Investments

[Heisenberg]

Wrong bro. This trader uses stop losses and market timing, on all assets.

And don't believe 1/10th of the nonsense you see posted in here about professors giving speeches.

Ever hear of William O'Neill, or the Investors Business Daily newsapaper? Pretty successful guy, I think you would agree.

His number one rule is a 7% stop loss on any stock or mutual fund....and believes dollar cost averaging is for the birds.

But who is he, to question the buy and hold guys, now down nearly 50% from the market top?

Stop acting like investors - especially people such as myself who won't retire for a LONG time have "lost" anything.

The only way we have lost anything is if we were to take that money out now - the only thing that matters is the value of these investments 30+ years from now.

[techboy]

Market close to a big leg up. Didn't think it would happen for another few days, but we are now low enough to dip the toes in again.

Down another 5%?

I agree wholeheartedly. It is extremely likely that the market will go either up or down again tomorrow.

[TMat184]

.

The only way we have lost anything is if we were to take that money out now - the only thing that matters is the value of these investments 30+ years from now.

This is a very good point. Capital gains/losses aren't realized until the actual investment is cashed in.

[McD5]

Stop acting like investors - especially people such as myself who won't retire for a LONG time have "lost" anything.

The only way we have lost anything is if we were to take that money out now - the only thing that matters is the value of these investments 30+ years from now.

Absurd. Total loser's mentality, just put your head in the sand....it will get better.

so the Lehman brothers shareholders, the ones that bought at $66 a share less than a year ago....if they don't sell at .06 cents a share today, they haven't lost anything?

How about the Madoff investors? They haven't sold yet either. Have they lost anything?

[techboy]

so the Lehman brothers shareholders, the ones that bought at $66 a share less than a year ago....if they don't sell at .06 cents a share today, they haven't lost anything?

An excellent example of the uncompensated risk of buying individual stocks. You're coming around.

[TMat184]

Absurd. Total loser's mentality, just put your head in the sand....it will get better.

so the Lehman brothers shareholders, the ones that bought at $66 a share less than a year ago....if they don't sell at .06 cents a share today, they haven't lost anything?

How about the Madoff investors? They haven't sold yet either. Have they lost anything?

You really deal in extremes don't you?

[Heisenberg]

Absurd. Total loser's mentality, just put your head in the sand....it will get better.

so the Lehman brothers shareholders, the ones that bought at $66 a share less than a year ago....if they don't sell at .06 cents a share today, they haven't lost anything?

How about the Madoff investors? They haven't sold yet either. Have they lost anything?

That would be the case if I only invested in one company or one fund.

I'm pretty sure even a 1st grader would understand by now - anyone who diversifies their portfolio would not see losses like this unless the entire market collapses - again, if that occurs even your genius day trading won't help you so it really doesn't matter.

Since it's not likely the entire market will collapse there is no reason to believe young people should worry about their retirement investments - and the older investors should have been moving their money to lower risk investments as time passed if they were doing it properly.

You very well may make good money with your short selling but based on your posts I refuse to believe it's due to anything but dumb luck.

[Hubbs]

I agree wholeheartedly. It is extremely likely that the market will go either up or down again tomorrow.

*snicker*

By the way, anyone who's read this entire thread and can't see that McD5 deals in nothing but the most extreme individual examples is a total, complete, and utter idiot.

Similarly, anyone who invests their entire wad in a single company or industry is a total, complete, and utter idiot.

But of course, we've been trying to tell McD this for several pages now.

[McD5]

Stop acting like investors - especially people such as myself who won't retire for a LONG time have "lost" anything.

The only way we have lost anything is if we were to take that money out now - the only thing that matters is the value of these investments 30+ years from now.

I am really just trying to open the eyes of investors that are angry, and rightfully so for what has happened to them over the last ten years, and to debunk some of the bs out there in the investing world. To help people that might take interest in their financial future.

Your first statement is incorrect. If you are in a market index fund, you HAVE in fact, lost roughly 10% in the last week alone.

Now whether you decide to sell and realize that loss.....or hold and hope that it comes back up in time, the loss is still there this moment.

Whether you sell or not, the loss is very real. It is in your account.

Your second statement is also another widely quoted belief instilled into the minds of investors by mutual fund companies. To an extent, it is also untrue.

Here is another thing that mutual fund companies will never tell you:

Over 77% of Americans take premature distributions from their retirement accounts. Don't think for a second that you aren't going to need that money before retirement. The odds are very great that you will, and with the way the economy is going, that 77% figure is more likely going up to the mid 80s, if not higher.

Maybe you get married, and need to pull out 10k for a wedding.

Maybe you get divorced, and need to pull out much more than 10k.

In this economy, maybe you become unemployed at some point in your life, and need to take a distribution to live on.

Maybe you take money out of an IRA for a home purchase. Roth IRA's are wildly popular for this feature.

Regardless of the reason, there is a nearly 80% chance that you will be pulling money out early.

So don't fall for the trap that you won't need that money until retirement. Mutual fund companies like to pitch that idea to you in an effort to turn you into a client for life. A nonstop source of commissions for them, even though they are aware that you are likely going to need at least a substantial portion of that money long before retirement.

If people were aware of that fact, they wouldn't be so willing to buy into the buy and hold, everything will be fine, don't check your account statement, almost robotic brainwashing.

[McD5]

An excellent example of the uncompensated risk of buying individual stocks. You're coming around.

Agreed. Diversification is important.

Figuring out the direction of the market, which accounts for 80% of a stock's direction, is even more important.

[McD5]

You really deal in extremes don't you?

That is an extreme example, but a good analogy. Whether you sell tomorrow or not, the loss is there.

[McD5]

*snicker*

By the way, anyone who's read this entire thread and can't see that McD5 deals in nothing but the most extreme individual examples is a total, complete, and utter idiot.

Similarly, anyone who invests their entire wad in a single company or industry is a total, complete, and utter idiot.

But of course, we've been trying to tell McD this for several pages now.

A. I don't invest money into a single company.

B. Those are strong words coming from someone considering playing texas hold em for a living.

I practice the safest of money management. I don't tolerate losses.

[McD5]

Nortel files for bankruptcy today.

Motorola lays off another 4,000 workers.

Steve Jobs, surrounded by rumors of pancreatic cancer, steps down from Apple until at least June to concentrate on his health.

Citigroup drops 24% alone today, as it tries to sell off assets quickly.

Bank of America, which recently bought Merrill Lynch out for $30 a share, goes back to TARP begging for more money. While at $35 per share when the buyout was made, shares of the combined companies now go for $9.50 per share.

Now.....to the average investor, these seem like a lot of reasons why the market went down today. Certainly this explains it, very logical.

In reality, these events had little, if anything to do with the market going down today. In fact, even if none of those events had taken place, AND we had captured Bin Laden, the market was still going down 250 points or more today.

Knowing why, is what separates the people who lost money over this past week, from those that made money on this large drop.

It was easy to see well ahead of time.

I mentioned it in this thread last Thursday, shorting stocks at the exact top, and covering them today, with the market down another 300 points. So how did I know this......and how did I profit from it?

Here is a report from the top technical analyst in the country, published by a PHD, last evening, Tuesday, about exactly what would happen to the stock market on Wednesday.

The Daily Full Stochastics suggest the short-term decline that started a few days ago has a few more days left in it. It may have another week left in it. But we believe it is corrective, inside a larger degree rally leg.

There was a very small change in the McClellan Oscillator Tuesday, suggesting a large price move is coming either Wednesday or Thursday.

Wake up people. Stock charts to an investor are akin to x-rays for a Doctor.

To not learn them, and to hope and pray, a strategy that has lost yet another 10% in the last week is wild gambling.

[techboy]

One is led to wonder why said PhD, if he really knows what the market will do with such certainty, and how to profit from it, would choose to share that information rather than simply making a billion dollars with it and becoming the next George Soros. Especially since, if he knows the markets, he also knows that the more people that know, the less he himself can benefit, as the trading of others dilutes the effect.

Could it be that this newsletter is not free?

[Fergasun]

Why not take half your money and invest it like techboy; and half of the money and invest it like McD5? I don't get why both of you have to castigate and war over strategies and such.

techboy,

Do you ever deal with options?

McD5,

I'm guessing you deal with options.

Notice anything violent about options expiration? Or anything funny with companies moving their earnings reports *up* to the day before options expiration?

Does everyone realize that the stock indexes don't track the same companies over time?

I'm starting to think its a better bet that x company will fail in the next 20 years instead of succeed.

All of the "gains" in housing and stock market are directly related to inflation...

Don't worry, you too can be a millionaire doing exactly what other millions of Americans are doing. You all are using the same strategy of investing in similar or the same "strong" companies. So what happens when some folks want to retire and spend the gains?

I'm sorry, but the more mainstream stocks become the less value they have. Now maybe we just went through the great devaluing we needed to shake some of the people out; or maybe not. But when everyone thinks they can all follow Warren Buffet's strategy to get rich... just like everyone thought they could flip houses to become rich... or everyone thought they could invest with Madoff and become rich...

Great investments are things that make you happy, like family and friends... things that will be with you forever... not paper... (or even gold).

Compounding interest rocks my socks!

[McD5]

One is led to wonder why said PhD, if he really knows what the market will do with such certainty, and how to profit from it, would choose to share that information rather than simply making a billion dollars with it and becoming the next George Soros. Especially since, if he knows the markets, he also knows that the more people that know, the less he himself can benefit, as the trading of others dilutes the effect.

Could it be that this newsletter is not free?

Great question. I have been managing money for 18 years, and have tried literally just about every system, subscription, black box and trading system on earth. Literally.

98% of them are total bs. Just there to generate fees for subscriptions.

This PHD imparticular, is simply the best I have ever seen.

He is becoming famous right now for predicting a Dow 7,500 within one week of the actual date of occurence, when the Dow was trading at 13,000.

He also called the exact date of the November low three weeks ahead of time, stating "the market should rally nearly 1,000 points on this specific day alone."

The Dow closed up 950 points on that exact day...following weeks of relentless selling.

And, surprisingly, the newsletter is as close to free as possible. The first month is free, requires no credit card, and doesn't send you junk mail. After that, it is roughly $10 a month. You talk about refreshing.

The PHD is pretty religious, his results are well-documented, and he recently donated $150k of personal trading profits to a charity weeks ago.

This donation was one of many.

I have watched the guy for 16 months now.....and was skeptical to say the least. About three months into watching his daily, weekly and monthly predictions, I had seen all I needed to see.

[techboy]

Why not take half your money and invest it like techboy; and half of the money and invest it like McD5? I don't get why both of you have to castigate and war over strategies and such.

I'm not castigating. McD5 is free to do as he pleases. The answer why not, though, is that the data shows market timing is a bad idea. Why invest half of your money in a sub-par manner? 9.5 trillion dollars is a lot of money.

techboy,

Do you ever deal with options?

No.

I'm sorry, but the more mainstream stocks become the less value they have.

I'm sorry, but this is simply wrong. In the long term, the value of the stock market will be determined by GDP+dividends+inflation. Unless you're suggesting that our economy is going into the tank, permanently, and all the companies in the market are going to go belly up, stocks will always be a good long term investment. There will always be companies that require capital, and investors will always demand a premium for their risk.

Compounding interest rocks my socks!

This much is true.

[McD5]

Why not take half your money and invest it like techboy; and half of the money and invest it like McD5? I don't get why both of you have to castigate and war over strategies and such.

techboy,

Do you ever deal with options?

McD5,

I'm guessing you deal with options.

Notice anything violent about options expiration? Or anything funny with companies moving their earnings reports *up* to the day before options expiration?

Does everyone realize that the stock indexes don't track the same companies over time?

There is nothing wrong with what techboy does....as far as mutual funds go. They are a decent vehicle for the most part. Nothing is perfect, and they certainly have faults.

My point of dispute is with the buy-and-hold, or the belief that even the simplest market timing strategies, like using stop losses on any investments, cannot benefit investors.

I am living proof. Just trying to help people.

Yes on options.......I mostly sell them to generate monthly income. Yes on the replacement of companies in indices.

Whenever a company totally craps the bed....like Bethlehem Steel, they pull it from the dow.

This is done in an attempt to keep the dow looking good.....to keep it going higher.

[PeterMP]

Now.....to the average investor, these seem like a lot of reasons why the market went down today. Certainly this explains it, very logical.

In reality, these events had little, if anything to do with the market going down today. In fact, even if none of those events had taken place, AND we had captured Bin Laden, the market was still going down 250 points or more today.

Knowing why, is what separates the people who lost money over this past week, from those that made money on this large drop.

It was easy to see well ahead of time.

I mentioned it in this thread last Thursday, shorting stocks at the exact top, and covering them today, with the market down another 300 points. So how did I know this......and how did I profit from it?

Here is a report from the top technical analyst in the country, published by a PHD, last evening, Tuesday, about exactly what would happen to the stock market on Wednesday.

The Daily Full Stochastics suggest the short-term decline that started a few days ago has a few more days left in it. It may have another week left in it.

But we believe it is corrective, inside a larger degree rally leg.

There was a very small change in the McClellan Oscillator Tuesday, suggesting a large price move is coming either Wednesday or Thursday.

Wake up people. Stock charts to an investor are akin to x-rays for a Doctor.

To not learn them, and to hope and pray, a strategy that has lost yet another 10% in the last week is wild gambling.

I thought the market was going to close "to a big leg up" at 12:12. Now you are telling us from a news letter from last night saying it was going to continue to decline over the next couple of days, how's that make sense, which is it? (I'm assuming that wasn't a "big leg up" today).

I'd suggest you seriously take a step back if you are buying stocks based on the suggestions of somebody who takes Elliot wave theory seriously.

[Fergasun]

mcd5,

I mean... I've been following housing market (and started branching into the economy).

It seems like the difference in strategies is time-horizon and loss. I agree with you that it is really foolish to hold onto an investment as it keeps dropping, 5%, 10%, 15%. I started doing some trading, and wow... I think that must be the first lesson I just learned! Even if it is a good investment, there's not really a great point in sticking with it through the losses. So if it has some momentum down... why not jump out at 5% and see how it performs before jumping back in?

At the same time; you can pick up really great investments and hold them over the long run... however I think most people don't understand this... of course it is *easier* to buy and hold. Honestly, it was hard for me to open up a brokerage account, but when I did... wow... flexibility in where I can put my money. I'm not exposed to cash as much if I was just putting it in the bank (well being exposed to cash has been good for a bit, right?).

Of course, now I opened up an options account and haven't started trading in that yet... but think it is another good investment vehicle... and also will hope to do some trading in a margin account in order to go short on companies (or ETFs). I'm intrigued by the strategy of shorting shares of the ultralong or short ETFs (although I'm not sure that shares are always available for shorting... wouldn't surprise me)

[techboy]

I thought the market was going to close "to a big leg up" at 12:12. Now you are telling us from a news letter from last night saying it was going to continue to decline over the next couple of days, how's that make sense, which is it? (I'm assuming that wasn't a "big leg up" today).

I'm telling you, McD5 is spot on. The market almost certainly will end the day either up or down. And he doesn't even charge for this info!

It seems like the difference in strategies is time-horizon and loss. I agree with you that it is really foolish to hold onto an investment as it keeps dropping, 5%, 10%, 15%. I started doing some trading, and wow... I think that must be the first lesson I just learned! Even if it is a good investment, there's not really a great point in sticking with it through the losses. So if it has some momentum down... why not jump out at 5% and see how it performs before jumping back in?

Allow me to repeat why not:

From How to lose $9 trillion in a bull market: That's what bad timing cost investors over the past 25 years. But you can learn to avoid a similar fate, by Jason Zweig. Excerpts:

An inconvenient truth

An accounting professor at the University of Michigan named Ilia Dichev has cracked the case, and his findings, published recently in the prestigious American Economic Review, have huge implications for how you should invest.

I've written before about the gap between the returns reported by mutual funds and the money earned by their investors. Reported returns almost always look better than investor returns because people pile in after a fund gets hot and then sell or freeze after it's gone cold.

What Dichev's research shows is that the same thing holds true for the stock market as a whole.

By looking at how much money was flowing into publicly traded companies through initial and secondary stock sales and how much was flowing out via dividends, buybacks and buyouts, Dichev was able to measure the return on the typical invested dollar.

So what about that $9.5 trillion? "The money did not disappear," says Dichev. "It was never there in the first place." In other words, reported long-term returns aren't historical, they're hypothetical.

The U.S. stock market was never worth $28 trillion. That 13.3 percent "average" return was only for a strict buy-and-hold investor, a description that hardly applies to the big institutional players that move the stock market.

Consider that between 1973 and 2002, Nasdaq stocks gained an annual average of 9.6 percent. But that assumes money was invested on Jan. 2, 1973 and stayed put until Dec. 31, 2002 (with no taxes paid on the gains).

In reality, because investors pumped $1.1 trillion into Nasdaq stock offerings between 1998 and 2000 - just before the worst crash in modern history - the typical dollar invested in the Nasdaq earned only 4.3 percent a year, less than half the historical return.

Anyway, here's the paper, with free pdf download.

The abstract:

Abstract: The existing literature typically does not differentiate between security returns and the returns of investors in these securities; usually implicitly, these two concepts are assumed to be the same. However, the returns of stock investors depend not only on the returns of the securities they hold but also on the timing of their capital flows into and out of these securities. This paper suggests a new and more accurate measure of stock investors’ historical returns, which involves dollar-weighting of the returns and properly reflects the effect of investors’ timing. Theoretically, the essence of dollar-weighted returns is that they value-weight both the cross-section and the time-series of returns. In practical terms, dollar-weighted returns are computed as internal rate of returns (IRRs) from investment projects in which initial market values and contributions from investors (e.g., stock issues) enter with negative signs, and distributions to investors (e.g., dividends, stock repurchases) and final market values enter with positive signs. The empirical results indicate that aggregate dollar-weighted returns are systematically lower than buy-and hold returns. The annual difference is 1.3 percent for the NYSE/AMEX market over 1926-2002, 5.3 percent for Nasdaq over 1973-2002, and averages 1.5 percent for 19 major stock markets around the world over 1973-2004. Thus, this study provides comprehensive evidence that stock investors’ actual returns are considerably lower than those from passive holdings and from those documented in the existing literature on historical stock returns. These results have implications for the debate on the equity premium, for the literature on long-run returns following capital flows, for building successful investment strategies, and others.

Emphasis mine. Some other excerpts:

These results have a number of implications. The most obvious one is that stock investors’ actual historical returns are lower than existing estimates based on buy-and-hold specifications.

For example, the annualized buy-and-hold return on Cisco’s stock since the initial public offering in 1990 until the end of 2002 is 48.7 percent, indicating a truly extraordinary performance. However, Cisco’s dollar-weighted return over this period is only 11.7 percent.

For example, one puzzling finding in

the existing literature is that most investment managers underperform the market (measured as buy-and-hold returns), which questions the value-added of professional investment management.

Again, this study's period covers exactly when, if market timing worked, it should have. It's about the worst scenario one can imagine for buy and hold: it starts right before the worst Bear Market in ages, so the "hold" held it down 50%, and it ends right after another horrible drop in 2002 (tech bubble pop plus 9/11). And yet buy and hold still outperformed.

What you say might make sense on the surface (especially with McD5's made-up numbers), but in practice, it just doesn't work that way.

[PeterMP]

I'm telling you, McD5 is spot on. The market almost certainly will end the day either up or down. And he doesn't even charge for this info!

Well, it can do a 3rd thing. It can not change, which I think it might have actualy done yesterday afternoon.

[techboy]

Well, it can do a 3rd thing. It can not change, which I think it might have actualy done yesterday afternoon.

That's why I said "almost" certainly.

[McD5]

For those that continue to doubt.....that is a great thing. You should doubt and question everything.

You should also doubt and question why you are holding funds down 50% from the top.....and if that really is the best strategy going forward from here.

Later tonight, I will post past technical messages. Not only did this person call the exact top last week, and he immediately said the mkt would be down a week or more in length this time.....but he also called the rally prior to the exact date.

Here is last night's report. Sit back, and just see if this gentleman doesn't continue batting 100%. I really believe that a week from now, your jaws will drop.

One month from now....no one will question such logic.

The Dow Industrials plunged 248.42 points, 2.94 percent, Wednesday, closing at 8,200.14. We got the strong price move Wednesday that Tuesday's small move in the McClellan Oscillator suggested was coming. NYSE volume rose to 118 percent of its 10 day average. Downside volume led at 97 percent, with declining issues at 89 percent, with downside points at 97 percent, another 90 percent down day, reminding us this Bear Market is far from over. We are in a respite for a few months, but a severe decline is coming once this wave ( up pause ends, and Wednesday was a stark reminder.

The Daily Full Stochastics suggest the short-term decline that started a few days ago has a few more days left in it. Prices could drop into the inauguration next Tuesday, then wave C-up starts as the new administration passes stimulus legislation, giving hope for better days. Some high probability projections suggest the PPT Indicator could be on a pace to generate a new "buy" signal around inauguration day next week +/- a day or so.

We believe the decline over the past week is corrective, inside a larger degree rally leg. Short term indicators, the percent above 10 day and percent above 5 day have fallen to extreme oversold zero levels, and the percent above 30 day is also very oversold at 3.33. This suggests a short-term bottom is approaching. These show the Daily Full Stochastics' Fast measure has dropped to the level where bottoms occur. The Slow is not quite there yet, so a bit more downside is possible, but a short-term bottom is approaching. The Weekly Full Stochastics remain on a buy, and at a level where multi-week rallies occur, so this short-term decline, which is probably the remainder of B-down, should be measured in days, not weeks or months. The Monthly Full Stochastics are arguing there is another up leg coming that lasts several weeks. The next up leg should be wave C-up of ( up. The point here is that probably by early next week, around inauguration day, the technicals should be harmoniously set up to see a rally that lasts several weeks.

Now....disclaimer: Trade/invest on your own. This is for informational purposes only. Do your own due diligence. This is not a recc to buy or sell any specific security.

Let's see if he isn't dead-on again. Sharp, several week rally beginning next Tuesday.

Have a great day all.

[McD5]

I thought the market was going to close "to a big leg up" at 12:12. Now you are telling us from a news letter from last night saying it was going to continue to decline over the next couple of days, how's that make sense, which is it? (I'm assuming that wasn't a "big leg up" today).

I'd suggest you seriously take a step back if you are buying stocks based on the suggestions of somebody who takes Elliot wave theory seriously.

Yes, I expect a multi-week rally to begin Tuesday of next week. I booked my short profits, large in size and $$s invested, to be prudent. I am not greedy....and prefer to exercise caution.

He actually uses 17 different indicators. Elliott wave theory is only one of them.