Active investing and "market timing" are the same thing. That's quite obvious.

What isn't obvious and is the primary reason passive investing has worked - is after hours appreciation. In the past decade if you bought everyday at the close and sold at the open, you'd come out far ahead of buying at the open and selling at the close. Secondly, the market spends the majority of the time regaining what it lost.

Passive investing depends entirely upon when you have enough money to invest and when you retire. Over the past 2 years the market is up 7% with an 18% drawdown. By any measure of risk adjusted performance, that's terrible.

Proponents of passive investing will simultaneously point at history and say wait and see while claiming various strategies' backtests (or out of sample tests) aren't proof of future performance.... Passive investing will get harvested, it's only a matter of time

JJMt said:

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hypeiv said:

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I would be cautious of survivor bias when evaluating anyone who has correctly timed the market multiple times.

If you start with 100 investors trying to time the market, I could imagine after 10 years or so, 15 of them beat the index funds and could point to their success as evidence they have it figured out but in reality they just got lucky.

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And if you take 100 students, some will get A's. Are they the lucky ones or are they better students? If someone has a rational approach to market timing, an approach that makes sense, and it works, how is that luck?

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Not a valid analogy at all. Studying and understanding math vs predicting stock market movements?

It's absolutely a valid analogy. Change the subject to art.

claym711 said:

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Active investing and "market timing" are the same thing. That's quite obvious.

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Boeing in February had run up significantly over 5 years. Take some profit and reallocate to Apple as it had just dropped 25%.

That's active fundamental management and asset allocation, not market timing.

Market timing is I saw the yield curve, recession coming, I'm no longer investing.. I'm moving to cash until the market bottoms and I'm back in.

The A student reads a text book/listens to lectures/researched facts and then applied those facts accurately. Your premise is that is potentially doable based on this information you have received. If that gold true, then your analogy is fine.

But, taking the art comment, that's a more realistic analogy in my opinion... Because art isn't based on facts and figures. Any given persons bias, opinions, emotions, etc. lead to different paths. So 1 person could get an A this week, next week a new teacher disagrees and gives a C.

cjsag94 said:

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The A student reads a text book/listens to lectures/researched facts and then applied those facts accurately. Your premise is that is potentially doable based on this information you have received. If that gold true, then your analogy is fine.

But, taking the art comment, that's a more realistic analogy in my opinion... Because art isn't based on facts and figures. Any given persons bias, opinions, emotions, etc. lead to different paths. So 1 person could get an A this week, next week a new teacher disagrees and gives a C.

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The only thing wrong with the original math analogy was the rigidity and absoluteness of math vs investing. However, you can develop a system of probabilities and with enough historical metrics, those will play out over time - a systematic trading approach.

Art, as with anything, requires a huge amount of practice and repetition to become elite. Same with trading, even if using a systematic approach.

AggieMainland said:

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When the market crashes in the next 4 months, I will be sure to bump this and laugh at all the people that though it was different this time. Good luck.

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Checking my math here. Aug, Sept, Oct & Nov 10th right around the corner seems like 4 months. Where was this crash you spoke of? I don't hear you laughing.

Amazes me people put their money in play with preconceived notions based really on nothing whatsoever. Trade price and it will make you look a lot less stupid.

claym711 said:

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Buy and hold depends entirely upon when you were born and when you retire. It is not a strategy.

The widespread reliance upon index fund and passive investing is ripe for harvesting, and it inevitably will be.

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My personal theory, and as valuable as any other predictions.

Index funds will continue to grow, and will become a giant buffer to market swings. At the same time, they will be so big that changes to the index's will be predictable and able to be front run to some extent. This will increase the ability of managers to beat the index, but limit the size of those gains. They still won't be able to beat by enough consistently to cover their fees.

JJMt said:

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For example, we know that if we enter into a recession, the market will decline a lot. The trick is whether or not there are any reliable, timely and useful predictors of recessions.

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Edit to say: I think we are saying the same thing!

Herein lies the challenge. The lock-step of market declines to recessions isn't predictable. Even in hindsight, it becomes evident that there are frequently fits and starts leading up to and throughout, usually punctuated with a quick and steep recovery (but not always). Wrap that all up in the fact that "recessions" typically aren't even identified until the are at or near completion.

Take the scenario of this thread...let's just say the market rises another 10% over the next 3 months. With the 4%+ to date, and a couple of dividend payouts, we've got 15% since this one stated indicator was reached. Then what? Let's say a 25% decline, but it looks like what we've seen over the past 4 months (full of volatility).

Election cycle in full swing, China and Syria still grumbling, Brexit falling apart...nothing sounds good (oh, today we added suggestion of war with Mexican drug cartels!). But suddenly systematic trading takes hold and the run up begins. Market climbs 15% within a month...but everything John Q. Public hears and feels still points to bad.

Average investor has no idea where to go, so they sit out and end up severely lagging the market.

I'm not talking about resourceful hedge fund billionaires and life long engineers who have studied data and built a model that seems to work. I'm talking about the average TexAgs poster who links an article and says it's time to unwind.

Endo Ag said:

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claym711 said:

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Buy and hold depends entirely upon when you were born and when you retire. It is not a strategy.

The widespread reliance upon index fund and passive investing is ripe for harvesting, and it inevitably will be.

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My personal theory, and as valuable as any other predictions.

Index funds will continue to grow, and will become a giant buffer to market swings. At the same time, they will be so big that changes to the index's will be predictable and able to be front run to some extent. This will increase the ability of managers to beat the index, but limit the size of those gains. They still won't be able to beat by enough consistently to cover their fees.

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I believe the widespread availability and use of indexing is a bubble.

We have already seen over the past 2 years that corrections have become quite extreme in velocity - and these have occurred absent any major catalyst like a real crisis or recession.

As passive investing continues to grow, these price discovery events will become more and more extreme - because there is virtually no liquidity when they occur. Most daily liquidity is machine originated and this disappears in an instant during these events, leading to immediate price discovery - add to that the ever growing passive investment space - and price discovery is absent most of the time, until it's too late. Additionally, too much of the value is distributed in a small number of companies (and high risk companies at that) - made worse by the index sampling utilized by index funds.

What will happen during the next crisis or recession? I think we will see extreme low liquidity and extreme drop velocity, exacerbated by passive investors attempting to flee.

claym711 said:

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This is an awfully odd one to gloat on. 4 months later and this call is barely in profit while riding through another correction. No doubt more volatility is on the way.

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We broke a Darvis Box to the upside. It wasn't a market timing thread; it was about cashing out. Well anyone who cashed out is missing some serious upside ahead.

Or if they believe in the upside ahead and they didn't start adding back on the dip, then they've only missed the first few % while avoiding a large drawdown.

claym711 said:

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Or if they believe in the upside ahead and they didn't start adding back on the dip, then they've only missed the first few % while avoiding a large drawdown.

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And then a few more % when they get back in, and then a few more % next time, then next time, and then the next time.

Why is that hard to understand?

Thats the sentiment of someone that holds until it's too late. You can be long only, but buy and hold is not a strategy.

Good thread. I'm in the live and learn position having made a similar call as the OP a few months ago. What I entirely did not anticipate was the aggressiveness of the fed, injecting +$250 billion of liquidity and cutting rates.

iluvpoker said:

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2019 will continue to be a good year for the market. It won't be straight up, but the stock market will hit new highs in December.

2020 is interesting as the Democrats will try to tank the market next Summer/Fall. But unless Trump gets out over his skis this year, then I think he has enough bullets in his tool belt to keep the economy up and get reelected.

His reelection should set up the following 4 years to be good for the market, as he likes to burn the candle at both ends, tax cuts and spending. I predict the Dow in 2024 will be in the 35k-40k range.

2025 is setting up to be a major recession. I think it will rival the 2008-09 recession.

Someone bookmark this thread and let me know how I did.

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My prediction for 2019 looks spot on. Still see Trump getting reelected. If he does look for nearly 40% gain between now and late 2023. Then a 50% decline in the next 18 months.

Quote:

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If he does look for nearly 40% gain between now and late 2023. Then a 50% decline in the next 18 months.

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Like you could ever know that

Huell Babineaux said:

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Quote:

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If he does look for nearly 40% gain between now and late 2023. Then a 50% decline in the next 18 months.

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Like you could ever know that

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That's why it's called a prediction. And not I know for a fact.

In November of 2003 the Dow was nearing 10,000. 4 years later ((Nov 2007) it topped 14,000, over 40% gain. By March of 2009 (16 months later) it was below 7,000. Over a 50% decline.

Those who fail to remember history are condemned to repeat it.

iluvpoker said:

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Huell Babineaux said:

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Quote:

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If he does look for nearly 40% gain between now and late 2023. Then a 50% decline in the next 18 months.

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Like you could ever know that

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That's why it's called a prediction. And not I know for a fact.

In November of 2003 the Dow was nearing 10,000. 4 years later ((Nov 2007) it topped 14,000, over 40% gain. By March of 2009 (16 months later) it was below 7,000. Over a 50% decline.

Those who fail to remember history are condemned to repeat it.

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Okay, so your sample size to form that prediction was......one

Got it

Huell Babineaux said:

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iluvpoker said:

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Huell Babineaux said:

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Quote:

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If he does look for nearly 40% gain between now and late 2023. Then a 50% decline in the next 18 months.

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Like you could ever know that

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That's why it's called a prediction. And not I know for a fact.

In November of 2003 the Dow was nearing 10,000. 4 years later ((Nov 2007) it topped 14,000, over 40% gain. By March of 2009 (16 months later) it was below 7,000. Over a 50% decline.

Those who fail to remember history are condemned to repeat it.

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Okay, so your sample size to form that prediction was......one

Got it

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claym711 said:

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Thats the sentiment of someone that holds until it's too late. You can be long only, but buy and hold is not a strategy.

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What does "too late" mean to you?

Huell Babineaux said:

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claym711 said:

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Thats the sentiment of someone that holds until it's too late. You can be long only, but buy and hold is not a strategy.

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What does "too late" mean to you?

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Death

claym711 said:

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Thats the sentiment of someone that holds until it's too late. You can be long only, but buy and hold is not a strategy.

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Just curious why buy and hold wouldn't be considered a strategy?

Depending on what you plan to buy it might be a decent or poor strategy, but still a strategy regardless.

Article I think is informative and relevant to the premise of this thread.

https://seekingalpha.com/article/4305642-spy-rising-spite-recession-risk?source=cnbc

Couple of quotes at the end of it I thought were relevant to this discussion:

"Most investors are concerned due to signs of slowing economic growth at times when SPY is at historical highs. However, past economic data is already well-known and incorporated into market prices."

"Back in September, I published an article entitled, Recession Fears Are Creating A Buying Opportunity, which explained that all that matters is the economic data in comparison to expectations going forward, not past economic data."

"Most investors tend to get too pessimistic after the data shows signs of weakness. A low bar is relatively easy to beat, so low expectations set the stage for better than expected economic data and rising stock prices going forward."

There are so many factors that can be used to predict the future of the market, and this article just talked in a little more detail about digging deeper and not just jumping on one indicator

So the market is up 5% in the 4 1/2 months since the OP sold out. Will the Nasdaq hit 10k before the end of 2020?