Great morning read by one of the best fund managers around. He moved to 15% cash a year ago and took conservative action on holdings. On the surface you might ask why he didn't go to 100% cash like I did? When you are controlling $9B you ARE the market versus a few million Huge difference in weighting his ability in tandem with responsibility to market and clients. Funds exist to be in the market. I exist to capitalize on their being forced to play within those confines.

Note that he isn't calling for a collapse but is in no hurry to put cash in this market. His code word for a recession hit to stock/share value "repricing".

How quaint.

http://www.bloomberg.com/news/articles/2016-02-18/top-stock-picker-with-9-billion-says-he-s-still-happy-in-cash

That is some interesting performance on that fund. He wisely missed most of the downside in 2008, and missed the upside of 2009-10. As an investor, you would love the 2008, but maybe question the next 2 years.

Then, he absolutely kills everyone in 2013 and 2015. 2015 was amazing performance compared to everyone else.

Makes you wonder how someone that takes less risk can make that much more.

He does appear to be great at timing and stock selection.

Exactly....again we are talking about a fund having to move like a tanker ship versus us as a speed boat. When he divests share holdings he has to do it over a period of days and even weeks.

So, I was talking to a hedge fund manager sitting next to me on a plane yesterday. Smart older gentleman who has been a fund manager since the 80s. Seemed to be a warren buffet style investor. Told me about some companies he owned and gave some insight into why. Was cool talking to him.

Says some think the markets could move down another 50% from where they are now because of Europe and China.

We are headed first to the top of the channel. Currently that comes in around 17k DOW, give or take 100.

Looks like attempt this AM to break through resistance at S&P 1945 failed and uptrend stopped for now. Stocks falling back and gold going up again. Thanks guys for reawakening my interest the in technicals.

What rarely gets discussed when people throw out various trading strategies or technical indicators is what a huge percentage of total return over the long term stems from dividends. Technical analysis and trading strategies almost all focus on price movements and completely dismiss what a HUGE percentage of total return over the lifetime of an investor is due to dividend reinvestment.

Here is a great piece by Michael Gayed, winner of several Dow award winning papers: http://www.marketwatch.com/story/is-it-dow-17000-or-13-million-2014-10-29

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Pop quiz.

• What is the value of the Dow Jones Industrial Average now if you reinvested every single dividend back into the index starting from inception in 1896?
• Is the market just the S&P 500 Index?

Some people say, "I have a target of the Dow Jones Industrial Average Index hitting 20,000 by the end 2020." "Well, I have a target of the S&P 500 Index hitting 2,000 by year-end."
I'm sorry, folks, but whenever I hear people talk about targets, I smile to myself. Let's face it, probabilities change literally by the nanosecond, making any forecast on targets susceptible to new information which can alter it. While we're at it, never mind the fact that human beings, from a behavioral standpoint, tend to be awful at accepting an unknown future, which is why numbers tend to be anchors for current decision making, regardless of if the anchors are well grounded in reality.

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I always ask the first question mentioned at the start of this writing to people attending my presentations. Some people might say the Dow Jones Industrial Average would be double what the index level is now if you reinvested dividends. Others might say the number is a few hundred thousand. The correct answer? If you reinvested every single dividend back into the Dow Jones Industrial Average, the Index would not be around 17,000 as it is as of this writing. The Index would be north of 1.3 million. This is not opinion it has been verified by academic studies, most notable from Meir Statman1.

Why then does everyone focus on price targets, when, in my opinion, total return (which so few people understand) is all that matters for many people? I believe performance should not be based on price alone, but price plus reinvested dividends. This has been a frustration for me on a personal level that so few understand this concept.

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Keep in mind, he runs strategies that incorporate technical indicators, so don't dismiss him as if he were some buy and hold, value investment guy.

You totally just GAYED this thread....

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You totally just GAYED this thread....

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To the extent you guys have convinced buy and hold investors to try their hand at trading, you are doing a HUGE disservice.

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I feel like this thread was by traders and aimed at traders. If a B&HI decided to try trading based upon this thread then that's their responsibility. Traders should be able to discuss trading in a public forum. And I appreciate their posts.

Dividend considerations aren't necessarily for buy & hold only. I have a system that monitors dividend dates, and could use it in my algo as a minor factor in buy/sell trade decisions.

I trade my parents retirement account except for $100k that gets re-weighted to $100k Jan. 1 each year. As a matter of normal routine I told him when I was taking 100% of the accounts to cash last year.

He went to cash except for one fund that is a dividend focused fund. He called last week and said he was down $17k out of his $100k and I asked why he didn't sell it too. His reply "well most of the dividends payout in Jan. and Feb.

That's about the best response to calculating dividends as part of a formula. Funniest thing I heard was a guy who had a stock that avg. cost was $74 and when it dropped to $16 he said the dividend yield NOW is 8.5%. Well congratulations!

Woody, I am not a trader as you know. But the technicals help picking buy points in stocks I want to own for the long haul. I completely agree with you about dividends.

Also the coupling of oil and stocks and their inverse correlation with gold looks interesting for traders and longs alike. Clearly the fear of the economy slipping back into recession is high and the interest in gold seems particularly acute with the threat of negative interest rates coming to America. What an awful idea that is and indication of just how desperate governments and central bankers are becoming.

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You totally just GAYED this thread....

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To the extent you guys have convinced buy and hold investors to try their hand at trading, you are doing a HUGE disservice.

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This is funny because Michael Gayed and his firm are market timers. He gets in and out of the market all the time if you follow him.

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You people have very seriously misunderstood me. I think trading is fine for people who know what they are doing -- like Gayed. I know his strategies well, so if you think you've caught me in something you have misunderstood.

However, the vast majority of people shouldn't be actually trying their hand at trading. They should find a low cost professionally run fund run by actual academics like AQR and use that to compliment a more traditional value-focused portfolio if interested in capturing the momentum premium.

An amateur trying to implement trading strategies himself ought to just light his money on fire. There is an extremely high likelihood he will abandon his strategy very quickly after it starts to turn on him for even a relatively brief period.

I just don't like Gayed. Not many finance Twitter people do.

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We are headed first to the top of the channel. Currently that comes in around 17k DOW, give or take 100.

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Everyone enjoy the market "shake out" today??? 400 point intraday swing. Nothing has changed on the move towards top of channel.

What caused the reversal today?

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Coincided with crude reversal and retaking and holding 1900 level on S&P. Looking for follow through tomorrow on the upside.

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Thanks Jake

Posting real time purchase for the traders

50 AAPL March 4 Expiration $100 Call Options Executing at $0.16 (27) and $0.17 (23)

Futures green across the board as we continue trending, after all this down volatility, toward top of channel, 17k DOW with understanding that "flashes" above that intra day can occur, just as they did on the lower channel mark.

Expect the wild day ranges to come under control signaling the big money is asserting a slow squeeze upward. Look for the upper channel bands getting stretched to sell the 50% swing trade positions.

Posted the real time trade of AAPL $100 March 4the calls when the stock was at $96.20. At $97.08 premarket this morning. If it plays a little catch up today, after government battle kept it from joining markets bounce, I'll exit at least 50% to lock in profit and be trading with the houses money.

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I'll exit at least 50% to lock in profit and be trading with the houses money.

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I really don't want to discourage the trading conversation because it's very interesting, but I'm curious as to this mindset. Clearly, this is a logical fallacy as money is fungible but perhaps an intentional bias in order to allow yourself the freedom to take what you would otherwise view as a risky gamble?

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I'll exit at least 50% to lock in profit and be trading with the houses money.

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I really don't want to discourage the trading conversation because it's very interesting, but I'm curious as to this mindset. Clearly, this is a logical fallacy as money is fungible but perhaps an intentional bias in order to allow yourself the freedom to take what you would otherwise view as a risky gamble?

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It's a discipline on options due to their time value decay. I risk 15% down side with stop and sell 50% above double total entry cost. The options have doubled and I just filled $0.32 with last trade at $0.33. It's right at a key resistance mark so the anticipated move and planned trade strategy has worked.

What exactly is the fallacy?

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What exactly is the fallacy?

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That you are using the house's money. It doesn't matter that it's profit or investment. Money is fungible.

BTW, any other CFAs here? I'm tired of people talking down to me as if I were uneducated. Please don't make the mistake of thinking I haven't evaluated pretty much every strategy seeking to capture the momentum premium.

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I'm a CFA but I don't believe in efficient markets.

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I don't believe in strong-form. However, I don't believe market inefficiencies can be consistently identified and captured, either. AQR is probably the best firm I've seen, and would be far more likely to implement their strategies as a true negatively correlated strategy complimenting a traditional value portfolio than I would be to actually try my hand at trading itself.

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I'm a CFA but I don't believe in efficient markets.

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I don't believe in strong-form. However, I don't believe market inefficiencies can be consistently identified and captured, either. AQR is probably the best firm I've seen, and would be far more likely to implement their strategies as a true negatively correlated strategy complimenting a traditional value portfolio than I would be to actually try my hand at trading itself.

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There will always be inefficiencies to exploit in markets. A few years ago when they NYSE was transitioning to a hybrid market you could put an order out to the specialist and get "wrapped up" in a single print and instantly flip to ECNs for a profit with basically no risk. Traders who were fast enough made an obscene amount of money off that for a while. That lasted for about a year until the algos figured it out and exploited it effectively killing that trade. As computers become faster and smarter they will find and exploit any market inefficiencies with increasing speed and precision thereby making the overall markets more and more efficient. The last great inefficiency for humans to exploit will be the few times a year when the machines go haywire.

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Posting real time purchase for the traders

50 AAPL March 4 Expiration $100 Call Options Executing at $0.16 (27) and $0.17 (23)

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Very nice buy!

Getting ready for a leg down? Or do you think we hit 17k on the Djia first? S&P would test near 2000?

Charterholder here. Equity research, distressed credits and I-banking background. And I find 98% of the conversation on here to be quite entertaining and interesting...

[edit to remove the use of "amusing" as it was perceived to be condescending]

Somebody do an analysis on CRC.

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Somebody do an analysis on CRC.

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Oxy brilliantly laid off a ton of debt on to CRC. Analysis done.

Just kidding. Barely.