Archive through May 05, 2008

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ody

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Saturday, May 03, 2008 - 12:20 am:

KEN: GOOD RESULT

Congratulations, Ken. You have obviously got things well and truly under control and show what can be done.

ody

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Saturday, May 03, 2008 - 07:44 am:

SWITCHING FROM SHARES INTO BONDS AND VICE VERSA

I happened to come across this on CNN, and must admit I couldn't remember having seen such an item before:
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The old 'sell in May' strategy says that if you invest in the S&P 500 or the Dow industrials during the 'best six months' (November through April) and then switch into bonds during the 'worst six months' (May through October), you'll end up with better returns than if you did the reverse. The strategy doesn't always work, but has been one of the more reliable indicators going back to 1950.

For example, $10,000 invested in the Dow during the 'best' period and switched to bonds during the 'worst' period in every year since 1950 would result in a compounded $578,413 return, according to the Almanac. The same $10,000 invested in reverse would leave you with a compounded $341.

[Note: this is based on AMERICAN results.]
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What this shows to me is that going into and out of the market, rather than staying there all the time, is obviously a winning strategy if you make your switches at the right time.

The article also argues that what has recently applied is so to speak "back to front": that the past six months have been the "worst" six months rather than, as normally, the "best". This fits in, of course, with what so many have been advocating for quite some time, i.e. that the next six months will be "the better half", during which markets will be up compared with November-May. If we bear this in mind then an April/May start for the better half would be logical this time round, and that is what we may be seeing. Often, in such cases, people get in a month or so before the "better" period is "officially" supposed to start.

All in all, a number of good stretches or sectors notwithstanding, those who were out of the market during this last normally "good" period (November-May) have been the winners, and those in the market (unless they were smart enough to choose the right stocks) the losers.

It does not follow with iron logic that the second half WILL be a better period, in that the economic situation in the US is extraordinary, with the worst financial crisis since the Great Depression. "Rules" like these, about good and bad periods, are notoriously "rough". Even so, there is every possibility that we are moving towards better times FOR THE MARKET, as that may decide to "foresee" an improvement in the economy for 2009. Certainly the last several weeks have demonstrated market conduct of that nature.

A problem is that virtually all economic pointers of importance have been so negative as to predict that the economy will need much longer, this time, to pick up. This is the quandary for investors: whether to trust the market as indicating real improvement to come simply because it is going up, or whether one should see the market as flying in the face of economic facts.

And, in all this, the view that one takes of the US is the most important one, as that has been the driving force. However, it is not as though it has been merely slavishly followed. In Australia, for example, sentiment has on the whole proved more negative in recent months than in the US, though our economic data are much superior. This may indicate either that Australian investors don't kid themselves as much as Americans, and rightly foresee troubles (the more so because we are behind in e.g. the housing cycle), OR that Australians have been too pessimistic since their great bull market collapsed during the November/December period.

One thing seems to me very clear, personally, and that is that those Americans who are pushing up their market because the Bear Stearns matter supposedly proved a "solution" are simply ignoring all negative economic pointers for the sake of their belief that this PSYCHOLOGICALLY important turning point is also a "real" one, and that inevitably the market - simply by going up - must be seen as "proving" that good times are round the corner.

While of course the belief may yet prove right in the event, one would have to say that it would be very odd for the economic indicators to be "wrong", and an unusual event for the market to be able to demonstrate that. The more normal situation would be for this to be one of those instances where the market will be proved wrong in its assessment. Many bear market rallies are exactly of this nature, with those in them always maintaining that the market is "right".

It is, of course, "right" within its own terms, as a market reality - but that does not in any sense guarantee that it is right as an INDICATOR. If that were so, the market logically would ALWAYS be right as an indicator, which is plainly at variance with the facts.

sway

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Post Number: 264
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Saturday, May 03, 2008 - 11:02 am:

Ody
I bought and read Weinstein only last year. His book was written in 1988 and is one of "the" texts for medium/long term investors and traders with a bent for technical analysis. As good as it is, I'm not inclined to type out or copy even one and a half pages to post here. Maybe your local library will have a copy?

When I started out, I was trying to digest fundamental data and broker research "recommendations" from the likes of Aspect Huntly, The Intelligent Investor, Fat Prophets, Ecinya etc and found they had really poor success rates. I decided to educate myself and started reading Austin Donnelly, Leon Wilson, Allan Hull, Daryl Guppy and most recently Weinstein and more Guppy. And yes, even Buffett. By the way, I have studied economics, finance and accounting subjects at postgrad level.

I started this discussion because I wanted to present an alternative to the endless barrage of one-sided gloom and doom, which since the start of March has looked less and less probable. I will continue to present this forum with charts and other data (bullish and bearish), but I no longer feel there is any point in challenging the conventional wisdom of the authors here.
Cheers
Sway

This is not a recommendation or advice. As they say .... DYOR.

resillent1

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Saturday, May 03, 2008 - 11:20 am:

Sway

If there is one thing I have learn't, it is that it's best to disagree with Rudy and Ody in silence.

I greatly appreciate your posts and hope you keep them coming, Maybe another thread.

The problem with Guru's is that they think their "opinion" is the lighthouse....

Yes Rudy, I'm being cynical again, but the posts on this thread when you and Ody don't agree are really starting to get up my nose!

rdumas

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Saturday, May 03, 2008 - 11:42 am:

Resillent1,

I am sorry that you don't like it when people have their own opinions which don't coincide with yours. I have yet to see Sway argue his case with any logic. My only disagreement with Sway from day one is his view that charts represent what is happening in the real economy at the current time. I have tried to get him to show why his view is correct and am still waiting for a logical reply.

You may agree with Sway's view but I don't as it totally defies logic based on the economic data that is out there for all to see.

If he were to say that those participating in the equities market make their money from the market movements themselves and not on what is happening in the real economy I would not argue against that because it is true. I do believe in many of the things that Weinstein says in his book and believe that it is one of the better texts on the subject of making money out of the market using TA alone.

The fact that I choose to provide myself with additional safety in my investments by using a combination of TA and FA suits my risk profile and those of a number of people on this thread who sit on the sidelines but message me privately. If having that view gets up your nose then that says more about you than about me. You are not forced to read what is posted on this thread. Like any other forum you just take from it that which is useful and applicable to you and scroll down through that which isn't.

sway

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Saturday, May 03, 2008 - 01:08 pm:

Resilient
Thanks for the encouragement. You might also be interested in the Dow thread here. http://forum.incrediblecharts.com/messages/6/1405685.html

Cheers
Sway

This is not a recommendation or advice. As they say .... DYOR.

eblode

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Saturday, May 03, 2008 - 02:31 pm:

Sway,

In my experience,limited tho it may be, Weinstein is heads and shoulders above the best writers on the share market. His principals,if followed, are vital to successful trading. Ody and Rudy are both absolute experts in TA analysts but the market is a constantly moving identity, it can be deadly in sudden vicious sweeps like a cobra, or lull you into feeling completely secure in your portfolio. Never take it for granted. However I too feel that too many lost opportunities are caused by a overbearing pessimistic view of our present market. I feel it is now free of the pressures of the subprime disaster and well and truly going north.
I even am willing to increase my bet on June 1st with Rudy that we may see the DOW at 16,000 by Christmas (that should lure you out Rudy) but meanwhile lets watch those banks go north, the energy companies head north, the mining companies break new ground, and by Christmas we'll all be laughing to the bank.

Eugenio

rdumas

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Saturday, May 03, 2008 - 02:39 pm:

Hi Eugenio,

You're spot on mate. That is just too good a bet to let pass by. I'll take it with both hands. If the DOW is over 16,000 by Christmas I'll gladly give you the bottle of Southern Comfort.

I am almost embarrassed about robbing you with that sort of bet but hey........ let's party.

eblode

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Saturday, May 03, 2008 - 02:59 pm:

Rudy,
You old fox. I knew that you would jump at the bait of the DOW at 16,000 but my provision was to make the bet on June 1st.It's still May. lol lol.

Eugenio

rdumas

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Saturday, May 03, 2008 - 03:32 pm:

Eugenio,

Now who's an old fox. I hope the market roars so that you are still feeling so enthusiastic on the 1st June.

ody

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Saturday, May 03, 2008 - 06:07 pm:

SWAY - INFORMATIVE RESPONSE, THANKS

I didn't mean, or say, that you SHOULD copy out material from Weinstein: only that legally you are allowed to do so. It would have been a complete waste of your time, as in the area of T/A Weinstein is just about the most congenial author to me. What I disagree with is this: 'I believe that trying to read "the economy" is a waste of time and ultimately not of any use in making money.' I think that that is demonstrably wrongheaded and untrue.

It's not, incidentally, as though some of Weinstein's basic principles were not already applied and understood in any form before he came along. It's always amusing to see how people tend to regard him as some sort of revolutionary. I'll grant, however, that he attractively systematised things that many in essence have long understood.

You certainly won't hear me sing the praises of "The Intelligent Investor", to which I have already on this thread from time to time referred as "The Unintelligent Investor"; "Fat Prophets", whose advice I have at times found quite high-risk; or even Huntleys', although I think they are rather better. It is certainly not difficult to beat THEIR (Huntleys') portfolios, however.

So I have no quarrel with you concerning those people. But I do wonder why you should bring them up? Surely you would not see them as people who have an impressive grasp of economics OR investment OR TA?

Austin Donnelly, I must confess, I have learned a lot from - a significant influence on me, especially because he early on taught me that timing does matter, and that one must be careful both before and during bear markets. Allan Hull I find a surprise on your list. However, one can learn from different people in different ways. But I still don't quite see your point. It seems that you are mainly saying that it is unwise to limit oneself to the insights provided by the people you mention as having poor success rates, such as that dreadful Intelligent Investor magazine.

Incidentally: coming back to Donnelly - his followers produce a magazine which I at one point subscribed to which also has a tendency to recommend underperforming portfolios! So although Donnelly taught me some beneficial things, that is still not to say that his methods guarantee success. Much will still depend on the ability of the individual investor. Look at all those Buffett followers who mess up.

I commend you for going beyond your original sources. Indeed, to my mind people who don't are most unwise. But I don't think of any of these as showing us that economic knowledge is unimportant, whatever their professed ideas. Also, I distrust intellectual dependence on ANY particular author, and feel that the best is to work out one's own method: the one that one is best capable of handling and successful with.

The main difference between you and me is probably that I employ a wider range of approaches, and in particular combine F/A and T/A like Rudy, rather than limiting myself to T/A. Now if one takes this at its most basic level I would propose to you that indeed the combination of T/A and F/A may at certain times have its drawbacks, but surely it is also true that those who concern themselves only with T/A or only F/A will similarly be handicapped by the shortcomings of THEIR particular approach. I think it would be very difficult to demonstrate that there is ONE particular method that at all times works better than another. Furthermore, not each method suits each investor. This last thing is perhaps the most important issue.

One further point: neither Rudy nor I are professional bears, so to speak. Our concern in that regard is at present with the way economic troubles may well continue to hamper share markets - but we may be shown to be quite wrong. At other times we have been more bullish because both the fundamentals AND the T/A profile of the market and individual stocks were more positive. Neither of us has ever denied that opportunities existed in the present market, and we highly commend those who are successful in it. So it is not the case that we don't respect those who do things differently from ourselves.

resillent1

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Post Number: 449
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Saturday, May 03, 2008 - 10:57 pm:

rdumas wrote on Saturday, May 03, 2008 - 11:42 am:
I am sorry that you don't like it when people have their own opinions which don't coincide with yours.

How do you get that from what I wrote?

rdumas wrote on Saturday, May 03, 2008 - 11:42 am:
I have yet to see Sway argue his case with any logic.

Logic according to whom? His logic looks fine too me. Darvas' book is a good argument for his point of view.

rdumas wrote on Saturday, May 03, 2008 - 11:42 am:
My only disagreement with Sway from day one is his view that charts represent what is happening in the real economy at the current time. I have tried to get him to show why his view is correct and am still waiting for a logical reply.

Logical according to who? There are no indisputable laws of nature involved here so it seems its just your opinion vs. his.

rdumas wrote on Saturday, May 03, 2008 - 11:42 am:
You may agree with Sway's view

What makes you think that? The point is that I'm happy for him to have his own regardless of whether it matches my own or not. I value what he shares of his perspective.

rdumas wrote on Saturday, May 03, 2008 - 11:42 am:
but I don't as it totally defies logic based on the economic data that is out there for all to see.

Who's logic again? And whose interpretation of the economic data. (k1's maybe). Economists never agree! You and me would probably look at the same thing and come to two different opinions. Bias's probably mean we are all looking at different things anyway.

rdumas wrote on Saturday, May 03, 2008 - 11:42 am:
The fact that I choose to provide myself with additional safety in my investments by using a combination of TA and FA suits my risk profile and those of a number of people on this thread who sit on the sidelines but message me privately. If having that view gets up your nose then that says more about you than about me.

What you do does not get up my nose, but the badgering you give others when your opinion differs to there's is what gets up my nose.

rdumas wrote on Saturday, May 03, 2008 - 11:42 am:
You are not forced to read what is posted on this thread. Like any other forum you just take from it that which is useful and applicable to you and scroll down through that which isn't.

I've been skipping posts for quite a while now, but when I see people's posts that I do read getting frustrated with the badgering then I look to see what caused it.

ody wrote on Saturday, May 03, 2008 - 06:07 pm:
What I disagree with is this: 'I believe that trying to read "the economy" is a waste of time and ultimately not of any use in making money.' I think that that is demonstrably wrongheaded and untrue.

I just see two different opinions here "I believe" vs "I think" nothing more nothing less neither right nor neither wrong.

ody wrote on Saturday, May 03, 2008 - 06:07 pm:
So it is not the case that we don't respect those who do things differently from ourselves.

This just looks like lip service when people expressing different opinions get hit with a barrage of "

ody wrote on Saturday, May 03, 2008 - 06:07 pm:
demonstrably wrongheaded and untrue

ody wrote on Friday, May 02, 2008 - 11:50 pm:
A bit more knowledge and a bit more thinking would not come amiss.

rdumas wrote on Friday, May 02, 2008 - 05:34 pm:
argument defies logic

Take this post how ever you please, but if you reduce this thread to only those that agree with your opinions, it will be your loss. I for one, have had enough!

(Message edited by Resillent1 on May 03, 2008)

ody

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