Pyramid up question

[uncleharley]

Apr 5, 2024 19:29:10 GMT bruce said:

Apr 5, 2024 18:37:37 GMT liftlock said:

Pyramiding can also underperform just as well as other strategies that attempts to outperform.

Any strategy is likely to outperform no strategy.

[retiredat48]

I planned to post this weekend (tolorrow), my selling methods. I can start a new thread if we like.

R48

[bruce]

The data below compares portfolios ( Mutual Funds ) that use various strategies to outperform. The 20-year results make it clear how seldom these "strategies" succeed.

The no-strategy success rate:

All Lrg Cap funds vs. S&P500…………….94.79%

All Sm Cap funds vs. S&P600SmCap……93.67%

LrgCapGrwth funds vs.S&P500Grwth……97.65%

MidCap funds vs. S&P400…………………97.03%

Data provided by S&P Dow Jones Indices.

Is PyrUp the exception? It would be easier to imagine PyrUp adding value to an investment portfolio only when reliable data vs. anecdotal performance is available.

[racqueteer]

Again, I can't help but think that the problem lies with expecting PUP to add value to everyone's investing.  I don't see that as being its benefit.  I think its benefit lies in getting people who wouldn't exhibit good behaviors into the market and keeping them there.  Everyone seems to acknowledge that being in is better than not being in.  It follows that any process which brings the uninvested into the market is going to be beneficial.  Expecting PUP to make the currently-investing folks more efficient/productive is unreasonable; imho anyway.  Any productive selling strategy would be valuable, but that is not PUP; nor is it the purpose of PUP (again, imho).  Your mileage may, of course, vary.

[retiredat48]

Apr 6, 2024 15:22:05 GMT racqueteer said:

Again, I can't help but think that the problem lies with expecting PUP to add value to everyone's investing.  I don't see that as being its benefit.  I think its benefit lies in getting people who wouldn't exhibit good behaviors into the market and keeping them there.  Everyone seems to acknowledge that being in is better than not being in.  It follows that any process which brings the uninvested into the market is going to be beneficial.  Expecting PUP to make the currently-investing folks more efficient/productive is unreasonable; imho anyway.  Any productive selling strategy would be valuable, but that is not PUP; nor is it the purpose of PUP (again, imho).  Your mileage may, of course, vary.

Spot on   +1

I am comfortable buying any mutual fund/ETF, at any time, under any market conditions...including NOW!

I would be uncomfortable if I were some of the forum investors who have had 50-100% of portfolio in money market funds the last year, at 5% yield, soon to be declining yields about six months from now, yet an inflation more on the 3-4% side...if not higher.  No gain in purchasing power.  How is this an "investment", as you watch the market go to new highs, getting away from you.  BTW about $5+ Trillion sitting in MM Funds currently.

R48

[retiredat48]

bruce ,...I suspect you do not understand what PyrUp is. It is a buy-in strategy that ends when one is fully invested with targeted monies into the fund or ETF they are buying. It works 100% of the time. If you make a fifth bucket purchase, you are invested in your desired fund, at a reasonable gain, and can now "think straight" going forward. IT is when investors are in a loss position (and growing loss position) that behavioral issues are compounded.

Hundreds of backtesting has been done and I gave a summary of performance results above.

R48

[chang]

Apr 7, 2024 6:12:12 GMT retiredat48 said:

bruce ,...I suspect you do not understand what PyrUp is. It is a buy-in strategy that ends when one is fully invested with targeted monies into the fund or ETF they are buying. It works 100% of the time. If you make a fifth bucket purchase, you are invested in your desired fund, at a reasonable gain, and can now "think straight" going forward. IT is when investors are in a loss position (and growing loss position) that behavioral issues are compounded.

Hundreds of backtesting has been done and I gave a summary of performance results above.

R48

I would be reluctant to use language like "It works 100% of the time" -- anything works 100% of the time if you define "works" properly. Yes, subject to the proper expectations for what can happen, PUP will produce a definite result. (Of course, some selling strategy is needed if the market falls off a cliff.)

I think retiredat48 makes an excellent point about behavioral issues. PUP is probably a good approach for people with poor investing behavioral traits. Say you buy a full position of XXX and it promptly goes down by 15%. What do you do? Sell and cut your losses? Hold and do nothing? Buy more? There is no correct answer here without knowing the future, but the point is -- some investors might not want to be in this position in the first place, asking themselves this question.

As to back testing, I don't see what the point would be. PUP is an exceedingly simple concept, and (to use an even more provocative expression than "it works 100% of the time") it cannot go wrong. It will do what it's supposed to; the results are predetermined. No need to "test it". It will almost certainly not be the most rewarding strategy nor the least rewarding strategy.

Last comment: I am not sure why retiredat48 says PUP is for mutual funds and ETFs. It makes perfect sense for stocks, where I have used it. One just needs to be mindful of the volatility of the asset in question, and set the increments appropriately.

[mnfish]

Apr 7, 2024 6:01:08 GMT retiredat48 said:

Apr 6, 2024 15:22:05 GMT racqueteer said:

Again, I can't help but think that the problem lies with expecting PUP to add value to everyone's investing.  I don't see that as being its benefit.  I think its benefit lies in getting people who wouldn't exhibit good behaviors into the market and keeping them there.  Everyone seems to acknowledge that being in is better than not being in.  It follows that any process which brings the uninvested into the market is going to be beneficial.  Expecting PUP to make the currently-investing folks more efficient/productive is unreasonable; imho anyway.  Any productive selling strategy would be valuable, but that is not PUP; nor is it the purpose of PUP (again, imho).  Your mileage may, of course, vary.

Spot on   +1

I am comfortable buying any mutual fund/ETF, at any time, under any market conditions...including NOW!

I would be uncomfortable if I were some of the forum investors who have had 50-100% of portfolio in money market funds the last year, at 5% yield, soon to be declining yields about six months from now, yet an inflation more on the 3-4% side...if not higher.  No gain in purchasing power.  How is this an "investment", as you watch the market go to new highs, getting away from you.  BTW about $5+ Trillion sitting in MM Funds currently.

R48

If your inflation prediction is 3-4% then your prediction of declining yields probably won't happen this year.
"with officials saying they are in no rush to ease monetary policy while the economy and the job market continue to grow." 

If the rate cut(s) does happen, typically that means the economy is slowing. IMO, if this market even gets a whiff of a slowing economy, look out below. 
"Not every Fed hiking cycle leads to a recession, but all hiking cycles that invert the curve have led to recessions within 1 to 3 years," said Deutsche Bank
"Rate cuts typically begin once the Federal Reserve has confirmation that the economy has slowed down and inflationary pressures have subsided." 
"Nearly every interest rate cutting cycle has seen the economy enter a recession right before or after rate cuts have started."
 
PV shows that from Dec 2021 to Dec 2023, $10k invested in SPY or CashX (MM fund) was worth nearly the same. Only in the last 3 months has the market been "getting away from you."

I'm satisfied with 5% payments and no loss of capital (edit to add - with 40% of my portfolio) until this all plays out.

[racqueteer]

Apr 7, 2024 12:22:15 GMT mnfish said:

I'm satisfied with 5% payments and no loss of capital (edit to add - with 40% of my portfolio) until this all plays out.

More importantly, imo, you can use that guaranteed 5%+, for now, as a no-risk 'bond' component to offset opportunistic equity exposure, replacing a traditional 'balanced fund' portfolio; this coming from an allocation fund advocate.  With many traditional bonds struggling with higher rates, you come out ahead in that scenario.  R48 has been touting a separation of bond and equity exposure in lieu of traditional allocation funds for a couple years now.  This is just a variation on that theme.

[oldskeet]

Hi retiredat48 and others. Thank you for explaining your take and version of the pyramid up buy process. It is very similar to my step buy process. Although there are many spins from the basic process, from what you have described, many have subscribed to a process that they feel works best for them. Again, thank you for your time and energy spent making comment for me and others to read. I want you to know that it is most appreciated. I look forward to reading about your selling process now that you have explained your pyramid up buying process. Old_Skeet

[Fearchar]

Investors should be extremely cautious right now about jumping into the equity market.
As it's extremely over valued right now.

Equity risk premium is the lowest I've seen since I started tracking it in 2/23/2018.
Equity risk premium is the 10 year Treasury - the S&P Forward Earnings Yield.
It was 0.6% last week.
With the jump in the 10 year, I suspect equity risk premium is now nearer to 0.5%.
Again, the lowest I've seen.
Suspect you'll have to go back to 2006/2007 to find a similar situation to the present.

Yield curve has been inverted since 10/28/2022.
That's a long time for the economy to shoulder what's traditionally a bad omen.

BRK price to book is about 1.6 right now.
They are sitting on about $120B in 3M treasuries (MMs.)
If the price/book was nearer to 1.4, they might buy some.

BRK actually sold 28B in stocks 1st 3Q of 2023.
With the equity market marching even higher, I'm sure he's continuing to sell.

It's unfortunate that the FED is typically late at cutting rates.
However, I understand their concern with inflation and the need to snuff it out.

[bruce]

Apr 7, 2024 6:12:12 GMT retiredat48 said:

bruce ,...I suspect you do not understand what PyrUp is. It is a buy-in strategy that ends when one is fully invested with targeted monies into the fund or ETF they are buying. It works 100% of the time. If you make a fifth bucket purchase, you are invested in your desired fund, at a reasonable gain, and can now "think straight" going forward. IT is when investors are in a loss position (and growing loss position) that behavioral issues are compounded.

Hundreds of backtesting has been done and I gave a summary of performance results above.

R48

 Could you please repost the summary of performance results, I don't see them.

Thanks

[Norbert]

Apr 7, 2024 6:12:12 GMT retiredat48 said:

bruce ,...I suspect you do not understand what PyrUp is. It is a buy-in strategy that ends when one is fully invested with targeted monies into the fund or ETF they are buying. It works 100% of the time. If you make a fifth bucket purchase, you are invested in your desired fund, at a reasonable gain, and can now "think straight" going forward. IT is when investors are in a loss position (and growing loss position) that behavioral issues are compounded.

Hundreds of backtesting has been done and I gave a summary of performance results above.

R48

I'm going to use R48's strategy to climb Mt. Everest in seven phases:



PUP rule: Never proceed to the next phase without successfully completing the previous phase. If I complete the 7th stage, I will have summited Mt. Everest.

This works 100% of the time with zero risk.

[retiredat48]

Apr 5, 2024 19:29:10 GMT bruce said:

Apr 5, 2024 18:37:37 GMT liftlock said:

Pyramiding can also underperform just as well as other strategies that attempts to outperform.

Here is a summary of relative performance of Pyramid Up versus Lump Sum versus Dollar Cost Averaging:

Stock Market Immediate Rises and keeps going

Lump sum....performs best.

DCA and PyrUP...lesser gain, both return about the same. Performance difference a "blip" over long term gains.

Stocks immediately fall, into bear market down 33%

Lump sum.....worst...terrible performance

DCA......not as bad, but terrible performance when fully in.

PyrUP....slight loss. Avoided the entire bear market losses (Norbert acknowledged this is how I won the market contest two decades ago)

----------------------------------------------------------

PyrUp is like an insurance policy...you give up some of the gains if huge gains ensue; but you greatly mitigate huge loss potential.

Seems this is the desire of most retirees.

The forth investing buy-in approach is Value Averaging...a refinement of DCA, which requires much more admin follow, but can enhance DCA some.  

R48

[retiredat48]

Apr 7, 2024 13:38:44 GMT Fearchar said:

Investors should be extremely cautious right now about jumping into the equity market.
As it's extremely over valued right now.

Equity risk premium is the lowest I've seen since I started tracking it in 2/23/2018.
Equity risk premium is the 10 year Treasury - the S&P Forward Earnings Yield.
It was 0.6% last week.
With the jump in the 10 year, I suspect equity risk premium is now nearer to 0.5%.
Again, the lowest I've seen.
Suspect you'll have to go back to 2006/2007 to find a similar situation to the present.

Yield curve has been inverted since 10/28/2022.
That's a long time for the economy to shoulder what's traditionally a bad omen.

BRK price to book is about 1.6 right now.
They are sitting on about $120B in 3M treasuries (MMs.)
If the price/book was nearer to 1.4, they might buy some.

BRK actually sold 28B in stocks 1st 3Q of 2023.
With the equity market marching even higher, I'm sure he's continuing to sell.

It's unfortunate that the FED is typically late at cutting rates.
However, I understand their concern with inflation and the need to snuff it out.

OK Fearchar , let's assume your risks of a market being high are 100% correct.

But here's what you leave out:  I don't buy the market; I buy mutual funds...changing allocations and sectors.  In the last decade or more Small Caps have severely lagged large caps, and especially large growth.  This lag in fact is near record spreads in performance. So, let's say an investor like me and some others here want to make a reallocation from LC to small caps, or want to simply invest in small caps funds/ETFs.

To me, the shift underway to small caps in the market now, overweighs being at a near term market high.  Like, if this is a small correction and the market goes to new highs, now what?  Those investors who are watching and waiting will be doing so forever.  Can't pull the trigger.  then when small caps doubles and maybe doubles again, they might choose to buy as it now "seems safe" when exactly the opposite is true.

Case in point.  A fund manager named Wm. Miller beat the S&P 500 avg for 15 straight years.  Then stumbled badly.  Yet the average investor in his fund lost money!  How could this be, you ask?  Answer:  more than half the shareholders came in during the year of the high point!  They bought high, and sold low.  (Of course had they pyramided up they may have greatly mitigated this by not buying more buckets.).  The investor is his/her own worst enemy...emotions need to be minimized.

R48

[mnfish]

retiredat48,
"Case in point. A fund manager named Wm. Miller beat the S&P 500 avg for 15 straight years. Then stumbled badly. Yet the average investor in his fund lost money! How could this be, you ask? Answer: more than half the shareholders came in during the year of the high point! They bought high, and sold low. (Of course had they pyramided up they may have greatly mitigated this by not buying more buckets.). The investor is his/her own worst enemy...emotions need to be minimized."

I don't think this has anything to do with PUP. If one had "stayed the course" Millers' mutual fund would have performed very similarly to VFINX (SP500) from 1991 to today.
Where is the sell strategy to sell in Oct 07 vs Mar 09?

[racqueteer]

Apr 7, 2024 15:33:13 GMT mnfish said:

I don't think this has anything to do with PUP. If one had "stayed the course" Millers' mutual fund would have performed very similarly to VFINX (SP500) from 1991 to today.
Where is the sell strategy to sell in Oct 07 vs Mar 09?

R48 was simply illustrating My point: that people exhibit poor instincts and, correspondingly, adversely impact their results.  PUP mitigates against reluctant investor's poor execution.  Yes, not about PUP per se, but neither is any kind of selling methodology.  Selling, in whatever form, is not PUP.  Separate tools, like a hammer and a can opener are best used for specific tasks.  Asking them to perform tasks for which they were not intended is unreasonable.

With PUP we're, first of all, removing all passive investors and enthusiastic investors from the picture and not considering anything about selling protocols, so we're already working with a limited data set.  Let's first acknowledge that we have ceased discussing PUP entirely at this point.  What we're now working on is the concept of "compelling value"; which is a bit undefined, and a selling strategy which is also undefined.  These are two separate things and both separate from PUP.

I, too, eagerly await information on these other two areas, but please, no more mention of PUP in this context.

[fishingrod]

R48 says
"Those investors who are watching and waiting will be doing so forever. Can't pull the trigger. then when small caps doubles and maybe doubles again, they might choose to buy as it now "seems safe" when exactly the opposite is true."
-------------------------------------------------------------------------------------------------------------------

I think this is the most important aspect of PUP. And we may be in exactly that type of situation right now.

But Norbert makes a good point that once one is fully invested at the peak before the fall, one is subject to the same losses if not more than the person who went all in at once. And if one didn't have the tolerance to invest lump sum in the beginning, then when the stuff hits the fan, fear and selling may ensue at the wrong time.

Good concept to be used with that knowledge.

I think it is more important to know your risk tolerance so one can stick to your allocations thru the turmoil, and be ready to buy more close to the bottom.

[Fearchar]

Apr 7, 2024 14:39:42 GMT retiredat48 said:

Apr 7, 2024 13:38:44 GMT Fearchar said:

Investors should be extremely cautious right now about jumping into the equity market.
As it's extremely over valued right now.

OK Fearchar , let's assume your risks of a market being high are 100% correct.

But here's what you leave out:  I don't buy the market; I buy mutual funds...changing allocations and sectors.  In the last decade or more Small Caps have severely lagged large caps, and especially large growth.  This lag in fact is near record spreads in performance. So, let's say an investor like me and some others here want to make a reallocation from LC to small caps, or want to simply invest in small caps funds/ETFs.

To me, the shift underway to small caps in the market now, overweighs being at a near term market high.  Like, if this is a small correction and the market goes to new highs, now what?  Those investors who are watching and waiting will be doing so forever.  Can't pull the trigger.  then when small caps doubles and maybe doubles again, they might choose to buy as it now "seems safe" when exactly the opposite is true.

Case in point.  A fund manager named Wm. Miller beat the S&P 500 avg for 15 straight years.  Then stumbled badly.  Yet the average investor in his fund lost money!  How could this be, you ask?  Answer:  more than half the shareholders came in during the year of the high point!  They bought high, and sold low.  (Of course had they pyramided up they may have greatly mitigated this by not buying more buckets.).  The investor is his/her own worst enemy...emotions need to be minimized.

R48

Thank-you retiredat48,

Your logic is beyond me right now.  Maybe I'm a bit slow!

The market is either overvalued, undervalued or too close to call.  Those are the only real choices.

Yes; one may buy various sectors or funds, but timing those is extremely difficult and I don't advise one trying that either.
One nice aspect about buying a basket full of various funds though is that one can then look at the portfolio and see a "winner" that outperformed the other funds.  Maybe a holding or 2 will even outperform a broader measure of the market.  But that's a rather hollow victory isn't it?  So, I don't advice that strategy either.  Granted, it is popular with some people.

For now don't fight the FED.
Stay patient and keep durations short (MM or 3M T-Bills).
Enjoy the distributions while they last.
Inverted yield curves don't last forever.

There is a variety of fundamental indicators that one can review to assess market valuation.
Likewise, there are a number of technical indicators that can be useful over the shorter term.

I'm more of a longer term investors, but hats off to the shorter term guys & gals.

[fishingrod]

Apr 7, 2024 17:31:43 GMT Fearchar said:

Apr 7, 2024 14:39:42 GMT retiredat48 said:

OK Fearchar , let's assume your risks of a market being high are 100% correct.

But here's what you leave out:  I don't buy the market; I buy mutual funds...changing allocations and sectors.  In the last decade or more Small Caps have severely lagged large caps, and especially large growth.  This lag in fact is near record spreads in performance. So, let's say an investor like me and some others here want to make a reallocation from LC to small caps, or want to simply invest in small caps funds/ETFs.

To me, the shift underway to small caps in the market now, overweighs being at a near term market high.  Like, if this is a small correction and the market goes to new highs, now what?  Those investors who are watching and waiting will be doing so forever.  Can't pull the trigger.  then when small caps doubles and maybe doubles again, they might choose to buy as it now "seems safe" when exactly the opposite is true.

Case in point.  A fund manager named Wm. Miller beat the S&P 500 avg for 15 straight years.  Then stumbled badly.  Yet the average investor in his fund lost money!  How could this be, you ask?  Answer:  more than half the shareholders came in during the year of the high point!  They bought high, and sold low.  (Of course had they pyramided up they may have greatly mitigated this by not buying more buckets.).  The investor is his/her own worst enemy...emotions need to be minimized.

R48

For now don't fight the FED.
Stay patient and keep durations short (MM or 3M T-Bills).
Enjoy the distributions while they last.
Inverted yield curves don't last forever.

 I don't understand the logic in staying in MM and waiting for the yield curve to uninvert. What is the waiting for? Won't longer bonds be even more expensive then? Or will you ride the MM yield down until it crosses the yield of the longer duration bond and then switch? Won't you pay more for that long bond then? I am really not getting it.

While I will admit and acknowledge that MM has been THE way for a while, except for stocks and high yield corporate bonds lately.

I don't see mid to long bonds getting cheaper as the FED starts to lower rates. What am I missing?

 

Fishingrod

[retiredat48]

Chang posted: "Last comment: I am not sure why retiredat48 says PUP is for mutual funds and ETFs. It makes perfect sense for stocks, where I have used it. One just needs to be mindful of the volatility of the asset in question, and set the increments appropriately."

It can be used for stock buying; I got PUP idea from a 1950's individual stock picker's book  who was considered the best at the time; he abhorred averaging down.  I adapted to mutual funds as I do not buy individual stocks.

R48

[retiredat48]

Apr 7, 2024 12:17:06 GMT chang said:

Apr 7, 2024 6:12:12 GMT retiredat48 said:

bruce ,...I suspect you do not understand what PyrUp is. It is a buy-in strategy that ends when one is fully invested with targeted monies into the fund or ETF they are buying. It works 100% of the time. If you make a fifth bucket purchase, you are invested in your desired fund, at a reasonable gain, and can now "think straight" going forward. IT is when investors are in a loss position (and growing loss position) that behavioral issues are compounded.

Hundreds of backtesting has been done and I gave a summary of performance results above.

R48

I think retiredat48 makes an excellent point about behavioral issues. PUP is probably a good approach for people with poor investing behavioral traits. Say you buy a full position of XXX and it promptly goes down by 15%. What do you do? Sell and cut your losses? Hold and do nothing? Buy more? There is no correct answer here without knowing the future, but the point is -- some investors might not want to be in this position in the first place, asking themselves this question.

As to back testing, I don't see what the point would be. PUP is an exceedingly simple concept, and (to use an even more provocative expression than "it works 100% of the time") it cannot go wrong. It will do what it's supposed to; the results are predetermined. No need to "test it". It will almost certainly not be the most rewarding strategy nor the least rewarding strategy.

Good observations.  Here is what a retired 60ish lady poster who just
fired her advisor/wealth manager and became a DIY investor, and has done quite well for herself, in last decade.  In her own words about Pyramiding Up":


"I'm not a sophisticated investor, but I've been using R48's strategy for a number of months, and I find it a truly easy system to implement. I don't view it as a list of complicated rules, but rather as an overarching concept for how to select asset classes, pick specific products, and reduce risk; the rules follow almost intuitively from that, and I always think of the concepts first in order to recall the specific rules. And the pyramiding up factor gives me the confidence to continue buying, whereas I surely would have hesitated to jump in with a large, one-time buy."

----------------------------------------

Disclosure:  I bought her a lunch once in NY State, for making this post. 

R48

Edit to add:  I'm preparing a new thread on SELLING...

[Fearchar]

Apr 7, 2024 18:01:24 GMT fishingrod said:

Apr 7, 2024 17:31:43 GMT Fearchar said:

For now don't fight the FED.
Stay patient and keep durations short (MM or 3M T-Bills).
Enjoy the distributions while they last.
Inverted yield curves don't last forever.

 I don't understand the logic in staying in MM and waiting for the yield curve to uninvert. What is the waiting for? Won't longer bonds be even more expensive then? Or will you ride the MM yield down until it crosses the yield of the longer duration bond and then switch? Won't you pay more for that long bond then? I am really not getting it.

While I will admit and acknowledge that MM has been THE way for a while, except for stocks and high yield corporate bonds lately.

I don't see mid to long bonds getting cheaper as the FED starts to lower rates. What am I missing?

 

Fishingrod

 Fishingrod;  

I'm not planning to move into longer term bonds; so I wasn't laying out logic for that.  I do though consider equity as over valued right now.  The FED is often late with cuts and in the meantime, MM and 3MT's will yield more than inflation.  So, without taking on significant risk, I'm ahead of inflation as is everybody else in MM's and short term treasuries.

This past week, the smart money was selling long bonds and driving their yields up.  If that continues, then a case may eventually be made for buying longer term bonds.  However, that probably won't be me.  I don't know when, but I do expect equity to eventfully sell at more reasonable valuations.  When BRK P/B falls nearer to or below 1.4, I'll consider buying as will I am sure BRK itself.  It was at one time their stated guidance.

If a person has unrealized long term cap gains, then the logical decision is to just ride this all out as it's all near/mid term stuff.  Could be a year or 2 from now; so patience is key in the mean time.

[archer]

I once ran across a Pyr down strategy of selling buckets when price descended below the 50, 100,150 DMA. I tried it it 2021 which is now a backtesting horror story for that method. The S&P bounced off its 50 day several times and seldom stayed barely below it more than just a few days. I'm sure there are other years where it would have been more successful, but I picked the wrong one. Fortunately just a small portion of my PF.

[richardsok]

Gentlemen:

On May 18, 2021 I publicly requested to chang that any poster who ever dared to re-spew the old "Be fearful when...." or the old "Rule #1: never....., #2: etc. " Buffet bromides should be shot at dawn. Not a single poster ever objected to that proposal.

And now, our boards again groan with violators.

Do we really have to name names?

-------------.

More to the point, I will repeat my selling discipline in as few words as possible:

1.  For broad market equity exposure, limit yourself to the lowest volatility ETFs and CEFs you can find.  I currently favor AMOM,  SPE,  CLSE, CSM.
2.   Set up your three- or six-month chart as simply as possible and overlay a good technical indicator.   I use (A) the HEIKIN-ASHI SMOOTHED on barchart.com.   (B)  the two-day MA crossing the 15-day moving average on Yahoo or stockcharts.com with the true price line bleached out or (C) the PPS Indicator on thinkorswim.com in the "CHART" section.
3. After a memorable bull run we will long remember, I just picked up some preliminary "sell" signals for CSM and AMOM.  Suggestion: lighten exposure right here and reduce risk.  Upon any confirming "sell" indicator, unload.  But if the dip proves shallow and bull signals reappear on your Low-Vol assets, buy at once.

You do NOT want to own heavily in a tiring market.  No indeed.  "You should be fearful when .... yada yada."

[archer]

richardsok, I think the data proves it's best to be greedy when others are also. The annualized returns during periods of low VIX are much greater than when the VIX is high. But, no worries. I will not repeat this ever again :-)

[Norbert]

Apr 7, 2024 23:48:44 GMT archer said:

richardsok , I think the data proves it's best to be greedy when others are also. The annualized returns during periods of low VIX are much greater than when the VIX is high. But, no worries. I will not repeat this ever again :-)

Am not following your logic. See the Vix, with the S&P 500, charted below.

The Vix soared to about 85 during the early 2020 Covid crash. It was the perfect moment to overweight stocks. Look at what the S&P did afterwards!

(Click to enlarge.)



At present the Vix shows complacency while the S&P has drifted higher and higher. Maybe not the moment to overweight stocks?

What am I missing? Buffett's old adage has worked very well.

[chang]

Apr 7, 2024 18:01:24 GMT fishingrod said:

Apr 7, 2024 17:31:43 GMT Fearchar said:

For now don't fight the FED.
Stay patient and keep durations short (MM or 3M T-Bills).
Enjoy the distributions while they last.
Inverted yield curves don't last forever.

 I don't understand the logic in staying in MM and waiting for the yield curve to uninvert. What is the waiting for? Won't longer bonds be even more expensive then? Or will you ride the MM yield down until it crosses the yield of the longer duration bond and then switch? Won't you pay more for that long bond then? I am really not getting it.

While I will admit and acknowledge that MM has been THE way for a while, except for stocks and high yield corporate bonds lately.

I don't see mid to long bonds getting cheaper as the FED starts to lower rates. What am I missing?

 

Fishingrod

I’ve been staying short while the yield curve is inverted. Why? Because 1) I’m getting paid the most by owning the top of the yield curve (6-12 months), and there’s no need to hurry to buy longer durations; 2) if LT yields rise, then prices will fall. I think you’ve got it backwards (or do I?).

[archer]

Norbert , I see on the chart you posted that when the vix was high (fear) the S&P fell. Vix going lower coincided with the S&P rising in 2nd half of 2020 through 2021. Vix averaged higher in 2022 with the S&P going lower. Vix came down again in 2023 with the S&P doing well.

As I see it, when the Vix goes above 20 more caution is warranted, as posited by other technical analysts Asbury Research, Dave Keller, and Tom Bowley to name a few.


Perhaps it's a matter of time frame? I'm thinking short term. When the vix is low and the market is gaining, I want to be in.

This raises the question of when to sell if we buy when the vix is high (others fearful). If we sell when the vix goes down again we miss out on the gains. So, I want to be in as long as the vix is low as long as I'm not seeing other ominous signs.

[Norbert]

Apr 8, 2024 5:44:49 GMT archer said:

Norbert , I see on the chart you posted that when the vix was high (fear) the S&P fell. Vix going lower coincided with the S&P rising in 2nd half of 2020 through 2021. Vix averaged higher in 2022 with the S&P going lower. Vix came down again in 2023 with the S&P doing well.

As I see it, when the Vix goes above 20 more caution is warranted, as posited by other technical analysts Asbury Research, Dave Keller, and Tom Bowley to name a few.


Perhaps it's a matter of time frame? I'm thinking short term. When the vix is low and the market is gaining, I want to be in.

This raises the question of when to sell if we buy when the vix is high (others fearful). If we sell when the vix goes down again we miss out on the gains. So, I want to be in as long as the vix is low as long as I'm not seeing other ominous signs.

I see that stocks soared after the Vix went very high in early 2020. That was a major stock market bottom, a buying opportunity.

I'm not suggesting that we trade / invest based on the Vix. More important was the fact that the stock market suddenly got cheap ... and that governments around the world threw money at the Covid crisis. But, it's true that maximum fear was the moment of maximum opportunity. Buffett is right; I don't get Richard's cynicism.

Personally, I just increase risk exposure when opportunity is evident; and decrease it when valuations are stretched and the technicals look shaky. It's not an all-in vs. all-out question.

Our upcoming discussion of sell rules should be interesting.

Anyone who managed to skip the two big declines 2000-2003 and 2007-2009 avoided serious losses. It's very difficult to nail. You've probably heard the old joke about calling nine of the last two recessions ...