pacalis

Cramer Does It Again with CIT Call

If you care about dividend yield you should have discussed a dividend yield strategy. For example, I hold cash until I can realize x divided yield from company abc. That seems to me to be a good general approach. However that's completely different from the "win some lose some" approach that DCA takes to supposedly address price volatility.

On Nov 05 03:41 PM consumeronstrike wrote:

> Some people want to gamble and some people want to invest. I would much rather spend my time buying pieces of solid companies and building up my dividend income over time than speculating on price movements.

Cramer Does It Again with CIT Call

You're right about it being basic - it was proven to be myth in 1979 by George Constanides in the Journal of Financial and Quantitative Analysis titled "A Note on the Suboptimality of Dollar Cost Averaging as an Investment Policy."

I have a few things to say about your example which is so typical of DCA examples...

1. You neglect transaction costs which necessarily drive up your cost basis.
2. You lost fifty percent of your investment in period 1. Sorry, but that's not a good thing. This is where we get into the psychology of it - a 50% loss is not a DCA opportunity. It's a 50% loss. If you've got a stock that's so volatile that its moving about so much to make DCA work you've probably got a different problem.
3. Remember that the long term trend of the market is expected to beat the return of a a risk free asset, so on the whole a dollar cost averaging policy will result in buying more expensive stocks over time, not cheaper ones.

On Nov 04 08:12 PM consumeronstrike wrote:

> Dollar cost averaging is so basic it doesn't need to be defended.

Cramer Does It Again with CIT Call

LOL, you watch too much TV.

Dollar cost averaging is not an academically sound principle. It is a scam that brokers use to increase the number of buy transactions around a position, thus increasing their fees while minimizing the psychology of loss.


On Nov 04 03:49 PM DonFurio wrote:

> CNBC commentators are not allowed to own stocks.
> No one forced you to buy NYX or SHLD. Besides these companies are
> not bankrupt and have a chance to come back, are you dollar cost
> averaging?

Cramer Does It Again with CIT Call

DonFurio - you're "eliminate suckers" approach is a good idea but not very practical. The game is stacked and there are a s@#tload of idiots out there - that's why investment advisers are regulated. And that's why someone who has the power to manipulate markets and also gives investment advice should be regulated.

Also your view of "proper research" is a bit naive - you ignore the plain fact that there's a huge industry that directs investments for other people and organizations. So, not a perfect world, but Cramer still makes it worse.

On Nov 04 09:48 AM DonFurio wrote:

> "Cramer should be taken off the air. If what he's doing isn't illegal
> it should be."
> - so does that mean you want to ban Fast Money and the other CNBC
> shows where people talk about stocks? You've got to be kidding me,
> where is everyone's personal responsibility? Do you want BO's cronnies
> to wipe you after you take a dump too...
>
> No one is forcing you to buy anything. If someone is too stupid not
> watch something on TV and buy it without doing to proper research,
> then that is their OWN fault.
>
> On Nov 03 08:55 PM pacalis wrote:

Cramer Does It Again with CIT Call

Cramer should be taken off the air. If what he's doing isn't illegal it should be.

It seems absurd that if you're an investment adviser to a few small businesses you need to be regulated, and have a fiduciary duty, but if you're a stock pumping dirt bag on TV, with a few million idiot viewers, you can say whatever the hell you want. Buy BUY BUY!!!

Of course an argument could be made that Cramer simply makes the market more efficient by reallocating "idiot capital."