TaiPan

TaiPan
Send Message
View as an RSS Feed
  • You Market-Timers Are Going To Get Crushed  [View article]
    OK, I did not wait. For reasonable people, a testing period of 20 years is enough to compare Buy&Hold (B&H) with the Timing system I explained in previous comments. And besides, when asked to commit to a period he WOULD consider valid for a true comparison of B&H with Timing, Millennial did his usual shuffle: avoid, avoid, avoid.

    For those new to this prolonged debate between Millennial and me, search for Taipan, from the beginning of the comments.

    The testing period is 1 Jan 1996 to 9 February 2016, a period of 20.12 years. My broker’s charting program will go back only to late 1995, but I wanted to choose 1 January as the starting date to avoid any controversy about cherry picking dates. Hence the starting date of 1 January 1996.

    B&H had only one transaction, of course, because Millennial never sells. (Of course, the B&H investor must eventually sell something in order to live on his portfolio during retirement, but let’s not get bogged down in nitpicking.) In contrast, Timing had 10 transactions – an average of 1 every two years – for a total commission cost of $49.50. Millennial likes to repeat that commission costs total in the tens of thousands, but he misrepresents the facts here.

    Once set up, a matter of a few minutes, looking at the charts is a matter of a few minutes per day, or per week if you prefer – not the hours that Millennial likes to cite, which he does to misrepresent Timing and reach his pre-ordained conclusion that only B&H makes sense.

    The results (the envelope, please). B&H had an annualized return of 9.89%. This will change slightly because I did the calculation in the middle of day of 9 February, and will (later) close the spreadsheet using the day’s closing price. In contrast, Timing had an annualized return of 12.84%. This is a “final” calculation for Timing because the strategy is currently in cash, waiting for the market to declare whether the current decline is the start of a Bear market or merely a serious correction.

    Millennial will want (again) to bring up taxes as a disincentive to Timing. But paying taxes earlier on a 12.84% profit is surely better than paying lower taxes on a smaller B&H profit of 9.89%. Unless you are in the 100% tax bracket, you get to keep some of the surplus Timing profit of 12.84% over the B&H profit of 9.89%. I can’t see how Millennial can get confused or try to confuse us about this point, but to judge from his past argumentation, I’m sure he will try.

    And, of course, a B&H approach using individual stocks, and never selling as Millennial advises, will not do even as well as SPY’s 9.89% This is because during the past 50 years, many companies originally in the index (DOW or S&P 500) have gone bankrupt or closed their doors, and some currently in the index, which Millennnial would buy, will unexpectedly disappear in the future. Because he never sells, Millennial's portfolio will get hit hard by these disappearances.

    In contrast, an index fund like SPY would not have suffered as much. This is because companies whose capital declines with its stock price are normally dropped from the index before they disappear (though not from Millennial’s "never sell" portfolio.

    And finally, I do regret the bluntness of my rebuttals of Millennial’s arguments, but either deliberately or through ineptness he has misrepresented and distorted many dissident comments (not just from me but from others), and this is not satisfactory from a supposed financial author.
    Feb 9, 2016. 03:25 PM | Likes Like |Link to Comment
  • You Market-Timers Are Going To Get Crushed  [View article]
    OK, if you think my periods of analysis favour Timing, let’s choose a different period that is neutral, and let the chips fall where they may. Are you in agreement? Do you accept the challenge?

    But if I’m going to go back and crunch more numbers, I want an agreement in advance that you won’t try to evade the result, as I won’t. If B&H wins, I’ll admit it; if Timing wins, you should admit it too.

    This means you should knock off making false objections to Timing, just to stick stubbornly with B&H. For example, you object that you’d spend “tens of thousands of dollars” on commissions, AND YET my timing strategy generated a scant $50 in commissions during the 16-year period I examined ( 2000-2016). That’s less than $50, not tens of thousands: quite a difference, and I told you that clearly. This is one the many inconvenient facts you prefer to ignore in repeating the B&H mantra.

    Another example: you don’t need to be “dumping hours per week” on research, as you claim you would. My system takes a few moments each day, no more. Indeed, how do you KNOW how much time a timing system would take when you have admitted you haven’t studied or implemented any? Another false objection.

    These false objections convince no one, and decrease your credibility.

    And while I think about it, you say your period is 30-50 years, and you “never sell”. So, presumably if you had started investing , using B&H, 30-50 years ago, you would have bought a selection of solid, reasonably-priced stocks and kept them, right? But some studies have shown that a significant number of those solid stocks subsequently went bankrupt. Since your mantra is “never sell”, even when the stock plunges, you would have lost a LOT of money, would you not?

    The studies lauding B&H never explicitly take this factor into consideration. And calculating a B&H strategy using an index would not take into consideration these bankruptcies, since when a stock declines seriously, the market capital of the company declines, and that stock is normally ousted from the index.

    So, going back for 50 years of data on an index is not a practicable way to assess B&H.
    .
    Now, as for the period in which to compare B&H with Timing, 1996 is as far back as my broker’s charting service goes. Starting in 1 January 1996 would give us a reasonable 20-year period for analysis, and does not start either at the bottom of the market (which would favour B&H) or at the top (which would favour Timing). Are you in agreement? Again, you have shown some quite-slippery argumentation to date, so I want your agreement to the terms of this new analysis before I begin.
    Feb 9, 2016. 11:06 AM | Likes Like |Link to Comment
  • You Market-Timers Are Going To Get Crushed  [View article]
    TSM:

    I said “I arbitrarily chose January to January periods to avoid the temptation to cherry pick my periods. This is as objective as I can be.”

    You counter with “ I am not interested in very specific, cherrypicked date ranges where some strategy somewhere may have outperformed buy-and-hold.”

    So, you consider a calendar-year period of 16 years to be “cherry picked”. Then how many years must a Timing strategy outperform Buy&Hold for you to finally take notice? Would you wait 30-50 years before you start to think that maybe there are worthwhile strategies outside your Buy&Hold perspective? As Galbraith said to those who argued that their economic theories would be correct over the long haul, , “in the long run we’ll all be dead.”

    You say that “Every practical study shows individuals probably will not beat a strategy that includes dollar-cost-averaging through regular purchases, reinvested dividends and holding.”

    Not true: there are many academic articles showing that momentum investing works. I may get the spelling wrong, but Gary Antonacci’s Dual Momentum strategy has been mentioned many times in the pages of Seeking Alpha. Possibly you haven’t informed yourself about these articles because blinkers are more comfortable.

    Or, are you qualifying your insistence that B&H is the only strategy by restricting the articles you favour to “practical” ones? What do you mean by “practical”? Is a study “practical” only if it agrees with your B&H approach? That is circular logic. Is a study “practical” only if it shows that investors often apply momentum principles poorly, and because of this they underperform B&H? This – as has been clearly pointed out to you by several commenters – does not mean that Timing itself is flawed; it means only that you have to be good at it to succeed.

    Endlessly repeating the B&H mantra does not make it true.

    If this is what you mean by “practical”, then the fact that you are still parroting this falsehood, ignoring the several cogent arguments to the contrary, shows that you are unable to pay attention or absorb contrary viewpoints.

    You say: “Over 89% of professional fund managers cannot beat the S&P 500. There is a reason for that.” Yes, the reason is that they must contend with investors who demand their cash at the worst times (the same investors who fail with Momentum on their own), and they must deduct high management expense ratios fro their returns. Also, many funds are designed to be relatively passive; their prospectuses prevent much timing; so the manager is not allowed free rein. . So, this statistic – often promulgated by fund companies and brokerages who do NOT want investors to inv=convenience them by buying and selling actively -- is a blunt instrument that glosses over (deliberately?) a lot useful distinctions.

    The bottom line is that while many timers do underperform B&H, it is because they don't do it well, but those who can do it well manage to outperform B&H. To focus on those who fail in order to discredit the approach itself is silly and unprofessional in an author who purports to be a financial expert.

    It is significant that you have so few followers. I'll not waste more time reading your comments.
    Feb 8, 2016. 04:36 PM | Likes Like |Link to Comment
  • Our Central Bank Team Is Not Super Bowl Worthy  [View article]
    Great analogies aside, Lawrence, and even if the FED is as inept as you say, would it not be more useful to focus on how to invest in these circumstances? Are you suggesting -- in essence -- that we go to cash?
    Feb 6, 2016. 02:21 PM | 1 Like Like |Link to Comment
  • Dollar Plunges, Gold And Oil Soar, Stocks Utterly Confused - Bezek's Daily Briefing  [View article]
    Thanks, DigDeep. I just hope I don't end up like the original TaiPan -- killed in a typhoon (of poor investments). So far not bad, but could do better. That's why I avidly read you guys.
    Feb 6, 2016. 02:10 PM | 1 Like Like |Link to Comment
  • Dollar Plunges, Gold And Oil Soar, Stocks Utterly Confused - Bezek's Daily Briefing  [View article]
    This is a general question, not relatedd to the article at issue.

    If I read a particular author and like his or her style, I can follow that author via Seeking Alpha.

    If I read a particularly knowledgeable comment, how do I follow that commenter?
    Feb 6, 2016. 01:12 PM | Likes Like |Link to Comment
  • Dollar Plunges, Gold And Oil Soar, Stocks Utterly Confused - Bezek's Daily Briefing  [View article]
    Ian:
    I don't get your enthusiasm for Latin America. Stocks and economies EVENTUALLY are correlated, are they not? Reportedly Latin American economies are extremely fragile these days. So picking stock in these markets must be done very carefully. Very carefully indeed.

    And so with DEA, AVAL, and CIB (your largest holdings). They are all under water for 6-month and 3-month periods. Only over the last month is one stock (AVAL) above water.

    Whence, then, your enthusiasm for these stocks and these markets?
    Feb 6, 2016. 01:08 PM | Likes Like |Link to Comment
  • You Market-Timers Are Going To Get Crushed  [View article]
    @soajustice:

    Good points in your several comments. Or let Enron, or Nortel be additional lessons for those who "never sell". The mantra should at least be "seldom sell". But never close your eyes on your investments, or be paralyzed (like a deer caught in the headlights).

    You seem to be a sensible fellow, willing to learn (a never-ending process for good investors, as opposed to demagogues who will NOT learn).

    How to keep in touch via Seeking Alpha, so I can keep up to date with your journey of discovery?
    Feb 6, 2016. 12:48 PM | Likes Like |Link to Comment
  • You Market-Timers Are Going To Get Crushed  [View article]
    @James:

    Well said. The author repeats his original "thesis" in the face of serious rebuttals, ignoring those rebuttals/facts, and apparently hopes that simple repetition will make questionable statements into truths.

    He and his future articles hold no useful interest for any serious investor looking to learn from intelligent exchanges with commenters.
    Feb 6, 2016. 12:39 PM | Likes Like |Link to Comment
  • Smart Beta In Correction: Momentum, Low Volatility And Quality Continue To Outperform  [View article]
    Bob: Are you directing your comment, about preferring the three-ETF portfolio, to me?

    If so, not true: I like the idea of the stock portfolio.
    Feb 6, 2016. 12:36 PM | Likes Like |Link to Comment
  • Dollar Plunges, Gold And Oil Soar, Stocks Utterly Confused - Bezek's Daily Briefing  [View article]
    The trouble is that with rotation, you gravitate toward the winning sectors, the get killed when they in turn roll over. When the entire market is bearish, you just stay the Hell out.
    Feb 5, 2016. 03:53 PM | 2 Likes Like |Link to Comment
  • Smart Beta In Correction: Momentum, Low Volatility And Quality Continue To Outperform  [View article]
    And it has proved wise to buy the stocks only when various technical indicators are bullish. But this is to be expected in a down market; we'll see how it all nets out when markets rise again.
    Feb 5, 2016. 11:15 AM | Likes Like |Link to Comment
  • Smart Beta In Correction: Momentum, Low Volatility And Quality Continue To Outperform  [View article]
    So far, the stock portfolio has declined less than SPY.
    Feb 5, 2016. 11:13 AM | Likes Like |Link to Comment
  • You Market-Timers Are Going To Get Crushed  [View article]
    Author’s reply »
    TaiPan,
    “You are asking me to guarantee a hefty tax bill to defend against the off-chance of a rare market collapse that rivaled the Great Depression.”

    Struggling Millenial, you are struggling … to find solid footing in a marsh of blind allegiance to Buy&Hold (B&H) If you prefer B&H for other undisclosed reasons, just say so, but don’t use rhetoric to hide the facts – and the facts are in, as I have presented them already.

    The facts say that Timing beat B&H in the 2000-2007 period, and again in the 2007–2016 period, when the superiority was greater. I presented 2000-2007 facts in a different comment, which you no doubt saw but preferred to ignore. The “rare market collapse” you mention, in a vain attempt to ignore the superiority of Timing in 2007-2016 did not occur in 2000-2007, when Timing was even more superior to B&H. How do you account for that?

    And yes, taxes do matter. Better to pay them later (with B&H) than earlier (with Timing). But you will eventually, inevitably pay taxes on your B&H gains too. So which would you prefer:
    (1) paying less tax, later, on the smaller gains of B&H, or
    (2) paying more tax, earlier, on the larger gains of Timing?

    You end up with more money in your pocket with Timing. So don’t let the tax tail wag the profits dog.

    Finally, you say that Timing works until it doesn’t. Well, it has worked for 16 years and counting. I guess I could go back even further to see how the indicators would have worked back then, but you’d find some other factitious reason to ignore the point that Timing works.

    As the market plunges, as it seems to do at least once every 10 years, you hang on to your Chevron shares, and your Enron shares, and repeat the mantra “buy and hold, do nothing, I am safe.” But don’t include “smart” in that mantra.
    Feb 5, 2016. 11:10 AM | Likes Like |Link to Comment
  • Dollar Plunges, Gold And Oil Soar, Stocks Utterly Confused - Bezek's Daily Briefing  [View article]
    Ian said:
    "DEO is the sort of stock everyone should own. One of the very few excellent businesses available at a good price right now."

    Ian: how do you determine when a stock is at a good price? Do you use the normal ratios, like price to book etc?
    Feb 5, 2016. 11:00 AM | Likes Like |Link to Comment
COMMENTS STATS
693 Comments
433 Likes