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Hi Max- this conversation is a good example of how things can get muddled when there is no general agreement on key words in subjects under discussion. For example: "in-and-out trading and attempting to "time" the Market".
What does ""in-and-out trading" mean to you? Or me? Or Charles or David? Probably we would all agree that none of us are "day-traders"- that word at least is pretty self-descriptive. Looking at the long end though, things get pretty murky: If day-trade defines the short end, what defines the long? Twenty years? 10? 5? Pick a number, and someone is sure to be using it. At what point is someone then trying to "time" the market?
Personally, I think that folks like Flack are essentially "timers", because he uses a set of predefined evaluation techniques to determine a buy or sell position, year-in and year-out, pretty much regardless of macro changes in the world as we know it. And, it surely seems to work for him, more power to him.
But if I say that Flack is a "timer", and yet I also make but and sell decisions based on market conditions, what's the difference between us? Am I a "timer" also? Well, maybe in the eyes of some, and that's OK with me, but I don't regard myself as a timer. My major buy/sell decisions are based to a large degree on what I observe happening in the word... not just the S&P or some other gauge, but in the world as a whole entity.
Am I right? Sometimes: back in the 70s with double-digit inflation roaring away things were a mess. Well, either things were going completely to hell and it wasn't going to make much difference what we did, or somehow someone would get things back under control. I came across some Utah-issued muni bonds paying some 14% (!) tax-free interest. H'mmm- Mormons are pretty sharp businessmen, and usually pretty honest as well. What the hell, why not? Great move- Volker took care of inflation, the Mormons paid 14% for some five years until the first available call date. Wrong as hell sometimes too... that's life.
Speaking of bonds, the handwriting on the wall has been there for bonds for a long time now. Some folks decided to ride that train right to the last stop. I didn't- got off starting late last year, and as of May was almost completely to cash on that bond allocation. Back in May and June I also really lightened up on equity exposure, not to the degree on bonds, but light, because I simply cannot predict the degree of turmoil that will be seen as the Fed changes hands, and also, direction. I looked at the instability in Egypt, Syria and Iraq, and the potential problems with Iran, not to mention Israel doing something uncontrollable. What's happening right now in a country that affects the entire financial and international trade world- China?
I realize that there are plenty of folks that don't work this way: For example, Ted, certainly a very knowledgeable fellow, is able to sleep well without worrying about any of this stuff. And, so far this summer, he's a bit ahead in the game. But any one of those factors that I've mentioned is quite capable of taking this market, or some significant part of it, down sharply in a matter of days, if not hours. Given this mess of fish, I simply believed that I would sleep a lot better until we begin to see, if not resolution, at least a sense of direction on some of this crap.
I keep a relatively large number of funds, all managed, to spread the risk around as much as possible, including relatively small exposure (no more than10% aggregate) to a few things that seem to be doing well at the time, simply because they are. If conditions change, and they stop doing well, then that's it- goodbye PONDX, I'm gone.
Max, I don't mean to be critical, but there's no way that I would keep some 45% of a portfolio in bonds right here- anybody's bonds- simply because the goodness or badness of the entities issuing those bonds is NOT the issue right now: the issue, Max, is what kinds of stuff is happening in the big picture to affect ALL of those bonds, whether they are good, bad or indifferent?* It's not a question of loyalty to a geographic area, or to a fund house: it's just a recognition that the degree of instability and potential instability right now means that we have to be able to move things around perhaps more than we normally would because neither we nor anyone else can either predict nor control all of those gray ducks sitting out there waiting to become black swans.
At this point, though, I think that much of the damage has already been done. If anything, I would try DCA'ing out of PREMEX especially, maybe 5% at a time, watching very carefully how things are progressing generally. It's true- cash these days pays nothing. But "nothing" is a lot better than you paying 10% to the market, yes?
Good luck and take care- OJ
* This is an excellent example of a "run-on sentence", and as such should generally be avoided.
Yes, its the "Jimmy Carter" era for bonds! This asset class is swimming upstream against strongly negative retail investor sentiment. And truly, what are the medium-term expectations for bonds as interest rates have nowhere to go but up? It's been a great run, but I don't think you can count on bonds (short-term or long-term) as your true portfolio anchor.
I use RPHYX as my proxy for cash/conservative fund while I wait for that magical Fed "tapering" announcement. Then we will find out just how much the Fed's stimulus has been propping up the equities market.
There is a certain amount of complacency in the stock market, and us "sideliners" are praying for a strong pullback. And I think the "sideliners" are an increasingly large group.
Reply to @JoeNoEskimo: Yes, me too on RPHYX, but unfortunately it's now closed to new investors.
Note that I understand that RPHYX is basically a bond fund, but because it is exploiting a very narrow and specialized market niche I also consider it a "cash/conservative fund" for my purposes.
Thoughtful responses. Lots to chew on. My timing has never been a matter of attempting to "time the market." But often enough, I go and deploy a bunch of money just before some awful shit happens. That's MY kind of "timing."
Today, I note, the 10-year is up to 2.98%, virtually 3%. Can it get much higher than 3% or 3.1%? Uncle Jeffrey Gundlach thinks not. He's not the only one. I don't trust him implicitly, but I do think that in general, he knows what he's talking about. Is he full of himself? Maybe. I don't really care. Kinky Friedman is intelligent, talented and funny--- and full of himself, too.
...OJ, I hope you're correct, that "most of the damage has already been done" re: bonds. I held a particular bond for 10 years until last July, when it matured. I was getting 5.68% but now, where can you find a rate like that? Nowhere. It does please me that YIELDS on EM bonds are back up, so my reinvested pay-outs are buying a sliver more, each month, month by month. I'm suffering through the current days in which SHARE PRICES on bonds have swooned--- for the sake of deliberately creating a decent income-stream with them. I'm still 3 years away from early Social Security at 62.
Will normal, standard portfolio turnover not take care of some of the source of my malaise? My portfolio is actually anchored by two funds. The PREMX is one. MAPIX is the other. I have invested a great deal of what I have as expeditiously as I could, not having any control over when a lot of inheritance money would fall into my lap. I just consider myself fortunate that such $$$ is in my possession.
If I NEVER cash-out, and leave the whole kit and kaboodle behind me, that prospect does not---strangely--- make me feel bad at all.
For the time being, wifey's job and my small pension are "getting it done," together. S.S. will add some comfort and more money to play with, to have a good time with--- when the day finally comes.
Your counsel is deeply appreciated. But even the words we use and how we mean them means that different expectations and standards are at work for each and every one of us. Point well taken. Thanks!
Reply to @MaxBialystock: Re that bond that you held until maturity: as with the "Mormon bonds" that I mentioned above, holding an actual bond is an entirely different animal than holding shares in a bond fund. The decision and ability to hold a bond until it matures provides an entirely different level of risk exposure.
Yes, for sure. Understood. It's rare for a little old ordinary retail investor to find bonds worth buying, and that do not require a huge bunch of money in order to own the thing. High minimums are the rule!
Reply to @Old_Joe: "What does ""in-and-out trading" mean to you?"
It depends on what your definition of is is. In all seriousness, I don't know - maybe if you have more than a certain % of turnover yearly?
" what defines the long? Twenty years? 10? 5? Pick a number, and someone is sure to be using it. At what point is someone then trying to "time" the market?"
I'd say long-term in this day-and-age is 3-to-5 years.
Excellent response by OJ.
In terms of Max, I continue to think that having funds at the fund companies makes it harder to move things around/diversify further.
Reply to @MaxBialystock: " I held a particular bond for 10 years until last July, when it matured."
In 2007 I had a 6-mo CD that yielded something like 4.5%. Now one yields around 0.045% lol.
I think your bet on Asia is fine, but I think that is going to go through periods of underperformance. I think if someone wants to invest heavily in one thing, whether small (a particular company) or broadly (a particular region), that's fine, but you just have to be willing to put up with periods where it's out-of-favor. If not, then you have to diversify further globally.
As for bonds, my view for a long while was that this would happen, but I think I could not have guessed that it would happen in the fashion it has. I could say that most of the move has probably already happened in bonds, but maybe not - I continued to be surprised by the move and I think if the 10 year gets to certain levels, you could see a quick, further moves.
Looks like we're into extended metaphors this morning. How about FDR's "The New Deal" to characterize the current Fed tapering plan? Truman's "The Buck Stops Here" might depict the dilemma they face. And JFK's "New Frontier" could describe the bond market going forward.
Good comments by everyone. Not inclined to add more. Have always felt that once you outgrow the "growth" stage of investing in the younger years, it really becomes mostly an allocation question. A few tweaks here and there. Occasional rebalancing. But, by and large an allocation issue. And yes - more to Max's point: A broadly diversified portfolio will ALWAYS lag a more focused one - provided the more focused one is in the hottest sectors.
Max, I can't add much to the great responses you've gotten, but not being diversified and putting a majority of your chips in a very volatile region like Asia or any emerging market, bonds or stocks, will always produce a bumpy ride. There could be years where your portfolio is in favore or years out of favore. Especially if your conviction is not to tweak anything when trends start to turn. Sorry if this is 'preachy' because I know you've heard it before.
Malaise? I would probably have malaise if my portfolio was not doing what I expected. But so far, YTD I am ahead of my benchmark TRRAX, the TRP target date fund that is around the 60:40 mix of equity/fixed income. And I've been able to do it with holding about 40% equity most of the year. I believe it's because I'm diversifide pretty well. So if I look at it that way I guess I can't complain - or have malaise. Would I like to be closer to the S&P500 YTD? Of course, but that isn't my benchmark or what I expect.
I guess that kind of brings up the question Max, what is your expectation for your portfolio mix? Do you expect higher returns then just a conventional balanced fund - like MAPOX, with a bit more volitility? Do you have something to measure against to know your allocation is not out of wack from your expectations and risk tolerance?
Right on point, MikeM. I am not suddenly surprised by what's happening in my portfolio. That's just a fact. It is what it is. I suppose like everyone, I wish I could see around corners. Political junk that's going on right now (and for how long?) is negatively affecting my stuff. I wish our "leaders" would grow either a BRAIN or a CONSCIENCE! In the meantime, I will live with the more risky bets I've made. I do not feel like I'm "in over my head," or that I've exceeded my risk tolerance. And Mr. Market ALWAYS over-reacts to both good and bad news. Maybe I did not phrase my original question precisely enough? Let's let it go, and allow this thread to retire... Thanks, everyone.
Comments
What does ""in-and-out trading" mean to you? Or me? Or Charles or David? Probably we would all agree that none of us are "day-traders"- that word at least is pretty self-descriptive. Looking at the long end though, things get pretty murky: If day-trade defines the short end, what defines the long? Twenty years? 10? 5? Pick a number, and someone is sure to be using it. At what point is someone then trying to "time" the market?
Personally, I think that folks like Flack are essentially "timers", because he uses a set of predefined evaluation techniques to determine a buy or sell position, year-in and year-out, pretty much regardless of macro changes in the world as we know it. And, it surely seems to work for him, more power to him.
But if I say that Flack is a "timer", and yet I also make but and sell decisions based on market conditions, what's the difference between us? Am I a "timer" also? Well, maybe in the eyes of some, and that's OK with me, but I don't regard myself as a timer. My major buy/sell decisions are based to a large degree on what I observe happening in the word... not just the S&P or some other gauge, but in the world as a whole entity.
Am I right? Sometimes: back in the 70s with double-digit inflation roaring away things were a mess. Well, either things were going completely to hell and it wasn't going to make much difference what we did, or somehow someone would get things back under control. I came across some Utah-issued muni bonds paying some 14% (!) tax-free interest. H'mmm- Mormons are pretty sharp businessmen, and usually pretty honest as well. What the hell, why not? Great move- Volker took care of inflation, the Mormons paid 14% for some five years until the first available call date. Wrong as hell sometimes too... that's life.
Speaking of bonds, the handwriting on the wall has been there for bonds for a long time now. Some folks decided to ride that train right to the last stop. I didn't- got off starting late last year, and as of May was almost completely to cash on that bond allocation. Back in May and June I also really lightened up on equity exposure, not to the degree on bonds, but light, because I simply cannot predict the degree of turmoil that will be seen as the Fed changes hands, and also, direction. I looked at the instability in Egypt, Syria and Iraq, and the potential problems with Iran, not to mention Israel doing something uncontrollable. What's happening right now in a country that affects the entire financial and international trade world- China?
I realize that there are plenty of folks that don't work this way: For example, Ted, certainly a very knowledgeable fellow, is able to sleep well without worrying about any of this stuff. And, so far this summer, he's a bit ahead in the game. But any one of those factors that I've mentioned is quite capable of taking this market, or some significant part of it, down sharply in a matter of days, if not hours. Given this mess of fish, I simply believed that I would sleep a lot better until we begin to see, if not resolution, at least a sense of direction on some of this crap.
I keep a relatively large number of funds, all managed, to spread the risk around as much as possible, including relatively small exposure (no more than10% aggregate) to a few things that seem to be doing well at the time, simply because they are. If conditions change, and they stop doing well, then that's it- goodbye PONDX, I'm gone.
Max, I don't mean to be critical, but there's no way that I would keep some 45% of a portfolio in bonds right here- anybody's bonds- simply because the goodness or badness of the entities issuing those bonds is NOT the issue right now: the issue, Max, is what kinds of stuff is happening in the big picture to affect ALL of those bonds, whether they are good, bad or indifferent?* It's not a question of loyalty to a geographic area, or to a fund house: it's just a recognition that the degree of instability and potential instability right now means that we have to be able to move things around perhaps more than we normally would because neither we nor anyone else can either predict nor control all of those gray ducks sitting out there waiting to become black swans.
At this point, though, I think that much of the damage has already been done. If anything, I would try DCA'ing out of PREMEX especially, maybe 5% at a time, watching very carefully how things are progressing generally. It's true- cash these days pays nothing. But "nothing" is a lot better than you paying 10% to the market, yes?
Good luck and take care-
OJ
* This is an excellent example of a "run-on sentence", and as such should generally be avoided.
I use RPHYX as my proxy for cash/conservative fund while I wait for that magical Fed "tapering" announcement. Then we will find out just how much the Fed's stimulus has been propping up the equities market.
There is a certain amount of complacency in the stock market, and us "sideliners" are praying for a strong pullback. And I think the "sideliners" are an increasingly large group.
Just my $.02.
Note that I understand that RPHYX is basically a bond fund, but because it is exploiting a very narrow and specialized market niche I also consider it a "cash/conservative fund" for my purposes.
Today, I note, the 10-year is up to 2.98%, virtually 3%. Can it get much higher than 3% or 3.1%? Uncle Jeffrey Gundlach thinks not. He's not the only one. I don't trust him implicitly, but I do think that in general, he knows what he's talking about. Is he full of himself? Maybe. I don't really care. Kinky Friedman is intelligent, talented and funny--- and full of himself, too.
...OJ, I hope you're correct, that "most of the damage has already been done" re: bonds. I held a particular bond for 10 years until last July, when it matured. I was getting 5.68% but now, where can you find a rate like that? Nowhere. It does please me that YIELDS on EM bonds are back up, so my reinvested pay-outs are buying a sliver more, each month, month by month. I'm suffering through the current days in which SHARE PRICES on bonds have swooned--- for the sake of deliberately creating a decent income-stream with them. I'm still 3 years away from early Social Security at 62.
Will normal, standard portfolio turnover not take care of some of the source of my malaise? My portfolio is actually anchored by two funds. The PREMX is one. MAPIX is the other. I have invested a great deal of what I have as expeditiously as I could, not having any control over when a lot of inheritance money would fall into my lap. I just consider myself fortunate that such $$$ is in my possession.
If I NEVER cash-out, and leave the whole kit and kaboodle behind me, that prospect does not---strangely--- make me feel bad at all.
For the time being, wifey's job and my small pension are "getting it done," together. S.S. will add some comfort and more money to play with, to have a good time with--- when the day finally comes.
Your counsel is deeply appreciated. But even the words we use and how we mean them means that different expectations and standards are at work for each and every one of us. Point well taken. Thanks!
Bummer.
It depends on what your definition of is is. In all seriousness, I don't know - maybe if you have more than a certain % of turnover yearly?
" what defines the long? Twenty years? 10? 5? Pick a number, and someone is sure to be using it. At what point is someone then trying to "time" the market?"
I'd say long-term in this day-and-age is 3-to-5 years.
Excellent response by OJ.
In terms of Max, I continue to think that having funds at the fund companies makes it harder to move things around/diversify further.
In 2007 I had a 6-mo CD that yielded something like 4.5%. Now one yields around 0.045% lol.
I think your bet on Asia is fine, but I think that is going to go through periods of underperformance. I think if someone wants to invest heavily in one thing, whether small (a particular company) or broadly (a particular region), that's fine, but you just have to be willing to put up with periods where it's out-of-favor. If not, then you have to diversify further globally.
As for bonds, my view for a long while was that this would happen, but I think I could not have guessed that it would happen in the fashion it has. I could say that most of the move has probably already happened in bonds, but maybe not - I continued to be surprised by the move and I think if the 10 year gets to certain levels, you could see a quick, further moves.
Good comments by everyone. Not inclined to add more. Have always felt that once you outgrow the "growth" stage of investing in the younger years, it really becomes mostly an allocation question. A few tweaks here and there. Occasional rebalancing. But, by and large an allocation issue. And yes - more to Max's point: A broadly diversified portfolio will ALWAYS lag a more focused one - provided the more focused one is in the hottest sectors.
Max, I can't add much to the great responses you've gotten, but not being diversified and putting a majority of your chips in a very volatile region like Asia or any emerging market, bonds or stocks, will always produce a bumpy ride. There could be years where your portfolio is in favore or years out of favore. Especially if your conviction is not to tweak anything when trends start to turn. Sorry if this is 'preachy' because I know you've heard it before.
Malaise? I would probably have malaise if my portfolio was not doing what I expected. But so far, YTD I am ahead of my benchmark TRRAX, the TRP target date fund that is around the 60:40 mix of equity/fixed income. And I've been able to do it with holding about 40% equity most of the year. I believe it's because I'm diversifide pretty well. So if I look at it that way I guess I can't complain - or have malaise. Would I like to be closer to the S&P500 YTD? Of course, but that isn't my benchmark or what I expect.
I guess that kind of brings up the question Max, what is your expectation for your portfolio mix? Do you expect higher returns then just a conventional balanced fund - like MAPOX, with a bit more volitility? Do you have something to measure against to know your allocation is not out of wack from your expectations and risk tolerance?