6/8/20 The Last Trade

As of today, I'm transitioning to buy-and-hold.  Positioning will take the form of 78% VT (ie, the world market, replicated using a 50/50 mix of VTSAX/ VTIAX) + 5.5% allocations in EEM (emerging markets)/ XLF (banks)/ XLI (industrials)/ XLE (energy).  I may rebalance from time to time.

I have no interest in trying to time the decision, and I'm OK paying up (~1%) to open the positions today.  After all, I skirted much of the damage on the way down, and also fully participated in last Friday's rally.

Moving on to other interests.

3/23/20 Out of the Blue and Into the Black

A Neil Young classic recorded at the Cow Palace in 1978:

https://www.youtube.com/watch?v=i6RZY4Ar3fw  

Trying to time the market based on fundamentals and/or technical signals has been next to impossible - which leaves us with sentiment as a rough road map.

Any upside reversal(s) into the black are likely to come out of the blue - as to when/ where it begins, well - your guess is as good as mine!  I'm only able to opine that we're probably close in both time and space.

Still long (and wrong).

1/31/20 A Decent Pitch

1. Put/ Call 112%.

2. Fear and Greed 45 (versus 97 not long ago).

3. Media accounts of the coronavirus appear to have switched from assurance to fear. 

4. There are now headlines calling for a -10% correction.

I think it's time to buy.

12/10/19 Long At The Close

Repositioned long the global markets at today's close.  

I prefer in general to buy negativity and sell exuberance.  The current environment is kind of a puzzle.  On the one hand, there's a great deal of anxiety - as evidenced by relatively large cash positions (both retail and institutional).  On the other hand, I sense optimism about the economy despite the anxiety.

Once in a while, the stock market will 'ride the upper Bollinger Band-' ie, prices will continue to rise on positive sentiment.  Think back to 2017 - the market remained 'overbought' for a long time.  I think we may be entering another period of persistent upside movement in prices.  Call it what you want - climbing a wall of worry, riding the upper band, a rally against the odds.  The fact is that it's happening - the market likes to defy expectations, and I think that's exactly what's going on. 

12/6/19 Take Five/ Mercy

I sat out today's rally.

https://www.youtube.com/watch?v=tT9Eh8wNMkw 

While we're taking five, let's discuss the cognitive behavioral approach to a missed opp:

(a) What's the point of trading?  Is it to nail every buying/selling opp?  Of course not (if that's the goal, you won't last long - more on that later).  No, the entire point of trading is to lower risk.  I don't like taking big hits, and I'm willing to pay a price to avoid them.  The price I pay takes the form of lower relative gains.  (Once in a while, of course, the fact that I'm able to sidestep extended declines means that I'll outperform the market!)

  

(b) What's the cost of a missed opp?  Some traders take the perspective of 'opportunity cost-' or as Peter Lynch once put it, 'Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves.'  Hey, that's probably true - but that doesn't work for me.  I have a big aversion to sitting through -50% market crashes.  My reply to the question would be, 'Nothing.'  Sure, I didn't make any money today watching from the sidelines, but neither did I lose any money.

(c) What's a good year?  For me, +7% is a good year.  I'm currently up +9.82% year-to-date.  Of course, most indexes are up >+20%!  So I'm way behind.  On the other hand, I ended 2018 off just -1.36% - well ahead of most indexes.  I matched the indexes with my own +20%+ year in 2017.  I can't even recall 2016, but I think it was a killer year.  Ultimately - who cares?  When it comes to performance, luck plays a big role and I consider myself fortunate to be up +9.82% right now.  A couple of months ago I was up just +6% and happy about it.  Everything in life is relative.

So what happens when traders feel the need to nail every opp?

https://www.youtube.com/watch?v=s4rXEKtC8iY

10/3/19 Green Signals!

Evidence that a short-term bottom was put in this morning at SPX 2856:

(a) Put/Call ratio 137% (even higher @ 154% earlier in the day).

(b) ETF Put/Call ratio 201%.

(c) VIX reverses hard to close at the intraday low.

(d) AAII Bulls decline to 21.37.  Bears rise to 39.44.

If you don't like numbers, here's what it comes down to:

The market rallied on bad news (ISM) to pull off a Staubach come-from-behind win.

9/4/19 The Beginning of the End

The +1000-point rally in the Hang Seng may be the shot that signals a reversal in trend for emerging markets - the beginning of the end of a long down trend (which in my opinion began in January 2018).

Emerging markets tend to lead the global stock market.

I will probably begin scaling back into emerging markets, with a longer time horizon.  Unlike recent buy/sell alerts, it probably won't matter whether you buy in today, tomorrow or next week (recall the 't+5' study).

Not having bought back in last night?  I don't view it as a 'missed buying opportunity.'  First of all, none of us participated in the recent down draft.  Secondly, it's appropriate to wait for a catalyst before making a trade - we open positions only on high(er) probability bets.