Thread: January 06 Tally

With an increasing population, there is increased consumption, jobs, and production. Unless people start dying by the millions, the five to ten year trend will always be up.

Bird flu.................

Originally Posted by Soldat

With an increasing population, there is increased consumption, jobs, and production. Unless people start dying by the millions, the five to ten year trend will always be up.

Except for when it isn't...

Originally Posted by SkyPilot

"Buy and Hold" works great in a positive market, almost any strategy does. However, you will get skunked on the down side (2000-2003). ...I encourage you to keep your head in the game, and watch for the next big downturn, so you can preserve your retirement. Good Luck!

Tom made a similar point, i.e. passive investing works in an up market, but not in a bear market.

Researchers Jess H. Chua and Richard S. Woodward arrive at a different conclusion in their paper Gains from Stock Market Timing. They state: If the investor has only a 50% chance of forecasting bull markets, then he should not practice market timing at all. His average return will be less than that of buy-and-hold even if he can forecast bear markets perfectly. Ouch!

Furthermore,Roger Gibson states in his book Asset Allocation that:

...a disproportionate percentage of total gain from a bull market tends to occur very rapidly at the beginning of a market recovery.

Therefore, it doesn't really help to forecast bear markets correctly, you have to forecast at least 50% of the bull markets correctly and forecast them at the beginning of the upturn.

Chua and Woodward go on to conclude that for market timing to pay:

Investors require the forecast accuracies of at least:

80 percent bull and 50 percent bear;
70 percent bull and 80 percent bear; or
60 percent bull and 90 percent bear...

Finally, Gibson states that a mythical 1926 investor, who invested $1 million and choose, with perfect predictive capability, on an annual basis, the best performing asset class (T-bills, long-term corporate bonds, large company stocks, and small company stocks), would have been worth $20 trillion in 1998. In other words, that mythical investor would have owned all of corporate America and half of all non-U.S. companies.

Obviously, that didn't happen, although on the surface, it doesn't sound all that hard, i.e. annually predicting and concentrating investments in the best performing of four asset classes.

Rokid,

I don't think anyone can accurately pick bull or bear markets over any length of time. However, if you can identify trends and positions, you will likely outperform buy and hold. True, this can be tricky as well. However, if you do not stay engaged you may "buy and hope" instead of "buy and hold", and end up riding the coaster down when you will need to access the money at retirement.

I can almost predict bull and bear markets and I am willing to share my methodology with everyone who posts here, for a price. If everyone sends me $10.00 USD, I will tell you which Funds I am about to invest in. They are GUARANTEED to go down as soon as word gets out that I have bougfht in.

Dell

I must follow the same signals / indicators as you... will PayPal work?

Hey Mike, no tracker this week, OK. I don't want to know!!!!
Norman
Just kiddin'!!

Originally Posted by rokid

Finally, Gibson states that a mythical 1926 investor, who invested $1 million and choose, with perfect predictive capability, on an annual basis, the best performing asset class (T-bills, long-term corporate bonds, large company stocks, and small company stocks), would have been worth $20 trillion in 1998. In other words, that mythical investor would have owned all of corporate America and half of all non-U.S. companies.

And the mythical inventor that builds a time machine and travels back in time to bet on every winning horse, boxer, team, and company would be worth more than the rest of the world combined.

Originally Posted by Mike

And the mythical inventor that builds a time machine and travels back in time to bet on every winning horse, boxer, team, and company would be worth more than the rest of the world combined.

Which is Gibson's point - it didn't happen and it isn't going to happen in the future.