if the worst 5 and worst 10 days had been avoided? He did not have an answer, because that side of the same coin would have supported the idea of timing the market to avoid the worst days.

If someone is interested in exploring this idea some more, Google "missing best 10 stock market days fallacy."

Nevertheless, I thought it would be interesting to see how my 4 round trip market timing trades this year compared to the 5 best and worst days of 2020. I was double-short for the fourth worst day (March 9) and closed out the QID position on the 2nd worst day (March 12) for a 39% gain. I opened a double-short position on the 3rd worst day (Sep. 3) and still held it for the 5th worst day (Sep. 8) and the 5th best day (Nov. 4) closing out the position on Dec. 1 for a -15% return (market timing does not guarantee a winning trade every time).

I was in cash for the worst day of the year (March 16th), the best day of the year (March 13th), the second best day (March 24), the fourth best day (March 17th) and the third best day of the year (April 6th) .

So I was in cash and completely missed 4 out of the 5 best days of the year and was on the wrong side of the market for the fifth, yet my 4 trades yielded returns of:

+6.6% QQQ
+39% QID
+43% QQQ
-15% QID
and the current QQQ position has a 4% return

for a compound annual return in 2020 of 91.1%

This year was by far the best year since I started timing the market in 2008. Many years there are no trades. I have never calculated each year to determine how much more I have due to market timing, but it must easily be 3-4 times versus if I had stuck with "buy and hold for the long term." Nothing wrong with that strategy, but I knew too many "buy and holders" who sold out at the worst times in 2008 and swore off the stock market for good. Much like people who get burned by a timeshare purchase and think they are scams.

 

[Brett]

I remember first seeing a bar chart about "missing the best days of the stock market" in 1994, when the company I was working for transferred the 401K plan management to Vanguard Funds. Even as a 30-something, I could see the fallacy in the chart, because it is distorted. It was much like a timeshare presentation where only positives are presented. So I raised my hand and asked, "What would the returns have been if the worst 5 and worst 10 days had been avoided? He did not have an answer, because that side of the same coin would have supported the idea of timing the market to avoid the worst days.

If someone is interested in exploring this idea some more, Google "missing best 10 stock market days fallacy."

Nevertheless, I thought it would be interesting to see how my 4 round trip market timing trades this year compared to the 5 best and worst days of 2020. I was double-short for the fourth worst day (March 9) and closed out the QID position on the 2nd worst day (March 12) for a 39% gain. I opened a double-short position on the 3rd worst day (Sep. 3) and still held it for the 5th worst day (Sep. 8) and the 5th best day (Nov. 4) closing out the position on Dec. 1 for a -15% return (market timing does not guarantee a winning trade every time).

I was in cash for the worst day of the year (March 16th), the best day of the year (March 13th), the second best day (March 24), the fourth best day (March 17th) and the third best day of the year (April 6th) .

So I was in cash and completely missed 4 out of the 5 best days of the year and was on the wrong side of the market for the fifth, yet my 4 trades yielded returns of:

+6.6% QQQ
+39% QID
+43% QQQ
-15% QID
and the current QQQ position has a 4% return

for a compound annual return in 2020 of 91.1%

This year was by far the best year since I started timing the market in 2008. Many years there are no trades. I have never calculated each year to determine how much more I have due to market timing, but it must easily be 3-4 times versus if I had stuck with "buy and hold for the long term." Nothing wrong with that strategy, but I knew too many "buy and holders" who sold out at the worst times in 2008 and swore off the stock market for good. Much like people who get burned by a timeshare purchase and think they are scams.

OK
Maybe you should consider starting your own actively managed mutual fund , make billions instead of measly millions. seriously

https://www.forbes.com/sites/jimwan...market-timing-is-for-suckers/?sh=4bd681d249d8
https://www.businessinsider.com/personal-finance/timing-the-stock-market-never-ends-well-2020-6
https://www.marketwatch.com/story/t...ck-market-look-at-this-chart-first-2017-12-08

 

[geekette]

One of the benefits of market timing is that it takes much of the emotion and angst out of investing. .... Buying into the market at the time went against my instincts, but market timing requires discipline.

I think that for most people, market timing ADDS emotion and angst. Fretting on the way down, greedy impatience on the way up ...

I'm with you on emotionless investing. Makes it tons easier, regardless of strategy. I do think that having a strategy and sticking with it is key.

 

[geekette]

....Nothing wrong with that strategy, but I knew too many "buy and holders" who sold out at the worst times in 2008 and swore off the stock market for good.

That's not buy and hold. I am buy and hold, haven't sold anything, been buying for over 30 years.

 

[PigsDad]

....Nothing wrong with that strategy, but I knew too many "buy and holders" who sold out at the worst times in 2008 and swore off the stock market for good.

That's not buy and hold. I am buy and hold, haven't sold anything, been buying for over 30 years.

I agree -- that is not buy and hold. That is buy and panic sell. Completely different.

And @CO skier, what are you doing hanging around here? If your system can give you the consistent gains that you claim, you could use those talents to become the richest person in the world in a few years. Seriously. I'd be the first to invest in your managed fund.

Kurt

 

[geekette]

I agree -- that is not buy and hold. That is buy and panic sell. Completely different.

And @CO skier, what are you doing hanging around here? If your system can give you the consistent gains that you claim, you could use those talents to become the richest person in the world in a few years. Seriously. I'd be the first to invest in your managed fund.

Kurt

Funny, once upon a time, I wanted to be a fund manager. I settled on making my own "mutual funds" for benefit of self.

For years, I tried to get an investment club going. The holdings there would have been a mutual fund of sorts. I think my biggest problem would be finding others with mindset of buy-hold-reinvest divvies long term, especially since my 20s are long gone. No worries, it has been fun to be a solo investor, accountable to my own self interest.

 

[GetawaysRus]

This fellow offers a free newsletter. Here's this week's issue with his commentary on the stock market:

Technically Speaking: S&P 500 - Trading At Historical Extremes - RIA (realinvestmentadvice.com)

Much of the issue is devoted to traditional stock market valuation.

For the technically inclined, notice that his S&P500 charts are data from Dec 31. He uses different moving averages on the different S&P500 charts in the article. The first chart uses 20 and 200 days, the next uses 52 and 200, and the third uses 12 and 48 days.

Also, he is using different MACD histogram settings on the various charts in the article than the defaults. On StreetSmart Edge (from Schwab), I believe the defaults are 12, 26, and 9. MACD (and the MACD histogram) is going to look a little different depending on the settings you select for the chart. So he shows the MACD histogram to the good (green). Using 12, 26, and 9 it turns out that I see it just a little in the red.

 

[Ralph Sir Edward]

Re: CO skier.

"No captain, no crew. Nobody's neck but your own." - Robert A. Heinlein - Space Jockey

Not everybody wants to work for other people, no matter how much money is offered. They may not want the responsibility. I know I don't!
Besides, beyond a certain point, money doesn't matter. As James Garner said in The Wheeler Dealers - "Wheeling and dealing isn't about the money. Money is just how you keep score."

 

[Breezy52]

As to the QID, you can make really good money buying & selling but really watch carefully. Some watch the 20 day Moving Average.

Does anyone have educated opinions on the u.s. dollar tanking? That's been bothering me lately.