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  • Are You Selling The Drama Or Buying The Rally? [View article]
    Let’s travel back to 2009 for a moment to revisit the bottom for assets like stocks and real estate. If I told you that – for the next 6 years – the U.S. government would increase its debt obligations by 40% over 6 years with $7.5 trillion/$8 trillion – you would expect economic bang for the buck, right? If on top of that – for the next 6 years – the Federal Reserve spent $3.75 trillion in electronic dollars to push key lending rates lower, you would expect bang for the real estate buck too… at least for the wealthiest who buy second homes, real estate investment trusts that rent to others and overseas buyers who have accounted for 1/3 of real estate acquisitions.

    (Note: Let’s keep in mind that the 40% growth of our debt over 6 years is more than 2x the growth rate of the economy that has annualized at 2.2%. The only way to service that monstrous debt over time will be to maintain the LONG-TERM trend of lower and lower rates. It is the same game that the U.S has been playing for 35 years now.)

    As an “abuelo,” you may well remember when 9.75% was the steal of a lifetime because mortgage rates broke below 10%. It will never get any better, people said. Then the 8% mortgage, an unbelievable bargain that will never be topped. Oh my, 6% in 2003, the lowest in 50 years. Never going to top that.

    With enough QE “stimulus,” overnight lending rates have been left at the zero bound for six-plus years for ultra-accommodating rate policy. And they have not been raised in more than nine years. We should expect real estate prices to appreciate when the cost to service mortgages moves lower, or at least prices to hold steady if mortgage rates do not move far beyond an ability to service debts. In other words, if mortgage rates were 5.5% or 6% today like they were just ten years earlier, what do you think would happen?

    For the economy moving forward, home prices can only move so much higher before the typical homebuyer – constrained by anemic wage growth – can no longer afford the dream at higher mortgage levels. Even 2nd home buyers/foreign buyers/REITs eventually determine that the investment opportunities are drying up.

    Housing going forward will depend on its affordability. It is contributing to 2.2% annualized growth, and thank god for that. But for how long will depend primarily on mortgage rates and investor sentiment.

    My sentiment? I purchased a second property via short sale about 3 years ago. I sold a property roughly in March of this year. With homeownership rates at 1967 levels, rents rocketing, and the investment community becoming less assertive in real estate acquisitions (the steals are gone), it will be increasingly difficult to get better economic growth from housing.

    Obviously, at some point, there will be a recession. Whenever it occurs, I anticipate quicker action by the central banks such that, well, that 4% mortgage on a 30-year today? Look forward to 2.5% or even 2% on the 30-year mortgage. We have not seen the end of a 35-year LONG-term trend in rates.

    GG
    Aug 28, 2015. 12:34 PM | 2 Likes Like |Link to Comment
  • Are You Selling The Drama Or Buying The Rally? [View article]
    Dear Reader,

    Yes, it is true. When the S&P 500 was trading at 2100, I provided 15 warning signs - fundamental, technical, corporate and macro-economic - suggesting that one might want to reduce a small bit of exposure to riskier assets.

    What happened after I wrote the article? The S&P 500 fell from 2100 to 1867... a gut-wrenching corrective move that served as a mini-crash. I did not predict the event. Nor did I suggest people go running for the hills. But ahead of the drop, I prepared hundreds of money management clients at my Registered Investment Adviser with the SEC as well as 100,000-plus regular readers of my commentary at popular web portals like SA and and several e-newsletters.

    Had I suggested something drastic? Not at all. I simply offered a form of rebalancing through tactical asset allocation. When the risks of loss are hitting extremes, take a little risk off... that's it. I said that:

    "If your asset allocation target is typically 65% stock (e.g., domestic, foreign, large, small, etc.) and 35% bond (e.g, short, long, investment grade, higher yielding, etc.), you might choose to downshift. Perhaps it would be 50% stock (mostly large-cap domestic), 25% income (mostly investment grade) and 25% cash/cash equivalents. Raising the cash level and modifying the type of stock and bond risk will help in a market sell-off as well as offer opportunity to purchase risk assets at better prices in the future."

    In the last two days, the S&P 500 has retraced half of its losses to move to 1987. It is still not at 2100. Considering the risks at mid-August - plummeting commodities, plunging foreign markets, deteriorating small-caps, high yield bond distress, global and domestic economic weakness, a less accommodating Fed, abysmal market breadth, revenue declines, earnings deceleration, extreme U.S. stock valuations and widening credit spreads - it made sense to raise a little cash. No big deal. No running for the hills. Just a little pruning.

    Right now, my clients and readers are well positioned after having sold a small amount to raise some cash. They lowered portfolio volatility prior to the sell-off and they are in a place where they will be able to restore target allocations at lower prices when market internals, credit spreads and other indicators demonstrate improvement.

    GG
    Aug 27, 2015. 07:57 PM | 1 Like Like |Link to Comment
  • A Market Top? 15 Warning Signs [View article]
    Dear Reader,

    On August 18, I laid out a sound case for why it would be worthwhile to reduce some exposure to riskier assets in one's portfolio. I offered a wide array of fundamental, technical, micro-economic (corporate) and macro-economic data that supported a modest reduction in one's target allocation. The article that I wrote (above) about the array of warning signs had been composed when the S&P 500 was trading at 2100.

    That day, "Frog" slammed my August 18th assessment as poppycock. It surprised me, frankly. Not because an anonymous participant on a message board disagreed with my interpretation of data. I'm used to that. I'm used to the sarcasm and nastiness that so many love to engage in. Rather, "Frog" derided my presentation as having no merit whatsoever, even though the fundamental, technical, corporate and macro-economic data have a great deal of merit.

    What happened next? The S&P 500 fell from 2100 to 1867... a gut-wrenching corrective move that served as a mini-crash. Did I predict the event? Nope. But ahead of the drop, I prepared hundreds of money management clients at my Registered Investment Adviser with the SEC as well as 100,000-plus regular readers of my commentary at popular web portals like SA and and several e-newsletters.

    Had I suggested something drastic? Not at all. I simply offered a form of rebalancing through tactical asset allocation. When the risks of loss are hitting extremes, take a little risk off... that's it. I said that:

    "If your asset allocation target is typically 65% stock (e.g., domestic, foreign, large, small, etc.) and 35% bond (e.g, short, long, investment grade, higher yielding, etc.), you might choose to downshift. Perhaps it would be 50% stock (mostly large-cap domestic), 25% income (mostly investment grade) and 25% cash/cash equivalents. Raising the cash level and modifying the type of stock and bond risk will help in a market sell-off as well as offer opportunity to purchase risk assets at better prices in the future."

    In the last two days, the S&P 500 has retraced half of its losses to move to 1987. It is still not at 2100. Considering the risks at mid-August - plummeting commodities, plunging foreign markets, deteriorating small-caps, high yield bond distress, global and domestic economic weakness, a less accommodating Fed, abysmal market breadth, revenue declines, earnings deceleration, extreme U.S. stock valuations and widening credit spreads - it made sense to raise a little cash. No big deal. No running for the hills.

    Right now, my clients and readers are well positioned after having sold a small amount to raise some cash. They lowered portfolio volatility prior to the sell-off and they are in a place where they will be able to restore target allocations at lower prices when market internals, credit spreads and other indicators demonstrate improvement.

    Perhaps not surprisingly, one can look at the timeline on this board to see that none of the naysayers wrote between 8/19-8/26, as they had lost confidence in their convictions. They can pretend otherwise, but they waited for a bounce before commenting. Naturally.

    So "Frog" is back on 8/27 after having disappeared during the selling rout and reappearing after a 2-day rally (which I also anticipated). See link with respect to bounces.
    http://bit.ly/1MRCWfB

    Even though I brought in the work of Research Affiliates, Mebane Faber, Ed Yardeni, Doug Short on Warren Buffett's favorite measure of market-cap-to-GDP, Bank of America, Citi, Gallup, the New York Fed, St. Louis Fed and so much more, "Frog" is upset about mention of Nobel Prize winner Shiller on the CAPE Ratio. Okay, I guess. I suppose "Frog" is prognosticating that I am bearish for having presented the bearish facts and that he is predicting a strong bull market from here, on 8/27?

    I suppose it would be nice if others would accurately portray what my opinion is. Instead of slamming the prognostications that I did not make, perhaps explain why it was wrong for me to suggest reducing risk from 65% stock/35% income to 50% stock/25% income/25% cash.

    I've been doing this thing for a quarter century now. I do not know which way the markets are going to move with certainty - not a soul on earth does. But I did help investors sidestep the bulk of the 2000-2002 tech wreck, the 2007-2009 financial collapse and the 2011 euro-zone crisis, all while growing their portfolios with less risk than 100% in equities. I do not need to predict or prognosticate. I simply reduce exposure to riskier assets when the fundamental, economic and technical backdrop raises enough flags.

    GG
    Aug 27, 2015. 07:39 PM | 5 Likes Like |Link to Comment
  • Do Not Blame China For Your Missed Opportunity To Reduce Risk [View article]
    Clark,


    You may want to read #3 of my 8/18 article from the previous Tuesday, "15 Signs Of A Market Top." The link is below. (If you'd rather not read it, you can simply view the BofA chart that I provided in the commentary. Or if you just want the simple answer... corporations via buybacks.)
    http://seekingalpha.co...

    GG
    Aug 26, 2015. 01:28 PM | Likes Like |Link to Comment
  • Do Not Blame China For Your Missed Opportunity To Reduce Risk [View article]
    mikenh,

    Damage by stop-limit loss orders? None.

    I think you may have read about the dangers of stop-loss orders which execute at market. Unwary users may have sold at ridiculously low prices.

    Stop-limit loss orders only execute at a price that you have pre-determined. There is a risk in not getting out at all - the stop-limit loss order can be jumped. It is a risk that I am willing to take. (Note: And yes, there were several stop-limit loss orders that did get jumped.)

    As an institutional investor/Registered Investment Adviser with the SEC, there are additional advantages that we have. We trade in block accounts. We do not sell 10,000 shares at one price; rather, we are able to work the trade throughout the day to get a favorable price across all accounts.

    Last, but certainly not least, if you are proactive in reducing risk ahead of time, as you know that I have been, you are not relying entirely on stop-limit loss orders alone. Nor should you. You have stop-limit loss orders. You have trendline breaches. And you have your risk management (sell) discipline.

    GG
    Aug 26, 2015. 10:25 AM | 1 Like Like |Link to Comment
  • A Market Top? 15 Warning Signs [View article]
    Dale,

    Then you are not "buying" and "holding." WHEN one rebalances, he/she selects a TIME that he/she believes is advantageous to sell some assets and buy other assets. Rebalancing is a market timing technique.

    How I have chosen to manage risk for 25 years is also a form of rebalancing. My clients have a target asset allocation. WHEN the fundamental, technical and economic backdrop collectively suggest reducing some of the risk, we reduce it. When valuations, market internals and economic signs show evidence of improvement, we restore the target.

    This is how I successfully reduced the downside loss for folks in the 2000-2002 tech wreck as well as the 2007-2009 financial collapse. It is also how my clients and readers are benefiting from the current circumstances that became increasingly evident in May of this year. Turns out, some folks get it, and others... well, whatever, never mind.

    GG
    Aug 21, 2015. 06:12 PM | Likes Like |Link to Comment
  • This Is What Happens When The Fed Tries To Leave 'QE' [View article]
    DamnYM,

    Please read more than the title and a few bullet points. For months, I have calmly put forward a wide array of facts, information and evidence to support the reality that downside risks have been far greater than upside reward.

    I have cited micro-economic corporate data (e.g., significant decrease in dividends, accounting issues, stock buyback loop, excessive/extreme debt levels, etc.). I have compiled macro-economic data (e.g., negligible wage growth, LFP 1977, home-ownership 1967, manufacturer recession, family leverage, government debts, consumer spending via credit versus savings, job quality, etc.).

    Of course, I did not stop there. Valuations have been stretched to the 2nd highest level in history, some at the highest. P/S, P/E, market-cap-to-GDP. Earnings growth flat, revenue declines for 2 consecutive quarters. Rising LIBOR rates, widening credit spreads, flattening curve. It's all there.

    And then there have been the canaries with broken vocal chords, from high yield bond distress to emerging market stock bears to currency devaluations. And the disastrous deceleration of both the global economy and the commodity slump.

    I have written extensively, and presented facts throughout all of the articles, (e.g., "Market Top? 15 Warning Signs." "3 Reasons Why Risk Is Exiting The Debate Stage," "5 Reasons To Lower Your Exposure To Risk Assets," "Why Investors Should Not Party Like It's 1999," etc.). And in none of those articles did I suggest one should run screaming from risk altogether... just a sensible, tactical decision to raise a bit of cash and hold onto mostly large cap domestic and investment grade income. Here you go:
    http://bit.ly/1Jqk32m
    http://bit.ly/1Jqk5qP
    http://bit.ly/1Jqk3iA

    Are corrections health-restoring opportunities... yes. Particularly, if you've planned ahead to have the cash to buy lower. Bears are normal in the course of market cycles too. However, it is not beneficial to ride 2000-2002 and 2008-2009 down to the bottom. Reducing risk makes sense to avoid the bulk of bear market losses, especially for those who no longer work and rely on their portfolios for growth/income.

    QE alone? No... plummeting commodities, plunging foreign market stocks, deteriorating small-caps, high yield bond distress, a weak global economy, a less accommodating Fed, abysmal market breadth, revenue declines, earnings deceleration, extreme U.S. stock valuations and widening credit spreads... just to name a few. Oh, and if we need a catalyst, let's decide that China finally pushed folks over the edge.

    Do I or have I blamed everything on QE? Hardly. Yet it is foolish to disregard the malinvestment that has occurred due to supposed emergency measures that turn into 6 years of permanent measures, and we still have not left ZIRP. Not understanding the impact of central bank policy is why people have been talking about rising interest rates for 30+years, when three decades of lower rates has been the reality. Here is one individual that is not a bond fund manager and bucked the overwhelming trend in 2014 by explaining why interest rates would move markedly lower in 2014.
    http://bit.ly/1iLuvUm

    Regardless of how far the Fed moves to raise borrowing costs, they will eventually return to the zero bound and QE4/5/6. It is likely the only way in which individuals, families, businesses and governments can service debt that makes the spending/consumption possible. Money will not be saved in another manner, nor will wages rise dramatically to keep up with asset price inflation. See Eurozone for preview.

    Yikes, I may have written yet another article!

    Cheers,

    GG
    Aug 21, 2015. 02:25 PM | 8 Likes Like |Link to Comment
  • A Market Top? 15 Warning Signs [View article]
    Skeptical Growth Geek,

    I do not run a magical hedge fund... sorry. I am the president of a Registered Investment Adviser with the SEC. Fee-only. Low-cost indexing.

    You can read about me and Pacific Park Financial, Inc. at the link below. You can also read more about the company by picking up the ADV II at FINRA.
    http://bit.ly/11RtnHW

    I present facts, and my opinions based on those facts. National financial talk radio co-host circa 1998-2005. Thousands of articles that originate at my web log (ETF Expert) and later appear on popular web portals like Seeking Alpha circa 2005-2015.

    The facts are straightforward, as is my opinion on how to invest in certain environments. I wrote:

    "When plummeting commodities, plunging foreign markets, deteriorating small-caps, high yield bond distress, global and domestic economic weakness, a less accommodating Fed, abysmal market breadth, revenue declines, earnings deceleration, extreme U.S. stock valuations and widening credit spreads come together, investors should take some risk off of the table."

    Notice that I did not screech that the mother of all disasters is about to transpire. I have been saying the same thing since April 28... take a little risk off the table. I presented the following solution... pretty much the same solution that I provided at the end of April:

    "If your asset allocation target is typically 65% stock (e.g., domestic, foreign, large, small, etc.) and 35% bond (e.g, short, long, investment grade, higher yielding, etc.), you might choose to downshift. Perhaps it would be 50% stock (mostly large-cap domestic), 25% income (mostly investment grade) and 25% cash/cash equivalents. Raising the cash level and modifying the type of stock and bond risk will help in a market sell-off as well as offer opportunity to purchase risk assets at better prices in the future."

    As for the FTSE Multi-Asset Stock Hedge (MASH) Index, we hope to see a low cost exchange-traded vehicle track the index in the future. That's about it. Since an ETF is not currently available, we do help interested investors track the index FREE of management fees. It is a way for passive investors to gain exposure to the index.
    http://bit.ly/1TWH7XQ

    For our active management, we use some of the components of the index when we wish to lower portfolio risk. No shorting. No leverage. No margin account needed. And for the last three months, my clients (and tens of thousands of readers) have benefited from the reduction of risk.

    GG
    Aug 19, 2015. 06:15 PM | 3 Likes Like |Link to Comment
  • A Market Top? 15 Warning Signs [View article]
    Frog,

    We could not possibly disagree more... but that's okay. Everyone is entitled to interpret the facts and discuss his/her opinions.

    Of course, it is a bit shocking to read your comment, "Not one of these 15 indicators has any historical relationship to the future movement of equity prices." Your statement is entirely inaccurate.

    You may not like market cap-to-GDP, but it has one of the most revered historical relationships to the future movement of equity prices. It currently projects 0.5% total return over the next 10 years. That is not my opinion, it is the data. You can review the work of Research Affiliates here.
    http://seekingalpha.co...

    You may not like P/S, but price to sales (revenue) per share also has a venerable track record in describing the future movement of equity prices. Perhaps you might review the research of Meb Faber and Ed Yardini. Faber found that median S&P 500 P/S ratios above 1.53 offer 0.6% total return over 10 years.

    You also took issue with P/Es, as though they have no bearing on the historical relationship to the future movement of equity prices. Robert Shiller won a Nobel Prize for the CAPE ratio, and trailing 12 month P/Es have always played a role in equity valuation. Both are at the second highest point in the history of stocks. Personally, forward P/Es are not something I employ, though others may value the opinion of Goldman Sachs when their data, not my opinion, found that the forward P/E of 16.7 when real interest rates are between 0% and 1% is far above the average of 11.2. (And there are a number of times in history when REAL interest rates are between 0% and 1% per Goldman Sachs, not just today.)

    Undoubtedly, your statement that none of the 15 indicators have a historical relationship to the future movement of equity prices was entirely erroneous. Three of the indicators that I just discussed in great detail in this reply demonstrate that.

    In fact, All of the 15 indicators have a historical relationship to the future movement of equity prices. Dividend decreases? Yes they do. Corporate debt levels? Yes they do. Widening credit spreads? Absolutely. Deteriorating market breadth (internals)? Most definitely. Fed tightening cycles? Without question.

    The facts are crystal clear. What one could take issue with is whether the warning signs are strong enough. I think they are. Others could take issue. For instance, credit spreads are widening, but have they actually widened so much to cause ripple effects across the S&P 500? They are still low on an absolute level. Or, yes, the Fed will embark on a tightening cycle, but might the pace be so slow and might it not stop so abruptly that it does not result in a bearish turn of events? Or, yes, the market internals/declining breadth signal risk aversion and historically involve pullbacks, corrections and bears, but have the shifts in risk preference reached a point of significance or not?

    In other words, if someone believes that a slow growth economy is not slow enough to stop stocks from continuing on its 6 1/2 year bull market journey, okay. If someone believes an overvalued stock market, 2nd worst in history, is not a problem until it is the worst in history, okay. If someone does not see the complacency via the VIX or AAII survey as complacent enough, okay. But the facts presented are the facts.

    My opinion? When plummeting commodities, plunging foreign markets, deteriorating small-caps, high yield bond distress, global and domestic economic weakness, a less accommodating Fed, abysmal market breadth, revenue declines, earnings deceleration, extreme U.S. stock valuations and widening credit spreads come together, investors should take some risk off of the table.

    Notice that I did not screech that the mother of all disasters is about to transpire. I have been saying the same thing since April 28... take a little risk off the table. In practice, it goes something like this:

    "If your asset allocation target is typically 65% stock (e.g., domestic, foreign, large, small, etc.) and 35% bond (e.g, short, long, investment grade, higher yielding, etc.), you might choose to downshift. Perhaps it would be 50% stock (mostly large-cap domestic), 25% income (mostly investment grade) and 25% cash/cash equivalents. Raising the cash level and modifying the type of stock and bond risk will help in a market sell-off as well as offer opportunity to purchase risk assets at better prices in the future."

    GG
    Aug 19, 2015. 04:56 PM | 11 Likes Like |Link to Comment
  • There's Still Time To Lower Your Exposure To Riskier ETFs [View article]
    kydder,

    Each component of the MASH Index has been strenuously tested for non-correlation to stocks in "good times" as well as potential inverse correlation to stocks in "bad times." For different reasons, different currencies in the world often thrive when the fit hits the shan. The dollar tends to be a success in risk-off trade, the reverse carry trade benefits the yen, and the Swiss franc tends to benefit due to Switzerland's history as one of the few country's that "attempts" to preserve the integrity of its paper money.

    You asked about the franc, so I won't go into the particulars on long duration treasuries, munis, JGBs, German bunds, gold and so forth.

    Best,

    GG
    Aug 13, 2015. 12:31 PM | Likes Like |Link to Comment
  • There's Still Time To Lower Your Exposure To Riskier ETFs [View article]
    RV,


    Since I began advocating my preference for a lower allocation to equities in late April (April 28th), and raising some cash (15%-20%), stock assets across the board have lost ground/money. Bond credit spreads have widened considerably, where high yield has also lost ground/money. In complete contrast, cash and investment grade have outperformed.

    I have provided two dozen fact-based articles with a wide array of information and data - technical, fundamental, and economic. All of the evidence favors the lowering of risk, something that my clients have already benefited from.

    In 25 years, I have been quite successful at the approach. I lower risk when valuations are hitting extremes, economies are stumbling and market internals are deteriorating. I raise risk when valuations are more attractive and internals are improving.

    Very few risk assets in any index - small, medium, large, foreign, domestic, higher-yielding bonds - have gained since my initial article on lowering risk in late April. Even the S&P 500 has fallen from 2114 to 2086, and I know very few investors who have only the S&P 500 in their portfolio. Whether it is Apple or Exxon, the Dow (DJI, DJT) or Dow Chemical, HYG or JNK, lowering the allocation to stock risk/high yield bond risk has been beneficial to my clients and tens of thousands of readers on a variety of financial portals.

    The article above was composed on Tuesday, and has nothing to do with Wednesday's reversal. Wednesday's action does not change the reality that stocks have lost ground since I first began discussing a tactical allocation shift. Similarly, investment grade has gained.

    I will let you determine whether we are in a secular bull market or not. I am focused on the enormous amount of evidence that suggests, very strongly, I might add, that a correction of 10%-19.9% is extremely probable this year. A bear market? That will depend very heavily on the market's perception of central bank decisions and decision-making.

    Perhaps you are correct. Perhaps this is a secular bull. I don't have any reason to tell you that you are wrong or right about secular or non-secular. I will say that corrections and bear markets happen in secular bull markets all of the time. And I have no intention of holding excess exposure to stock risk when an average bear involves 30% depreciation.

    So again, when an economy is weak (see data), when fundamentals are pushing extremes (see data), when market internals are deteriorating (see data), I advise that a moderate growth investor do the following:

    "...move from a 65% equity stake (e.g., domestic, foreign, large, small, etc.) and 35% income position (e.g., short, long, investment grade, higher yielding, etc.) to something that might resemble 50%-55% stock (mostly large-cap domestic), 25%-30% income (mostly investment grade) and 15%-20% cash/cash equivalents."


    Cheers,

    GG
    Aug 12, 2015. 07:59 PM | 1 Like Like |Link to Comment
  • Buying The Dip In Apple? You're A Market Timer [View article]
    Green E,

    Your comments often make me smile. And although you are playfully asking the SA community at large, I couldn't help but respond to what you already understand.

    ZIRP punishes savers and rewards risk-takers. Yet the rewards are subject to the laws of diminishing returns. In fact, diminishing returns can shift to marginal risk aversion, and marginal risk aversion can lead to painful reversions to the mean and extraordinary capital preservation efforts.

    Think about it. Do sellers even need to exhibit a risk asset exodus to bring about a directional shift? Not really. A reduction of buying interest can fan the flames. (Imagine if corporate buybacks slowed considerably. That alone could send riskier assets toward correction, unless retail investors were suddenly going to pick up the slack.)

    Best,

    GG
    Aug 4, 2015. 08:54 PM | 2 Likes Like |Link to Comment
  • Buying The Dip In Apple? You're A Market Timer [View article]
    bbro,

    Absolutely! Tactical asset allocation involves market timing. The same holds true for buying Apple on the dips. The same holds true for rebalancing back to one's target allocation on calendar quarters.

    I acknowledged that nearly all of us engage in market timing when I wrote:

    "My tactical asset allocation strategy for reducing exposure to riskier assets involves reducing (not eliminating) exposure to riskier assets when valuations are hitting extremes, technical internals are deteriorating and economic indicators are weakening. When valuations are fair, internals are improving and economic signs are strengthening, we raise exposure to riskier assets back to a client's target mix. Market timing? Sure, in the same way that opportunistic rebalancing activity and opportunistic efforts to buy quality stocks like Apple at lower prices fit the bill."

    Your cynicism notwithstanding, investing strategies exist on a spectrum. Day-trading/high-frequ... trading on the far left with thousands of times a session... buy-hold-never-ever-sell under any circumstances on the far right. And then you have everything in between.

    It follows that most investors engage in some form of timing - individuals, Registered Investment Advisers with the SEC, mutual fund managers, hedge funds, pensions. I have my rules for raising risk exposure and for lessening risk exposure. I may be going out on a limb, but I imagine that you have your rules for doing the same.

    I will add what I wrote to another earlier: I do not believe one should be pigeon-holed by either the "market timer" term or the "buy-n-holder" term. That said, rare are the moments when self-described "holders" are asked to defend those actions. The "market timer" term gets a bad rap when the reality is, nearly everyone makes timing decisions. (Of course, that was one of the main points in talking about what one does when he/she buys Apple on the dips.)

    GG
    Aug 4, 2015. 05:35 PM | 2 Likes Like |Link to Comment
  • Buying The Dip In Apple? You're A Market Timer [View article]
    dave,

    >>So based upon where you see the economy, do you think the Fed
    >>will actually raise rates?

    Yes, I believe the Fed will raise overnight lending rates this year. But NOT because they believe in the strength of the economy.

    The FOMC would like to maintain credibility and the members would like to be able to ease in the future. These are the reasons that they will do something on rates in 2015.

    >>Wouldn't that tumble the economy into a recession if they did so?

    Not necessarily. For instance, they might not raise overnight lending rates by a quarter point when they hike. Perhaps it is slower, by 0.125%. Moreover, they may not raise rates at every session such that they only get to 0.50% by the end of 2016. I'm not prepared to say that 0.5% overnight lending rates would cause a recession.

    By the same token, the Fed could leave rates at 0%, and we could still see the global economy take the U.S. down with it. That's a possibility.

    Recessions happen. And it is near certainty that we are closer to an eventual recession after six-plus years of recovery than we are to a 12-plus year expansion. The Fed knows this... and the members know that it needs to act in some capacity in 2015 for confidence in the institution to remain.

    GG
    Aug 4, 2015. 04:59 PM | 2 Likes Like |Link to Comment
  • Buying The Dip In Apple? You're A Market Timer [View article]
    Ts,

    What you are describing is precisely what I do for my Pacific Park clients - tactical asset allocation (TAA). It involves the raising or lowering of risk exposure based upon fundamental, economic, and technical factors. Buy-n-holders routinely dismiss any tactical decisions on asset allocation as "market timing."

    Ironically, the loudest naysayers are self-described buy-n-holders during the latter stages in bull markets. They shouted the loudest in 1999 before the 2000-2002 tech wreck. They yelled in 2006 before the 2007-2009 financial collapse. And they're making plenty of noise today.

    I have no idea what the next bear will look like, and do not anticipate that it will match the downside decimation of the prior two. Rather, I am reducing risk the way that I did prior to both of those downturns, as valuations are once again hitting extremes, internals are once again deteriorating and economic signs are once again weakening.

    >>Why should "buy and holders" have to live in a time capsule?

    I do not believe one should be pigeon-holed by either the "market timer" term or the "buy-n-holder" term. That said, rare are the moments when self-described "holders" are asked to defend their actions. More often, anyone who dares to discuss how and when to sell risky assets is chastised for "market timing."

    Keep in mind, exchange-traded indexing (ETFs) would never have reached the AUM that it has today were it not for the importance of intra-day tradeability/liquidity. Vanguard would have listened to its founder on sticking solely with index mutual funds. Instead, Vanguard is a top-tier provider in the 1600-plus ETF field.

    In truth, investing has never been black or white, in spite of the black-or-white thinking by many thinkers. The spectrum spans HFT/day-trading activity and incorporates sixty shades of in-between disciplines along the spectrum before one would reach buy-hold forever. Tactical asset allocation (TAA) is one such discipline.

    GG
    Aug 4, 2015. 04:44 PM | 1 Like Like |Link to Comment
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