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22 comments:
Roger,
I have been thinking of your strategy of taking some action after the S&P breaches the 200 day moving average. You had mentioned selling some equities, probably some portion of those with gains. Then, you may look at double short ETF's.
That raises two questions. First, do you have some kind of a percentage of the portfolio, say 10%, that you try to manage the selling to.
Secondly, once we have breached the 200 day moving average, do you have a second point at which you will look at taking additional actions? I don't want to get ahead of myself here, but just to be prepared for a "more down" heading toward "down a lot".
Like a lot of us, panic is not my friend.
Rick C.
Roger,
I enjoyed your fake panic bit at the beginning, as I knew you weren't talking about the market.
Good luck with the neighbors...
Ken
I will take Dow down 200+ over screaming small children any day of the week!!!
Good Luck Roger!
:)
Roger,
I'm a bit suprised that you would choose to enter SDS over SH, given how you seem to prefer not taking too much risk.
Could you explain your thoughts on going 2x short vs. 1x short
Great blog! I look forward to seeing
your article.
Jay Charles
Has anyone had any experience with IQTrends?
Any past history would be appreciated.
All funny comments about the neighbors. NO JOKE, they have friends up now and there are several ATVs there. I will take all action, with odds, that I will be responding to a medical call there before Sunday night, lol.
Rick C, it gets touch feely from there. I would be more inclined to take further action if the market drips lower as opposed to more panic.
There are two things going on at once; fast panics down usually result in fast panics up but we are below the 200 DMA which signals a long term demand problem. If we go back above the 200 DMA and keep it for a few days I would get a little more long, probably. Hence touchy feely.
SH vs SDS. To my way of thinking SDS is a more efficient use of capital. more hedge for the same dollars. Mory risky doesn't fit with my way of thinking. If the market rallied 20% SDS would get pasted, so what, everything else is up a ton. If I buy more SDS I'll only be taking people to not even a 5% exposure. I hope SDS gets crushed.
I have never heard of IQTrends or at least I don't remember hearing about it.
It could have been worse, Jim Cramer could have dropped in while you were making the video.
OG
Anyone think GS is a buy here?
I am glad to see such reasoned forward looking faith in the market comments here. Makes me think my view that there is real trouble ahead is valid.
I understand most events are short term. I usually do not enjoy them or it seems obvious it is short term and I buy more equities.
This time the housing and mortgage market (do not kid yourself, it is a lot more than subprime at this point) make me believe this will be more serious.
You can choose a longer term stratagem if you wish. I know it is correct the vast majority of the time, but I think you are missing something here.
1:34 Anon, first things first is to be disciplined to whatever you use to get defensive but that this will be different? That is a tough stand to take.
As I stressed in the video, I do not need to be right nor do you. If we are on our way to a 50% decline then starting to get out at 15% down won't be too late let alone right here.
http://www.galatime.com/
galatime has a link to the Cramer video with comments in subtitle if you are interested
Roger.
Maybe Anon 10:46 is wondering about the future intelligence quotient trends of your neighbors. Especially since their has been some recent gun play over there. :->
Or perhaps...
http://www.iqtrends.com/
http://www.aboutus.org/IqTrends.com
Ok, well I have seen Geraldine Weiss in Barrons going back, I think, to the 1980s, the decade I started reading Barrons.
I don't know much about her but I saw a thing on their site saying they were #1 on Hulberts FWIW.
I just took a look at my timing model and it's still at 2.5 (100% long). 3 of the 4 sentiment models I use as components of my timing model are in extremely OS territory and driving the positive score. Historically the market has been at or very near an intermediate term low when these models reached similar extremes. Keep in mind my timing model is 50% driven by sentiment indicators.
On the other hand, "the market" trend is in question. We broke through the 75dma a couple weeks ago and that was a first sign of a possible intermediate term reversal. Next stop is the 5/200dma. I use a 5dma smoothing to eliminate whipsaws. Both the Value Line Composite and Russell 3000 5dma are very near their 200dma. A crossover will have a significant impact on my model score.
My timing model has served me well over the years but it can act a bit erratic, particularly at market bottoms. I designed it so the trend components do battle with the sentiment components at market turning points and that is exactly what we are seeing right now.
Although I'd love to load up on leveraged longs right now, the right thing to do is to stay disciplined - much like a good pilot does in bad weather, deferring to his instument panel even though his intuition/gut tells him to do otherwise.
tom k,
assuming your model is normally good my question is when it fails does it fail catastrophically?
With regards to “Anon 10:46 AM” question, I have never subscribed to “Investment Quality Trends”, but have been “free sampling” the newsletter for some time. The letter has done consistently well going all the way back to 1986. I have an old Hulbert Financial Digest from 1993. At that time Hulbert had 6½ years of data. IQ Trends had gained 155% compared to the markets 124% and did so with much less volatility. This is typical for IQ Trends, it equals or beats the market, but with below market risk.
The only time to avoid IQ trends is when small caps are in vogue and big caps are doing poorly. Now could be the time to subscribe, I may do so myself. Hulbert has been rating this newsletter at or near the top of all other letters for decades. Weiss began the newsletter in 1969, it’s now run by Kelley Wright, who’s a contestant in MSN Money’s Strategy Lab.
To read the latest on Wright’s picks, here’s his most recent “strategy lab game” journal entry:
http://tinyurl.com/29basa
More on “IQ Trends”, follow the link to the “Prudent Trader.com”. There you’ll find a short article on the newsletter plus four links to screens that use the IQ Trends dividend methodology.
Here:
http://www.prudenttrader.com/ptltr080407.html#Section2
(sorry for this longish post)
Roger, great points. I missed JJC's rant on TV, but when he gets with Erin he always gets a little frenetic, and I wonder at times if someone is going to have to turn a hose on him.
You've calmly ramped into this "panic". The credit markets are a-twitter, as well they should be. This crap is everywhere--and I think that there are a few that are going to be surprised where it shows up.
One of my great laments is that the financial media has done an extraordinarily poor job in following the credit bubble. First, choosing to call it a subprime issue was the first mistake. Second, failing to see and/or report the ramifications of the repricing of risk was inexcusable. Third, that our leaders (Bernanke, Paulson, respected talking heads)blathered on about how none of this was an issue has discredited them. And I don't say that as someone who wishes to see these folks discredited.
When I was doing my research on hedge fund risk, I noted that those engaged in fixed income arbitrage were the riskiest and had the highest failure rates (due to the levering up to capture the arbitrage). So many financial institutions (banks and insurance companies)are now either funding or in investing in hedge funds that there will be pain felt everywhere (including the foreign banks) and a mortal wound or two. It will be interesting to see what sort of calls for "come forward and confess/report" we will see--remember, you cannot cover shit with snow as my grandmother would say!
Last night my book club (diverse group meeting over 10 years!) met at my home to discuss Jared Diamond's Collapse: How Societies Choose to Fail or Succeed. It's really an extraordinary book. Given your side interests, it might be worth your picking up and reading. JD also wrote Guns Germs and Steel. I've mentioned here before after having read the chapter on Iceland. Anyway, a non-market sidebar that may or may not have some merit. Another book on our radar (though the next book is Spell of the Sensuous) is Deep Economy by Bill McKibben.
A couple of weeks ago, I had to put my 2nd English Setter down (bladder cancer)after losing the first one the first of this year. I'm down to two dogs (geriatric miniature poodle and 1 yr old Am. Bulldog mix) and it just doesn't feel right! I called the English Setter rescue (I've had stray's that I've found or they've found me)to sign up for a dog.
sympathies on the dog situation, have walked in those shoes myself. Not to be trite but this goes with owning dogs and is the down side for the love and companioship they give.
But four dogs? What kind of a nut has four....oh wait, we're four dog people too, never mind.
Roger, it's not trite at all. I've got a veritable pet cemetery going here--we've loved and lost many a pet. So, I'm never looking for sympathy, but given you an your wife's love of dogs, wanted to share that I was going for a rescue dog. I think that adopting a rescue dog (yes, I have to have a home visit; I hope that I pass)might be as rigorous as trying to adopt a child!
Anonymous 5:16
First of all, my TAA system is up 14.16% YTD vs. the S&P 500 which is up a little over 2%. Admittedly much of that is due to a huge overweighting in internationals and an avoidance of poor performing U.S. sectors.
Second, look any 2+ year chart of the S&P 500. Do you really believe 7/19/07 through 8/3/07 is a catastrophy? I would suggest you stop looking at markets through a straw.
One more time:
1) Market timing is risk reduction strategy, not a performance improvement strategy.
2) The very best trend following systems have a hit rate between 50%-60%.
3) I measure relative performance in years, not weeks.
Now I have a question for you: What is your long exposure?
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