Broken Arrow: Sound familiar?

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Mr. Tuttle agrees that nations like Brazil, Russia, India and China should do well over the long haul. But he worries that these stock markets have gained between 50% and 100% this year, saying that "those types of numbers aren't sustainable...I would wait for some sort of pullback."

It appears that someone else thinks I should get off the wave and the ride is over. It was a good ride.

emerging-stock-markets-are-looking-better: Personal Finance News from Yahoo! Finance

Good luck though and I hope the wave continues for you. Just paddle out to me when you get off or get swamped.

[Broken Arrow]

Hehe, yes it does sound very familiar. It's exactly the same short-term forecast that I've written about here as well (for trading), which is the specter of a double-dip recession.

But if that does turn out to be the case, then nobody wants to be caught long on anything. And I mean anything, including defensives and negative beta stuff that has also failed during the first dip. Mega-cap dividend stocks, precious metal, oil, even treasuries.

Let me also add that I'm no permabull. I mean, passive investment-wise, I am buy-and-hold (and actually, that's run up quite nicely so far), but trading-wise, I will go in any direction that I need to go. Powershare Ultrashorts are not out of the question either. It just depends on the market.

Finally, for people who are investing passively, the same quote also stated that these foreign markets should do well in the long haul. So, to help keep it in perspective, this is a short-term speculation.

[wincrasher]

I like what Cramer says - he makes a distinction between investing and trading.

Trading is surfing these waves. Nothing wrong with that, but it's not investing.

[jIM_Ohio]

I just re-did Roth for wife

Her Roth and Rollover is in 9 funds (all T Rowe)

rollover is in global tech
Roth is in Emerging markets, financial services, global real estate, science and tech, new era (natural resources), health care, growth, value and africa and middle east.

Wife contributes $50 to each Roth fund, with an extra $50 overweight to 2 funds. The two funds I had overweighted for 2009 were Global real estate and financial services.

Financial services did real well last 12 months, so I stopped contributions to that and redirected that money to health care (so health care is now a $100 overweight) and also started $50 to Africa and Middle East, which has done poorly over last 12 months.

$50/month is going to all funds until each hits 10k balance.

Basic strategy is to always direct more new money to sectors which are not doing well (buy low). No sell strategy yet, I will figure that out when we hit 10k in each fund, plus 100k total balance.

If people here are not familiar with my investing situation, know that my wife's IRA balance is less than 10% of our overall portfolio value, so we are being relatively aggressive with this money. My blog has my holdings in it.

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BA,

Well, I"m not waiting for a pullback. I"m jumping off. To those who may ride further on the wave, no hard feelings or jealousy.

[Broken Arrow]

Ok... um... you know, that's no problem! Just... maybe it seems a bit strange that the same bearish analyst or manager you've quoted also said to wait for a pullback....

But maybe you mean to selling everything to wait for the pullback, and then buy back in? Because I most certainly did that back in 2008, and I wouldn't be above doing so again. My passive accounts took a hit then, but not my trading account, because I was on constant hair-trigger to sell everything (in that account).

Ah... but unlike 2008, where you could wake up every morning and maybe 7 times out of 10, you can bet correctly that the market has gone down again, today's market climate isn't anywhere as chilly. I am keeping watch on the possibility of a double dip, but I think it's too early and my crystal ball is way too cloudy to be sure of that.... A pull-back to lock in some profit is a reasonable speculation though, but that isn't the same beast as a double dip.

Given the current circumstances, with volatility still nowhere near winter 2008 levels, I've decided to hold with my current defensives. All of my long trading positions are quality companies with decent upside potentials in oil, healthcare, and everyday consumables. Plus, they also pay between 3.5% to 4.5% dividend, and have the balance sheet to sustain that if they wish....

Or do you mean jump off as in never touching any markets again? Maybe just savings, CDs, or buying burying silver coins in the back yard? I guess I don't know what you mean by jumping off as opposed to pull-back.

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Well, JimOhio did get me thinking. At first I dismissed owning healthcare stocks but I am not one to be so stubborn to think my analysis deserves a second look.

Yes, I am a silver bug and I'd hate to get out of that market. But, using my own logic. . .silver is up 100% in one year also (or nearly). . .so what's good for the goose. . .you know.

An interesting portfolio for me right now might be 33% healthcare (stocks! ugh!), 33% silver and 33% residential REIT.

I'll have to think about that one.

I just executed my trade on JAOSX. IT will settle at the end of the day. Maybe I'll consider that over 50/50 silver/REIT.

PS: It's not that I am never touching stocks or bonds again. . .I just think the whole market is one big train wreck. Look.. . .the first book I ever read was Kiplingers Guide to PErsonal Finance back in 1993ish. It inspired me to take an interest in investing.

It was the basic pyramind style of investing/portfolio construction and they said, "The stock market may be up 15-20% in one year and maybe down 8-12% in another year but overall, this is where you put your dough".

Now. . . 15 years later. . .that has evolved to up 100% one year, down 60% the next year, down 30% the following, back up 50%.

Couple that with Peter Lynch"s Magic "7%" number. . .his thesis (I beleive it was him) states that after a 7% return, the reward goes up geometrically but the risk exponentiates.

So, if you believe that (and maybe you don't). . .what do you think the risk is, to my money, and it is my money, of a 100% return, Broken Arrow, in 11 months?

PErsonally, I think it's astronomical. I make moves now more on downside risk vs, upside potential (except silver - I admit I a bit emotional on that )

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Or I'll put it 2 other ways:

1. I don't understand what's going on and why I should be in something I don't understand

or

2. As Elmer Fudd said, "There's something vehhhhhwee scawooweee goin on here."

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BA:

And you are supposed to say:

"Could be you, doc!"

[Broken Arrow]

Eeeeeeeeh, what's up Doc?

I don't believe in dismissing anyone because they could be on to something.

But... what is your thesis or logic behind silver? Because it's up 100%, therefore... hold it? I don't mean to be rude, but that doesn't seem... logical.

Actually, if I recall correctly, the original trade was with SLV, and the 2009 YTD on it is +44.2%. A tremendous gain by any measure, but it's not 100%....

Precious metal has had a really good run due to inflation scare, but it's running into tight resistance now. Gold (the precious metal standard) ran up to $1030 per oz before being pulled back and is now fighting the $1000 level. In other words, the only way it's going to break out and run is if inflation runs amok. Sure, it's possible, but even 50% is a pretty big bet on that....

So, if it's a trade on inflation, I say selling anywhere above $1000 would be great, but it's time to get off the train or at least take some off the table.

The funny thing about silver is that it's also a production material, and it's funny because this side of the story is correlated to the stock market! China is apparently one of the biggest buyers of silver, because it's a raw material in a lot of production goods. However, if the general economy suffers, then so do basic material demands, which includes silver. I don't know if that's the story or not, but it's interesting to see that, lately, SLV has been a rather close bedfellow with the rest of the stock market.



I have seriously looked into SLV. I really have. I think it has better potential than even gold, though copper would be even better if it wasn't already over-priced.... But between losing steam on the inflation run and yet, questionable demand from China, it's just not something I can commit my money into....

Of course, it doesn't matter what I or anyone else say about it, does it? I mean, if you like SLV and you want to buy it and hold it, then... there really isn't anything to discuss. Well, I can certainly leave it alone, though I do think it's kind of dangerous to get too attached to our investments. Sure, it's important to like what we buy, but not enough to have it cloud us such that selling is never an option. Not in trading anyways.

[Broken Arrow]

Now. . . 15 years later. . .that has evolved to up 100% one year, down 60% the next year, down 30% the following, back up 50%.

Couple that with Peter Lynch"s Magic "7%" number. . .his thesis (I beleive it was him) states that after a 7% return, the reward goes up geometrically but the risk exponentiates.

So, if you believe that (and maybe you don't). . .what do you think the risk is, to my money, and it is my money, of a 100% return, Broken Arrow, in 11 months?

PErsonally, I think it's astronomical. I make moves now more on downside risk vs, upside potential (except silver - I admit I a bit emotional on that )

Well, I think the numbers you are looking at is for very long term growth, typically up to 30 years, and it's used to simplify monte carlo simulations and future planning.

But yes, I do think such numbers are both a bit out of date, and a bit optimistic in planning terms.

However, none would deny that the stock market is a volatile place, and that's why they would also tell us to diversify properly.

To be fair, commodities have just as been volatile, if not more so, than the stock market. Plus, it's harder to diversify with commodities.

I would also say that there is typically a correlation between risk and gain. In short, anything that can double within a year can also half within a year. And while that may be an acceptable risk, it is risky nonetheless, especially if we don't really know why....

But mostly, I just wanted to say that the stock market isn't as bad off as it may seem. This, of course, depends on how you look at the time frame. Certainly, it will mean very little to those who are planning to retire in the next 5 to 10 years, but for the rest of us:

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I am reminded of hte Monty Python skit where the guy walks in and says, "Yes, I"d like to have an argument." LOL. I'm sorry if I am doing that.

YOur graph actually makes my point. . .how can that stock market just keep exponentiating? It's reminds me of an explosion or an orgasm. . .something is going to happen to bring it to an end (think of what happens to the penis after sex only skip the afterglow).

Look. . .I just read an article today.

Let's say 10 years ago savingadvice.com was here and they asked the Pundits and Me for advice. YOu give the 100 - you age = % stocks advice. . .standard stuff.

Or they follow my contrarian advice (eitehr uber-conservative or ultra-aggressive) of buying a 10 year US Treasuries (not sure about precious metals) and they are up 4%.

Following you, they haven't even broke even.

You may say, "Well, Scanner, you hae to think long term."

But gee whiz. . .what is long term? I thought 10 years was long term. It used to be.

What? Now, thanks to the Centrists. . .we are supposed to wait 20 years?

As far as silver, it's the depletion of inventories and the fact many mining operations that went bust during hte economic contraction that makes me refuse to part ways with it.

[jIM_Ohio]

Scanner- here is what I would do

if I am sitting on 100% gains in anything, I know they would not last- for example my wife's financial services fund is up around 30-50% (her performance, not the funds). I know that could not be sustained, so I stopped contributing to it. because its $2500 of a $15000 account, I am leaving the money in the fund, but not going to add more shares just yet (most other funds in the IRA are less than $1000).

In your case, do you know your basis on silver?

Assuming you have 300k total in investments, and its 33-33-33 as the 1/3 allocation (100k in silver)... if you invested 40k to get the 100k, why not take 20k, 40k or 60k profit.

No one ever went broke selling at a profit. I've read that in more than one place. By selling a portion, you are locking in a portion of your gain.

My advice would be to sell back to basis (if basis is 40k, sell all but the basis) meaning if you have 100k in account and basis is 40k, you have 60k in profits and you are letting your original investment ride.

What you put the new money into should not be considered until you decide if the advice to sell is right for your situation or not.

[Broken Arrow]

Hehe, my mind is still on Bugs Bunny, but OK.

YOur graph actually makes my point. . .how can that stock market just keep exponentiating?

Um, by a growing population with growing needs? And markets abroad that have yet to fully mature? Plus, there are always new industries that may spring up as technology and standard of living progresses?

Arbitrarily, it is indeed possible for the markets to fall, but it's also possible that it can climb some more, and based on the potential listed above, I'd argue the latter is much more likely....

Fundamentally, there is no rule that says we're currently at an unsustainable level. I don't mean short-term speculations here. Besides, we've already peaked higher at Dow 14k before, so in some sense, we're not talking about theory either. I mean, even Tuttle, the guy you quoted, thought the long term prospects of the market is good, but to just watch out for a temporary pullback.

Let's say 10 years ago savingadvice.com was here and they asked the Pundits and Me for advice. YOu give the 100 - you age = % stocks advice. . .standard stuff.

Or they follow my contrarian advice (eitehr uber-conservative or ultra-aggressive) of buying a 10 year US Treasuries (not sure about precious metals) and they are up 4%.

Following you, they haven't even broke even.

You may say, "Well, Scanner, you hae to think long term."

But gee whiz. . .what is long term? I thought 10 years was long term. It used to be.

What? Now, thanks to the Centrists. . .we are supposed to wait 20 years?

Well, there are a couple ways to look at this. First, you're cherry-picking the time frame that best suits your argument, but I can also pick a different time frame where the markets have done far better. But if I were to do that, I too would be guilty of cherry-picking.

It's also worth noting that, from a trading perspective, you can make money regardless of what direction the market goes in.

As for the "next 20 years", I don't know about you, but YES, I DO plan to live into the next 20 years and more! I'd like to even retire some day, and I know I'm going to need money when I get there.

So, what's wrong with looking at investing from a 20 or more years time frame? Of course, that's long term planning and investing, and that should never be confused with short term speculating and trading.

Well, please feel free to do what you want, but I've laid out what I think are reasonable premises for short-term speculation and long term investing concepts. I'm not sure why this is hard to accept. I suppose we'll just have to agree to disagree then.

Seriously, I'm not against you or anything, and I don't mind changing my thinking, but I really do need some proof or at least a reasonable thesis to be convinced otherwise. I'm sorry, but I just don't see it in this thread....

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Um, by a growing population with growing needs? And markets abroad that have yet to fully mature? Plus, there are always new industries that may spring up as technology and standard of living progresses?

I would say our American population has perhaps grown geometrically but not exponentially the last 100 years (the world probably grew at a faster clip.) Besides, the stock market is about businesses, not people. Has American business exponentiated? hmmm. Maybe.

Can it keep exponentiating? I doubt it.

I am not sure what the standard of living has to do with stock market growth. I think that has more to do with the rise of cheap oil/energy.

Okay, long term isn't 10 years anymore. . .it's 20 years. . .yet. . .if your recommend the "Target" strategy more or less (stocks slowly converting to bonds). . .what if you, A Centrist Pundit, told someone in 1999 to buy a 2020 Target Fund?

Now. . .it's 2009 and that theorectical person, suffering at the hands of savingadvice mainstream, centrist advice, now owns 50% stocks and 50% bonds (probably near that). How are they ever going to make the gains that they lost by going with "stocks/bonds"? The portfolio is buying high (in 1999) and selling low (today) to buy bonds, which will probably only go lower.

N'est pas?

The answer is I think they'll be lucky to break even in 2020, maybe make 2-5% if bonds rally in late part of the next decade.

Or am I just extrapolating a time period to make a point? Cherry picking?

They didn't even outpace that worrisome bug you all worry about - inflation

Look. . .all I am saying is that I think we need to evolve beyond the stock/bond portfolio we continually advocate here if the stock market is going to be up 50%, down 40%, up 60%, etc. There's nothing to justify that kind of erratic behavior.

There's something vehweee skawoowee goin on.