Slava plays Clairvoyant of Calgary

[Slava]

First let me say that this is one of the stupidest things that someone can do...try to predict the stock market! But with the other investment thread being severely de-railed into a dsicussion about oil workers vs. auto workers and things like that I figured it was time for a new one.

I also feel somewhat remiss about not posting last year when I was moving the bulk of my clients in to cash....so here goes. Before I make any predictions here though let me state unequivocally that this does not constitute investment advice, and like any good workout plan you should consult with an advisor before you implement these things!

Basically given the current cycle my position is that we are set for one more re-test of the lows. I would suggest that this will take place in the first week of December and things will bottom out right around the first. My suggestion for my clients will depend on a few things; if you are buying on a disciplined schedule (i.e. once a month or more frequently you have a purchase that comes out of your account) you should continue with this.

If you are not on a program such as that however you should really think about moving to a cash/very conservative position. Its a temporary situation and you will want to buy back in before the end of the year in all likelihood. I would highly, highly recommend this if you are in a position of holding non-registered investments specifically to crystallize the losses you have likely suffered.

What in the world do I base this on? Well there are a few things:

A) The last day for Hedge fund redemptions is on November 30th...you can bet that if people are eligible to take money out and that is their last kick at it than there will be some serious money moving.

B) The fundamentals in the market indicate that we are not quite done yet. As the date for a recovery begins to push back into later 2009 the bottom of the market moves a little backward with it. My impression is that the bottom is 60% of the way through...as the trough deepens, the 60% mark moves as well.

I say one more time for the record, that this is purely my opinion. As a lot of you may know I am not one who believes in trying to time the market, because it is relatively impossible...however I am also not terribly interested in watching everyone else ride it down and then back up again! I would be extremely interested to hear with others have to say though, which is a large part of the reason that I post this!

[Iowa_Flames_Fan]

I'm totally suing if this advice doesn't make me rich.

Seriously, I'm not doing anything with my investments--just leaving them alone. I'm just glad to hear someone who knows more than me saying there may be an end in sight, because those statements are a little depressing.

[bluejays]

Originally Posted by Slava

First let me say that this is one of the stupidest things that someone can do...try to predict the stock market! But with the other investment thread being severely de-railed into a dsicussion about oil workers vs. auto workers and things like that I figured it was time for a new one.

I also feel somewhat remiss about not posting last year when I was moving the bulk of my clients in to cash....so here goes. Before I make any predictions here though let me state unequivocally that this does not constitute investment advice, and like any good workout plan you should consult with an advisor before you implement these things!

Basically given the current cycle my position is that we are set for one more re-test of the lows. I would suggest that this will take place in the first week of December and things will bottom out right around the first. My suggestion for my clients will depend on a few things; if you are buying on a disciplined schedule (i.e. once a month or more frequently you have a purchase that comes out of your account) you should continue with this.

If you are not on a program such as that however you should really think about moving to a cash/very conservative position. Its a temporary situation and you will want to buy back in before the end of the year in all likelihood. I would highly, highly recommend this if you are in a position of holding non-registered investments specifically to crystallize the losses you have likely suffered.

What in the world do I base this on? Well there are a few things:

A) The last day for Hedge fund redemptions is on November 30th...you can bet that if people are eligible to take money out and that is their last kick at it than there will be some serious money moving.

B) The fundamentals in the market indicate that we are not quite done yet. As the date for a recovery begins to push back into later 2009 the bottom of the market moves a little backward with it. My impression is that the bottom is 60% of the way through...as the trough deepens, the 60% mark moves as well.

I say one more time for the record, that this is purely my opinion. As a lot of you may know I am not one who believes in trying to time the market, because it is relatively impossible...however I am also not terribly interested in watching everyone else ride it down and then back up again! I would be extremely interested to hear with others have to say though, which is a large part of the reason that I post this!

Good to hear some professional tips. Just be sure to update us when to get in! Far too many people explain why thing happened, but it's good to hear some predictions about future happenings.

[Clarkey]

Are we really going to see prices fall below the global panic fest of 3-4 weeks ago? That was the perfect storm of badness and immense fear all at once. I think we saw an over-reaction and over bail and that most sound companies will hover around that same bottom for a while and then start to improve. Some would argue that the market was under-reacting and not accounting for the long term blow this crisis will deal. That could be true, and I fully admit I don't know what the full extent of this thing is but I am bullish on a handful of bluechip Canadian based energy companies nonetheless. You can't go wrong with companies that have solid balance sheets, and a crapload of proved reserves that will always have a value whether it's worth $50 bucks a barrel or $200 bucks. Buy up bluechip energy and ride it out, the bottom can't go much lower on these guys, and if it does, just hang on for a year or 2 and you'll make money.

[Clarkey]

Originally Posted by fleury

Good to hear some professional tips. Just be sure to update us when to get in! Far too many people explain why thing happened, but it's good to hear some predictions about future happenings.

You've got to do the cost benefit on this. I think it would feel crappier psychologically to miss out on potentially the biggest buying opportunity in history than to say that you sat on the sidelines and avoided another 10-15% market drop.

[bluejays]

Originally Posted by Clarkey

You've got to do the cost benefit on this. I think it would feel crappier psychologically to miss out on potentially the biggest buying opportunity in history than to say that you sat on the sidelines and avoided another 10-15% market drop.

While I agree, a market drop of 10%-15% is something I'd be happy to avoid. A 10% gain annually is something most investors hope for. That much of a drop and you start to lose sleep. Also, I think for most people, a loss is a lot more emotional than a gain. I'll keep an eye out for this potential drop.

[bluejays]

Oh, forgot to ask (don't want to derail the thread...this early at least). I'm just in the process of finalizing my questrade account signup (cheapest trades on the net). I'm just going to use their basic webtrader to do online trades, but have never used it or seen what it looks like. Does anyone use Questrade? How is their Webtrader interface? Are their trades filled efficiently? How is their customer service?

[Slava]

I agree with you Clarkey; it would be bad to miss the initial 10-15% uptick. My point here is that if you have a chunk of money sitting in the market and it drops another 10-15% before that uptick though you are better off to move out and get back in at the new bottom.

Further, the initial uptick is not the be all and end all. You could miss the first up week and still gain the next 2-3 years of up times in the markets. If you are buying single securities this is even more apparent. Many companies went up by 10-15% only to rise by a few hundred percent over the next 5-7 years! Sometimes that little bit of caution is worthwhile...it can give you the confidence to know that company you're buying is doing what you expect.

[MoneyGuy]

All of this assumes that one knows when the next supposed 10-15% downturn occurs, when to exit the market and when to re-enter. I submit that no one does. Check out these facts.

-When the market does reach bottom and the recovery starts, on average it tends to make up fully a third of the losses in the first 40 days!!
-Over the last half century, bear markets tend to average negative 30% over 11 months; the bull markets tend to last five years and go up 161%.

That first point illustrates why you can't afford to miss the initial part of the recovery, which is spring loaded. I'd rather risk being in the market for a further 10-15% drop than being out of the market for any of the recovery. I want to be there to benefit from the entire recovery.

Market timing is just guess work. It usually fails. I wouldn't try.

[Clarkey]

Originally Posted by fleury

Oh, forgot to ask (don't want to derail the thread...this early at least). I'm just in the process of finalizing my questrade account signup (cheapest trades on the net). I'm just going to use their basic webtrader to do online trades, but have never used it or seen what it looks like. Does anyone use Questrade? How is their Webtrader interface? Are their trades filled efficiently? How is their customer service?

I'm on questrade. The webtrader thing seems to be ok, not great but not horrible either. There was a thing in one of the papers rating all of them, I think it got 12th place out of 15. I think BMO's thing was rated highest. I just don't get paying $30 when you can pay $5-10 with a slightly less sexy user interface.

[Clarkey]

Originally Posted by MoneyGuy

All of this assumes that one knows when the next supposed 10-15% downturn occurs, when to exit the market and when to re-enter. I submit that no one does. Check out these facts.

-When the market does reach bottom and the recovery starts, on average it tends to make up fully a third of the losses in the first 40 days!!
-Over the last half century, bear markets tend to average negative 30% over 11 months; the bull markets tend to last five years and go up 161%.

That first point illustrates why you can't afford to miss the initial part of the recovery, which is spring loaded. I'd rather risk being in the market for a further 10-15% drop than being out of the market for any of the recovery. I want to be there to benefit from the entire recovery.

Market timing is just guess work. It usually fails. I wouldn't try.

It depends on your time horizons too, if you absolutely need to cash out in the next couple months it's a different story. I'm not in that situation.

[Phanuthier]

Thanks again to our 2 resident experts and others

To me, the lows where we broke the resistance levels on the DOW and NYSE, correct me if I'm wrong, but weren't alot of stocks getting artificially pulled up by a new trader in the game, i.e. the feds?

To follow MoneyGuy's advice (and I realize the dangour of believing too much of the internet) I keep watching closely for when the end of this bear market is and the start of the bear, but the news just keeps getting worse and worse. Largest number of job loss in x number of years, projects getting cut (info from some friends working in design houses), the High-Tech has gone through massive layoffs the past 2 weeks, this week they recorded the largest drop in sales in however many years.

Are those the fundamentals / indicators that you are talking about Slava?

[Slava]

Originally Posted by Phanuthier

Thanks again to our 2 resident experts and others

To me, the lows where we broke the resistance levels on the DOW and NYSE, correct me if I'm wrong, but weren't alot of stocks getting artificially pulled up by a new trader in the game, i.e. the feds?

To follow MoneyGuy's advice (and I realize the dangour of believing too much of the internet) I keep watching closely for when the end of this bear market is and the start of the bear, but the news just keeps getting worse and worse. Largest number of job loss in x number of years, projects getting cut (info from some friends working in design houses), the High-Tech has gone through massive layoffs the past 2 weeks, this week they recorded the largest drop in sales in however many years.

Are those the fundamentals / indicators that you are talking about Slava?

Absolutely. That and the numbers that we appear headed for in the historical context could be much worse. For example the housing correction in the US is not yet in line with the historic norms for a recession, let alone the fact that this recession is being led by that sector.

I do agree with your sentiments about timing the market though moneyguy...but suffice it to say that there are a lot of people who try this, and over the past 12 months they have been rewarded for doing so.

[MoneyGuy]

Originally Posted by Phanuthier

Thanks again to our 2 resident experts and others

To follow MoneyGuy's advice (and I realize the dangour of believing too much of the internet)...

The difference is I'm not shy and am willing to tell people who I am. Otherwise, I agree; you could be taking advice from a 10-year-old kid. I don't mean Slava, who I know and is who he says he is. Unless he's a very old-looking 10.

Originally Posted by Slava

I do agree with your sentiments about timing the market though moneyguy...but suffice it to say that there are a lot of people who try this, and over the past 12 months they have been rewarded for doing so.

Sometimes you get lucky and it works, sometimes you lose those bets. I have a friend (not a client) who told me in 1995 he would not buy into the U.S. market because it was overpriced. He missed out on years of 20%-plus returns. My point is, it may have worked this time, but anyone who keeps making those bets over time is very likely to lose more than win. I'm old than 95% of you and have a large portfolio and I'm not willing to time the market with my money. I'm willing to sit tight and take another (possible) 15% decline for the assurance of knowing that I'll be there for the recovery, all of it. Someone who times the market has no such assurance.

[Slava]

Well the whole "timing the market" question is one that I actually struggle with. I don't know that an internet forum is the place for this, but this is term that gets bandied about a lot in the industry.

Lets face it though; if a recession is imminent, and almost everyone agrees on that than why would an investor ride the market down? It seems silly to sit back and hold onto positions just to be in the market as opposed to sitting back and buying when things bottom out, or at least get lower. I often wonder (sometimes aloud) whether the timing the market sentiments aren't still best left for the day-traders and stockpickers of the world...when ETF's are being held for an average of 3 days at a time; these people are trying to time the market. I consider looking at the macro-economic trends and taking a proactive approach to be something different though.

[MoneyGuy]

I'll tell you why. The market is not the economy. The market tends to move about half a year before the economy does, because investors make their decisions based on what they expect to happen. If, as I expect, the economy is in recovery about the middle of next year, then the first part of this year is about the time to begin investing again. Anyone who waits for a stong sign of an economic recovery, has missed a huge part of the market recovery. That's why I'm sitting tight.

[Nancy]

I think there is somewhat of a difference between attempting to time the market based on technical analysis of price movements and identifying major macroeconomic factors and adjusting your investment strategy accordingly. I think this is what distinguishes reliably performing investors like Buffet from someone who gets lucky on one side of a business cycle and loses it all on another.

[Nancy]

Originally Posted by fotze

Do you guys really think that past trends apply to this situation. To me (uneducated on this of course) this seems like unchartered waters that you cannot use past patterns to predict what will happen.

Totally agree. It could end up being an exact repeat of the recession of '91, which in my opinion could be a best case situation, or it could be more like the early '70s. And, to be honest, I do think that you'd do well over the long term to get into the market right now... What's keeping me back is the possibility of either my wife or I losing a job.

[Slava]

Originally Posted by MoneyGuy

I'll tell you why. The market is not the economy. The market tends to move about half a year before the economy does, because investors make their decisions based on what they expect to happen. If, as I expect, the economy is in recovery about the middle of next year, then the first part of this year is about the time to begin investing again. Anyone who waits for a stong sign of an economic recovery, has missed a huge part of the market recovery. That's why I'm sitting tight.

I don't disagree with you on that at all. I actually think that we are on the same page in a lot of respects here, except for the idea of moving out of the market and waiting for the bottom (my thought) and yours of just sitting tight.

I do think that historically this time in the market is very similar to past experiences. Incidentally the current market is most similar to the 1990-1991 bear markets in a lot of ways. While the media would have you believe that this is uncharted territory that is not entirely the case. Sure, the recession this time is being lead by housing and that is not always the case, but a similar situation took place in the 90's. Also while the actual numerical declines on the market have been severe (about 6000 points from peak to trough on the TSX) as a percentage the figures are still in line with past recessions and slow-downs.

Lets face it...when the GDP drop is 0.6% we are not looking at armageddon here. Yes, there is a lot of pain particularly in the US where a 25 trillion dollar market (housing) has just trimmed $5 Trillion (20%). That type of drop is going to be painful. People are ditching their houses and keeping their cars...which is an anomaly compared to past events. But at the same time you have corporations with balance sheets that are very strong. You have demand in SE Asia that was simply not there in previous decades, and by all accounts that demand will strengthen over the coming year.

There is no question that this is a temporary situation on the markets.

[flamesfever]

Originally Posted by fotze

Do you guys really think that past trends apply to this situation. To me (uneducated on this of course) this seems like unchartered waters that you cannot use past patterns to predict what will happen.

I think this is a really valid point. When can anyone recall deflation in a globalized economy?