So we've gotten around 1250 pts run up in the Dow recently, which I think nobody here predicted..... (Which begs the question why I'm opening up this new thread, but why not? haha) -- I think the market has factored in a Republican victory tomorrow for taking the house, and the Fed starting to Q-Ease soon... So my question is:

The election is tomorrow -- Massive Republican gains are forecasted. Is it times to sell the news, and plan for the market to stagnate again, or is there an opportunity for a nice upside surprise if the R's do better than expected?

I'm investing in the market only in my 401k, not in individual stocks -- so I'm trying to decide whether it's time to go back into money market for awhile, or if this thing can ride higher in the near term. I just recovered from the last drop in the market after 6+ months, so I'm looking to avoid the next ditch.


- Hakrjak

Trying to time the market is an incorrect strategy. Even Buffett says he can't time the market, so anyone else trying is not a game that can be won. If things are of good value, buy. If they're not, don't buy. The way most people are putting money into the market is pure gambling. They're buying pieces of companies they have no idea about and crossing their fingers hoping they go up. I'd recommend reading a ton of books before putting more money into anything. I've been doing a lot of research the last month or so on how to find and correctly evaluate good companies, and it's ridiculous how easy it is to get an edge. However, the reason there is an edge to have is because so many people invest without an edge. If everyone had an edge, there would be no edge. Read stuff by Lynch and Buffett. Forget trying to time markets.

Speaking for myself, I have no idea what the market will do.

Thankfully my investing strategy isn't based on knowing what the market will do.

Best regards and good luck!

snowbank said:

Trying to time the market is an incorrect strategy. Even Buffett says he can't time the market, so anyone else trying is not a game that can be won.

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This from a poker guy ... lol.

Many people make a fortune from timing the market, but it is a probability game. There are technical stock patterns that can indicate a specific probability of a trade's success, but only in a relatively large sample size of well executed trades.

Buffet's comments are accurate, but for investors. Trading is all about timing. Charts are patterns of human emotions and those are certainly predicable. Anyone who's been drunk or high knows that a hangover is part of the bargain... some goes on the markets. Trading is only the ability to recognize when the market is drunk or hungover and make a high probability trade that things will return to equilibrium.

Here's a link for this trading week that discusses whether or not the major markets are likely to go higher this week...

[video]http://icecommentary.com/dollar-index-week-commencing-1st-november-2010/[/video]

It will give you an idea of how a trader views the current markets based on technical analysis.

I see market timing like bluffing in Poker. If you can do it, you don't have to be great at it... You just have to be able to do it 1 time more than 50%, and you've created a huge upside for yourself.

- Hakrjak

The stock market is too risky. Too much to lose and not enough to gain. I have pulled out of the stock market and plan to never enter it again. So I can't help ya.

Jonleehacker said:

This from a poker guy ... lol.

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My response was based on the fact that hakrjak is attempting to invest, and not daytrade. If once/yr hakrjak attempts to time the market, even if he had a tiny edge at doing so he's hugely negative ev using this strategy because he'd be missing all of the +ev spots in the market while he was sitting out trying to time it. All the ev needs to be included, not just the ev from 1 particular spot.

Remdog said:

The stock market is too risky.

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It's risky if you do it like most people, yes.

Remdog said:

Too much to lose and not enough to gain.

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I think you pretty much described why it was so risky for you. If this was the case you were in the wrong companies.

hakrjak said:

I see market timing like bluffing in Poker. If you can do it, you don't have to be great at it... You just have to be able to do it 1 time more than 50%, and you've created a huge upside for yourself.

- Hakrjak

Click to expand...

Comparing it to poker, this would be like having a tiny edge in one situation, and never playing until that one situation occurred. You pass up spots that you feel you wouldn't have as big of an edge, but you lose all of the money in opportunity cost that you would have made.

Hugely negative ev to try to do what you're doing and it's not even close.

Also, trying to time it after all the news has already been out there on the subject would be really bad. If you're going to try to time anything, it's going to be effective when you invest before everyone else knows about something, not after.

hakrjak said:

So we've gotten around 1250 pts run up in the Dow recently, which I think nobody here predicted..... (Which begs the question why I'm opening up this new thread, but why not? haha) -- I think the market has factored in a Republican victory tomorrow for taking the house, and the Fed starting to Q-Ease soon... So my question is:

The election is tomorrow -- Massive Republican gains are forecasted. Is it times to sell the news, and plan for the market to stagnate again, or is there an opportunity for a nice upside surprise if the R's do better than expected?

I'm investing in the market only in my 401k, not in individual stocks -- so I'm trying to decide whether it's time to go back into money market for awhile, or if this thing can ride higher in the near term. I just recovered from the last drop in the market after 6+ months, so I'm looking to avoid the next ditch.


- Hakrjak

Click to expand...

I think for the market we need to look at it with an exit strategy or shift of stock focus. We could see a correction and some stocks are sold off, or the market could continue to do well, whether Republicans take seats in Congress or not. I think either way it will be a temporary decline if Democrats retain seats since Wall Street would be disappointed that Republicans didn't take more seats.

As for the exit strategy, look a how far you're willing to let your 401K drop (10-20%?) and then shift it. If you change out now to a money market, you could lose thousands and hurt you in the long run.

The same for stocks. Some stocks are doing better than others. You should also have an exit strategy. How much do you think you can make on a stock or in a sector, then at that point sell (or shift your market focus). I think we have learned that you can't get too greedy since no on knows how the market will perform. This is what I learned from the last crash.

Speaking for myself, the less knowledge that I have when investing in a particular asset class the more risky it is. For many, the stock market is "too risky" because they don't have an expertise there. Nobody has an expertise everywhere.

I have no exit strategy aside from selling "when I need the money". So far I haven't needed the money.

The U.S. stock market has been very good to me. It has given me 2 market crashes in 12 years. For those who have read about the history of the U.S. market, this is extremely frequent. Crashes provide massive opportunity and I have been fortunate to have taken part in the 2002 I.T. tech crash and the 2008 credit crisis.

Having said that, I have no idea when the next U.S. stock market crash will be nor do I know what will cause it to crash, but I am ready to take advantage of it. Being able to "predict" the future isn't necessary for me to do well. "Rinse and repeat" is my modus operandi.

The U.S. real estate crash was unexpected, but welcome for me. The downfall (and byproduct) of passive investing is that cash thrown off by investments (dividends, rental income, option premium, etc.) builds up over time and needs to be deployed. Since bull markets can run a very (very) long time and because I only deploy capital during crashes, the cash sometimes sits for long periods of time.

Again, this kind of strategy (and trade off) suits my personality and may not necessarily suit others. I strongly believe that everyone should do what suits their character otherwise there could be serious financial consequences.

Best regards and good luck!

Remdog said:

The stock market is too risky. Too much to lose and not enough to gain. I have pulled out of the stock market and plan to never enter it again. So I can't help ya.

Click to expand...

To quote Warren Buffett:
"Risk comes from not knowing what you are doing."

madison said:

To quote Warren Buffett:
"Risk comes from not knowing what you are doing."

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This is true and it is a smart thing for an individual to recognize this and avoid it.

The problem comes when an individual doesn't recognize it.

Best regards!

For me it's too risky. Not that it can't be done but I have never met anyone who has gotten rich off the stock market. Good luck!!!

Personally speaking I find that this is definitely unfortunate. If my criteria involved having to meet somebody who has been successful in a specific endeavour before I believed it to be less risky, I might never have started with anything.

Speaking for myself I never met anybody who made money from real estate or stocks before I made over a million in each.

Now I've met a few, but that was after the fact.

With regards to my real estate and stock portfolio, the stock portfolio was much easier to assemble and manage. It's not even close. Again, only speaking for myself.

Good luck and best regards!

I'm willing to bet that I can list 10 stocks here that are all at what I would perceive to be buy points and list all of the entry prices making sure to put stop losses in place on all, and out of this group, at least one will be up by 30%-100% within a 3-4 month period which will wipe out all of the losses of the ones that were stopped out, plus a decent gain.


All based on timing. ...any non-believers interested? :coco:

topherea said:

I'm willing to bet that I can list 10 stocks here that are all at what I would perceive to be buy points and list all of the entry prices making sure to put stop losses in place on all, and out of this group, at least one will be up by 30%-100% within a 3-4 month period which will wipe out all of the losses of the ones that were stopped out, plus a decent gain.


All based on timing. ...any non-believers interested? :coco:

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This is obviously completely different than what hakrjak was trying to do.

snowbank said:

Comparing it to poker, this would be like having a tiny edge in one situation, and never playing until that one situation occurred. You pass up spots that you feel you wouldn't have as big of an edge, but you lose all of the money in opportunity cost that you would have made.

Hugely negative ev to try to do what you're doing and it's not even close.

Also, trying to time it after all the news has already been out there on the subject would be really bad. If you're going to try to time anything, it's going to be effective when you invest before everyone else knows about something, not after.

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I hear you brother. I know you are the poker expert, so I defer to you in most of these metaphors. What I was trying to say was that most people can play average poker, and eek out a small mathmatical edge playing a system... But a truely great poker player increases his edge by occasionally bluffing successfully. It's the x-factor.

I thnk that most Average 401k investors can do so-so over 50 years, but someone who wants to do better than average should attempt to sell before the large drops. If you are 51% good at it, you've just given yourself a huge advantage that most investors don't even try to use.

In our current situation the market is going to do 1 of 3 things tomorrow based on what happens with the elections tonight. A). It could rejoice and shoot higher, B). It could say -- We've priced all this in, it's time to sell... or C). It could do nothing and just move sideways for awhile.

So far nobody wants to even make a guess?

Cheers,

- Hakrjak

hakrjak said:

If you are 51% good at it, you've just given yourself a huge advantage that most investors don't even try to use.

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No, the math doesn't work like that. If you're 51% good at it, it just means that you are going to be right more than you're wrong. However, the one time you're wrong about the timing and there's no drop you miss all of the gains you would have received by sitting out of the market. Besides, you won't even hit the long run to get to 51%, the sample size will be way too small.

snowbank said:

This is obviously completely different than what hakrjak was trying to do.

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Was skimming and saw one trader fighting some investors so I figured he needed some back up! :smxB: hehe

To address what hakrjak is concerned with I'd have to question why a longer timeframe such as with a 401k needs to be based on a short term move. Why not wait for a move to start and a confirmation as opposed to an immediate decision based on a short term statement like 'sell the news'?

If I were in that position and wanted to tie my sell decision in with a forecast of the djia, I'd probably wait to see where the last day of November closes. If below 10,500 there should be caution. If it goes below 9900, I'd be thinking the probabilities of a short position may look better.

Same with December.

hakrjak said:

So far nobody wants to even make a guess?

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If there is one thing to learn from all the people that have contributed to this thread, it is that successful people don't guess.

They have a system with proven rules and they follow that system. If you don't have a system that matches your beliefs; that is driving your decisions in the market, then best to get out... because you are operating as a high risk investor/trader, and they are the ones that the rest of us receive our profits from.

To speak to the OP question, the trend is against this being a short term top.

1. The seasonals prefer the 4th quarter. That is, the stock market performs better during Oct-Dec than during other quarters.

2. Stock market bottoms during the last 60 years have typically come during the first and second years of a presidential term. Bottoms during the 3rd year are rare, with none in the 4th year over the past 6 decades. Hence, we are more likely to have experienced a bottom in the past 24 months than in the next 24 months.

3. Presidential Elections and Stock Market Cycles - Graziadio Business Review | Graziadio Business Review | Graziadio School of Business and Management | Pepperdine University
4. AFC/NFC Superbowl Indicator
5. Wilshire 5000 PE low by historical standards
6. After elections, market typically outperform for the following quarter.

https://news.fidelity.com/news/news...162907&IMG=N&cat=Opinion&ccsource=rss-Opinion

In sum, Oct-Dec quarter typically outperforms the market average by about 5%. After an election, the market typically rises a median 8.5%, as measured since the 1940s.

Those are historical trends that bear watching; the trend is your friend.

Remdog said:

F . . . I have never met anyone who has gotten rich off the stock market. Good luck!!!

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I did small caps for a while (one in particular that I studied for 12 years before investing in it big). Made about 200-300% ROI over 6 month periods, riding the cycles.

Then did REITS when I was investing in RE, and made about $100K there.

But RE is where I really made my money. Millions.

-Russ H.

Oops, forgot to add:

I HATE gambling, which is what investing in the stock market is for me (since I know so little, risk is BIG).

Hak, you'll love this story:

I had to go to Vegas every year for a big trade show (CES). Never gambled.

I mean, at all.

One year, everyone was on my case to "let loose a little".

So I gambled.

And doubled my money before I left.

Wanna know how I did it?

Had a nickel and 3 dimes in my pocket when I was at the airport, waiting for my flight.

Stuck 'em in slot machines.

Got back 75¢.

After that, my friends just kinda stopped asking me to gamble.

True story. :banana:

-Russ H.

topherea said:

To address what hakrjak is concerned with I'd have to question why a longer timeframe such as with a 401k needs to be based on a short term move. Why not wait for a move to start and a confirmation as opposed to an immediate decision based on a short term statement like 'sell the news'?

Click to expand...

Concerned about shorter term moves that can be very large. i.e. if the market is going to drop 1000 pts, I want to get out of the way. I'm not satisfied with an average 5% per year gain over 40 years, and would like to increase the odds to around 10% if possible. This is free money from my company, so might as well grow it as aggressively as possible.

Cheers,

- Hakrjak

hakrjak said:

Concerned about shorter term moves that can be very large. i.e. if the market is going to drop 1000 pts, I want to get out of the way. I'm not satisfied with an average 5% per year gain over 40 years, and would like to increase the odds to around 10% if possible. This is free money from my company, so might as well grow it as aggressively as possible.

Click to expand...

Speaking for myself, I don't believe that any individual has the ability to predict the future. If somebody believes otherwise, they should learn it and apply it ASAP! Again, for myself, I consider it impossible so I don't spend any time on it.

At the time of this writing, my 40% YTD return in 2010 (without any focus on predicting the future) is "aggressive" enough for me and I don't expect it to repeat it any time soon.

Good luck and best regards!

Looks like from today's reaction, the market loves the new congress, they love the Fed's $600 billion injection, and they love that Obama came out and said he's open to extending all of the Bush tax cuts.

Now the question is.... Do we go higher or lower from here? The argument for higher, I believe is that most Joes are out of the market right now, still burned from the last couple big drops. They usually wait to get in until the very end of a Bull Market rally. Will we see another bubble created in stocks that we can make some good wealth off of, or does everything crash back down to the basement?

(BTW -- I did nothing and stayed 100% invested on election day... So far I'm glad I did, but who knows the future, as some pointed out...)

- Hakrjak

hakrjak said:

Looks like from today's reaction, the market loves the new congress, they love the Fed's $600 billion injection, and they love that Obama came out and said he's open to extending all of the Bush tax cuts.

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"Love" doesn't make the markets go up.

The market is rising for several reasons:

1. The US dollar is crashing, therefore US stocks (and everything else in the US) is "on sale" to foreign investors.
2. The FED announcement confirms interest rates will remain at near zero for the foreseeable future. People who need income from their investments have no other option than to turn to the stock market for dividends.
3. US companies are doing well in the global economy and bringing the profits back to the US.
4. Commodities (priced in US dollars) are booming due to global currency devaluation.

If the markets really loved all the things you mentioned, the US dollar would be rising... exactly the opposite is happening. The US dollar and the US stock markets have been inversely correlated since the housing bubble popped.

In "reality" the US markets aren't even really going up, they are only reflecting inflation of the US dollar. If you priced the stocks in a neutral currency like gold, you would see they are flat at best.

Jonleehacker said:

"Love" doesn't make the markets go up.

The market is rising for several reasons:

1. The US dollar is crashing, therefore US stocks (and everything else in the US) is "on sale" to foreign investors.
2. The FED announcement confirms interest rates will remain at near zero for the foreseeable future. People who need income from their investments have no other option than to turn to the stock market for dividends.
3. US companies are doing well in the global economy and bringing the profits back to the US.
4. Commodities (priced in US dollars) are booming due to global currency devaluation.

If the markets really loved all the things you mentioned, the US dollar would be rising... exactly the opposite is happening. The US dollar and the US stock markets have been inversely correlated since the housing bubble popped.

In "reality" the US markets aren't even really going up, they are only reflecting inflation of the US dollar. If you priced the stocks in a neutral currency like gold, you would see they are flat at best.

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Funny, Jon Lee, I had almost exactly the same response to Hak's comments.

But I'll add this:

Productivity was WAY up in Qtr3: 1.9% vs a drop earlier.

I figured investors were diving in b/c of the cheap dollar, the increase in productivity (increasing productivity is a GREAT way to get out of a recession), and continued low inflation.

From my understanding (which is pathetic, at best), the Fed is doing this $600B buy in to increase inflation to 2% (from 1%).

Sorry, Hak. Don't mean to poop on your love fest. I just see if from a different POV, I guess. /

-Russ H.

Russ H said:

the Fed is doing this $600B buy in to increase inflation to 2% (from 1%).

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I've come to the conclusion that *inflation* is the most misunderstood word in the English language... everyone thinks it is related to prices, but that is only the most simplistic and benign form of inflation.

The thing I learned when I began to trade Forex, that was never obvious to me before, was that every price is denominated in a specific currency.

To get back to your statement, yes the FED would love to have price inflation move from 1 to 2%, but remembering back to the theory of relativity from high school that only matters if your entire world is contained within a single train.

Unfortunately for the FED we live in a global world, and while they have been able to stave off price deflation by pumping massive numbers of dollars into the economy and they may be able to get the US train to go from 1 to 2 miles per hour faster, every other train in the world is going 5 to 10 to 50 miles per hour faster. Which means that relative to the world's trains, the US train is going backwards...

Sorry for the crazy mixed metaphor, but I hope you get the drift.

If you want to understand the real inflation, look at the price of gold, or food or other commodities that are priced in US dollars. Gold is up about 26% in 2010 alone, and silver is up 45% ... that is inflation. That is how much the US dollar has dropped as a result of insane policies of trying to pump money into the system.

The cycles that are being setup are the classic path to hyper-inflation... the only reason it hasn't happened yet is because the US dollar is the world's reserve currency. And because a lot of other governments are doing the same thing.

A government cannot continue to create money to pay its debts any more than you or I can continue to open new credit cards to make the payments on our existing debts... at some point it's going to stop working, and that is when hyper inflation is going to hit. Interest rates will have to sky rocket because the risk of lending to an irresponsible borrower will be so obvious.

That is actually happening already, as reflected in the prices of commodities as money flows out of US dollars and into assets that cannot be debased by irresponsible government policies.