Stock Market Risk

[Vic]

0 = Most Risk

10 = Least Risk

Current Model Reading As Of 11-20-02: 2

11-27-02: 2.5

12-4-02: 2

12-11-02: 2

12-18-02: 2

12-25-02: 2.5



1-1-03: 2.5

1-8-03: 3

1-15-03: 2.5

1-22-03: 2.5

1-29-03: 2.5

2-5-03: 3.5

2-12-03: 5.5

2-19-03: 5.5

2-26-03: 6.5

3-5-03: 6.5

3-12-03: 6.5

3-19-03: 4.5

3-26-03: 4

4-2-03: 4.5

4-9-03: 3

4-16-03: 3

4-23-03: 5.5

4-30-03: 3

5-7-03: 0.5

5-14-03: 1

5-21-03: 0

5-28-03: 0.5

6-4-03: 0

6-11-03: 0

6-18-03: 0

6-25-03: 0

7-2-03: 1

7-9-03: 0

7-16-03: 0

7-23-03: 0

7-30-03: 0

8-6-03: 1

8-13-03: 1

8-20-03: 0

8-27-03: 0

9-3-03: 0

9-10-03: 0

9-17-03: 0

9-24-03: 0

10-1-03: 0

10-8-03: 0

10-15-03: 0

10-22-03: 0

10-29-03: 0

11-5-03: 0

11-12-03: 0

11-19-03: 0

11-26-03: 0

12-3-03: 0

12-10-03: 0

12-17-03: 0

12-24-03: 0

3-17-04: 1

3-24-04: 3

4-7-04: 2

5-5-04: 3

5-19-04: 4

6-2-04: 3

6-16-04: 0

8-4-04: 2.5

8-18-04: 4.5

8-25-04: 5.5

9-1-04: 4

9-15-04: 2

10-13-04: 1

10-20-04: 0

4-6-05: 3.5

4-27-05: 4.5

5-11-05: 3.5

6-1-05: 2.5

6-29-05: 0

8-31-05: 2

10-12-05: 4

11-9-05: 2

11-16-05: 1

11-30-05: 0

2-15-06: 3

3-1-06: 5

3-29-06: 3.5

6-1-06: 4.5

6-7-06: 5.5

6-14-06: 6.5

6-21-06: 7.5

7-5-06: 6.5

7-12-06: 5.5

8-9-06: 6.5

9-6-06: 5

9-20-06: 4

10-11-06: 2

11-15-06: 0

1-17-07: 1.5

3-7-07: 3.5

3-28-07: 2

5-2-07: 1

8-1-07: 3

8-8-07: 4.5

8-22-07: 6.5

9-12-07: 3.5

9-19-07: 1.5

10-3-07: 0.5

10-10-07: 0

10-31-07: 1

 

[gwcrim]

Risk in the market is definitely low. Using your scale of 10 as very low, I'd put it between 8-10. I use a form of technical analysis for market risk management on a daily basis. It works so well that I've missed all the carnage in the last 3 years. I'm testing the waters in the telecom sector right now.

If you like to buy low and sell high, right now you wanna buy, buy, buy!

 

[MrLuckey]

I'm with you gwcrim - stock prices are low, its time to buy. Sure it could go down more but I doubt too much more before it bounces skyward.

 

[yzeater]

If we could just get Greenspan to say "the bottom has been hit", and for that to be true...

 

[Vic]

Originally posted by TTRGuy

stock prices are low, its time to buy

Did you think prices were low on 10-9-02 when the model reading was "9" and the major averages were about 20% lower ?

For anyone who's been paying close attention, the model's record speaks for itself.

 

[linusb]

The fact is: No one can reliably predict what the stock market is going to do tomorrow, next week, or next year. The best guage we have is that the long term trend of the market index has been up... so that hopefully, $1 today will be worth $1 annualized with ~12% return 30 years from now. Of course, that is not guaranteed. I expect that the United States will have economic success over the long haul and that should ensure the continued success of the stock market 20-30 years from now.

Any other guestimate at downside or upside is merely speculation and nothing more. Don't fool yourself into thinking you can time the market any better than you can predict lottery numbers. Mutual fund managers and their staff have every possible tool at their disposal to help them make ideal choices in when to buy and sell stocks. They can't beat the averages consistently. My accounts suffered the consequences of my thinking that I could do better than them. It's a suckers game of you vs. the corporate insiders. You being the sucker.

Start an index fund if you haven't already and put the most that you can possibly afford into every month with the intent of increasing that amount annually.

 

[gwcrim]

As I tell my clients: Accountants give investment advice, lawyers give investment advice, truck drivers give investment advice, coal miners give investment advice as do criminal investigators.

I'm not an accountant, nor an attorney, nor a truck driver, nor a coal miner, nor a criminal investigator. But I do earn a living in the investment business.

Mutual fund managers and their staff have every possible tool at their disposal to help them make ideal choices in when to buy and sell stocks. They can't beat the averages consistently.

To be fair, fund managers have rules regarding how to invest money. It's not as easy as it seems. But that sure doesn't excuse their miserable performance. I don't sell funds unless that's about the only option.

Any other guestimate at downside or upside is merely speculation and nothing more.

Are you sure of that? Because the tools I use haven't let me down. But then I don't approach the market like most investors. You certainly do need to be fleet of foot. When it's time to sell, don't think.......... SELL. The same goes for buying.

Start an index fund if you haven't already and put the most that you can possibly afford into every month with the intent of increasing that amount annually.

While that's not bad advice, it sure is settling for mediocrity. Believe it or not, it is possible to invest successfully under ANY market conditions. The investors biggest enemy is emotion. Greed and fear. Ignorance hurts too. Fortunately, I'm a cold hearted ba$tard and a smarta$$. :debil:

For anyone who's been paying close attention, the model's record speaks for itself.

What model is that?

 

[linusb]

Well let's hear your sytem. I still have accounts that I'm willing to actively trade when the mood strikes. I'd be curious to know what your returns have been over the past 2 years.

 

[gwcrim]

I use Point and Figure Technical Analysis. There are indicators that follow the overall risk level of the market. When things are overbought and begin to decline, I go do cash or Treasuries or something else that's 'out of the market'. When I go in, I look at industry sectors that are oversold but strengthening. There are instruments that are sector specific, so individual stock selection isn't necessary, but stocks can still be used.

I also watch seasonality. The summer and fall months are high risk, so I'm much more likely to be in cash then. Obviously positive returns for the last 2-3 years are hard to come by. I was developing my program during this time.

Though I really don't have positive returns, the downside was minimal. Nothing like the 40-80% losses that others have seen. I'm looking at 10-15% down. Not including the 2% I earned when I was in cash. This was accomplished by using the limited selection of mutual fund choices in my 401-K. Had I been able to trade options or short stocks, I could have done better.

But the program is now more mature and I have better investment choices as well. I'm actually looking forward to the coming sideways market. I'll be able to pinpoint where the action is and avoid losses when things are negative.

 

[linusb]

Well good luck to you. I've lost most of my excitement for the market. I guess a bear market will do that to you. :( This recent upturn we've seen the past few weeks has been encouraging. Perhaps once things get rolling again, I'll renew my quest for a good moneymaking stock market system. Afterall, ANYONE can make money in a good strong bull market, as evidenced by the late 90's.

 

[Vic]

Originally posted by linusb

The fact is: No one can reliably predict what the stock market is going to do tomorrow, next week, or next year.

True, but there are reliable methods to determine the relative risk of being invested in the general market at any given time. The goal being to be mostly in the market when the relative risk is low and mostly out of the market when the relative risk is high.

You can't assume that this cannot be done successfully because vested interests proclaim it or because you personally have not been successful.

gwcrim- For a couple of years or so, I've been posting the readings of a model that I developed years ago to measure the relative risk of being in the stock market at any given time. It is updated weekly. It's not a precision timing model and should not be used as such. There were several people that showed interest in it, which is why I have continued to post it. From now on, when I update the post each week, I will leave up the previous readings. That way, after a history has built up, a person can go back and compare the readings to a chart of the broad market and determine if they can be of any use to him.

No, I will not reveal the components of the model.

Anyone who believes that I am an idiot or that this is all a big waste of time, may feel free to ignore this thread.

 

[gwcrim]

Afterall, ANYONE can make money in a good strong bull market, as evidenced by the late 90's.

Really! When 65 yr. old housewives are day trading, something ain't right.

I've lost most of my excitement for the market. I guess a bear market will do that to you.

That's what ya sort of call the 'Odd Lot' Theory. When the small investors are bailing out, it's time to get back in.

 

[Senior KX Rider]

I was looking for you to come back Vic. I have been following Vics method of determining risk and he has been pretty close on his calls. The guy that manages my 401k and other investments says that Vics method has merit. My 401k and other investments have shown about 8% growth over the last 2 years and the moves that my guy has made have run pretty close when compared to Vics predictions. The market may be in an mild upswing right now but guess where my money is not at. ;) Keep the info coming Vic..

 

[gwcrim]

It's not a precision timing model...

None of them are, really. You must leave room for error.

I'm looking forward to watching your model. Mine turned full positive between 10/17 and 10/24. It's still pretty reasonable, though some sectors are a bit pricey now.

 

[geremacheks]

Obviously, the market has already answered the question: I think it's been up seven weeks in a row now. There were lots of good buys if you were prepared to buy. And still going up at this writing.

Good to see market watchers here. I've been trading the markets, I hate to reveal it, but since 1968. Started out in a bear market and learned how to short. Gone thru tons of market experiences--and love to trade. And that's what's going on here, I think. No buy and hold forever. Short term trading looks to be the safe route to go. Happy trading.

 

[Vic]

11-27-02: 2.5

 

[Tony Eeds]

Originally posted by Vic
Anyone who believes that I am an idiot or that this is all a big waste of time, may feel free to ignore this thread.

Actually Vic - The opposite is true, I feel I am the idiot.  If I better understood the market in years past I might have saved myself some of the losses that I have experienced.  To date the only active involvement I have had is to put money into my SEP.  There is no latitude as far as individual investments, only fund groups available; so, almost by accident, I am in groups that have lost but my losses are less that the norm.  One of my goals for the new year is to begin actively tracking my investments and educating myself.  At 51, I need to get busy, or my retirement will be postponed a long way out.

Can you (or any other knowledgable souls) steer a neophite to books and mags that offer "quality" rather than pablum and noise about investment?

Tony

 

[gwcrim]

To date the only active involvement I have had is to put money into my SEP. There is no latitude as far as individual investments, only fund groups available; so, almost by accident, I am in groups that have lost but my losses are less that the norm.

I'm no retirement plan expert but I 'think' you can move your SEP account to a brokerage firm. In a self directed SEP your investment choices are unlimted. You employer might not like the idea, but if you are allowed that's his tough luck!

As for good reading, Peter Lynch is a pretty common sense guy. He's easy to read for the non-professional. "One Up On Wall Street" is a good one. But it's kind of old.

 

[truespode]

Just for thought look at a $1000 investment in September 1982 in a S&P Index fund.

As of September 2002 it would be worth $11,923. That is a 13.19% return on investment over 20 years (and that is after a downturn).

I personally believe that there is NOT a better long term investment strategy than equity investments. Diversify, plan and put your time in and you will make money on your investment.

Only fools (in my opinion) try to time the market. It is the time IN the market that gives you the best returns. Look at it like this... for that same $1000 if you tried timing the market over the same period of time you would have a return like the following:

If you mis timed and missed the top 5 days: Investment would yield $8,852 (11.51%)

If you missed the top 15 days you would get $5,749 (9.13%).

If you missed the top 25 days you would get $4,014 (7.19%).

I believe you should not try to play the market. You should invest in the market and be diversified and patient.

Just my .02

Ivan

 

[Tony Eeds]

Ivan:

I hear where you are coming from, but what I mean is actively being involved in my future, not playing the market.

I sold a house in 85 that yielded a very nice nest egg.  Because of the downturn in the economy in 86, I used it to fill the gaps until I found work.  Not bad, but I wish I had put even 10% of it in the market then.  I didn't have a clue and after seeing the 70's, I didn't believe in the market.  I am not kicking myself for my inexperience, but I don't want to passively replicate it again.

Tony

 

[truespode]

I'm kicking myself for inexperience b/c I didn't realize the opportunity in the market until recently and have not been investing :(

That is changing though.

Ivan

 

[gwcrim]

Market timing? Look at this:

$10,000 invested in the S&P 500 in 1950. Portfolio A was in the market ONLY from May 1 to Oct. 31. Portfolio B was in the market ONLY from Nov. 1 to April 30.

Portfolio A = $18,000 at the end of 2001. Avg. Annualized Compounded return = 0.77%.
Portfolio B = $332,523 at the end of 2001. Avg. Annualized Compounded return = 6.98%.

These results are using a very rough method of market timing. Imagine the results if you could just tweak it a bit!

Buy and hold is OK. I'm not knocking it. But one CAN do better.

 

[geremacheks]

Ivan----Look at your first paragraph: An investment in September 82. Not only did you time the market, but you picked the absolute best time--the beginning of the biggest bull market of all time, right after a devestating bear market.

Just for fun, and to be fair, try picking another date, like April 01 to Sept 02, a period of only a bit more than a year, when the Dow went from 11,500 to 7025 approximately. Sadly, many people did get in at this time, and lost just about everything. They also timed the market like you did. You do need to choose a time to get in.

The fact is, timing plays a very important part of investing/trading in markets. The time IN the market is important, but to be sucessful, you must be IN, and in line with the trend of the market. If you decide to stay in during a devestating bear market on the long side, with a buy and hold decision, the outcome is not going to be pretty. Bear markets are dedicated to getting all the bulls out at the bottom, and is very efficient at it. These cycles play out over many years in time.

There is risk in timing the market, but you HAVE TO DO IT.

 

[truespode]

Just for fun, and to be fair, try picking another date, like April 01 to Sept 02, a period of only a bit more than a year, when the Dow went from 11,500 to 7025 approximately. Sadly, many people did get in at this time, and lost just about everything.

Let's talk in 2022 where their portfolio is if they do not panic. I believe that they will still have a profit and a sizeable one at that. The stock market is not a 1 year/2 year game. It is a long term investment that will pay off.

If you want to time the market good luck. The majority who time the market fail. Some make a good living at it and if you have the confidence and skill go ahead. The higher the risk the greater the reward.

Ivan

 

[geremacheks]

I guess you still want to time the market by one very favorable date. Unfortunately, that's not real life. We can pick all kinds of dates that you will either win or lose.

Be careful out there; it's a professional's game.