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Shall We Play a Market Timing Game? (2018)

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Re: Shall We Play a Market Timing Game? (2018)

#31

Post by remote_phone »

heartbeats wrote: post #30
dpc_pw wrote: post #28

This is such a nonsense being pandered by people who make money on it. You, you can absolutely "time the market". You just can't do it exclusively based on the chart. The real world is still there, and it's important, you know? And Stock Market and savings accounts are not the only investment instruments available to people. And you don't have to be all in or all out. Maybe if you don't have time and skills to think…

Agreed. I read about the coronavirus and decided to pull some of my money out - that's probably earned me 10% so far.

I read about coronavirus and bought puts when the market kept making new highs. I’m currently up $100k, with $80k already booked profits and riding the last $20k as a hedge against my new long positions. I also bought Gilead and Moderna and am up $15k and $5k, respectively.

I believe we are near a short term bottom and will bounce in 1-2 weeks. Most of the bad news is out and I expect better news in the coming weeks (quarantine is working, remdesivir/chloroquine is effective). Then I predict after the short bounce that the economy is so damaged that we make new lows

I’ve been timing the markets for 20+’years now. Just because some people can’t doesn’t mean that everyone can’t.

Re: Shall We Play a Market Timing Game? (2018)

#32

Post by raphaelrk »

I don't have much experience in the market, but "invest in index funds" seems like a way to inflate the values of all the companies in the index fund, deserved or not, and I find it worrying that it's touted as an easy/simple way to make money. If there's a lot more index fund money than hedge fund / active money it would probably mess with prices, right? Is there any good analysis of when it would stop making sense to invest in an index fund? Or ways to weight certain companies higher or lower in a 'personal' index fund?

Re: Shall We Play a Market Timing Game? (2018)

#33

Post by hogFeast »

jcfrei wrote: post #23
Majromax wrote: post #20

> Update: Added a Monte Carlo mode which lets you play with data that is randomly generated from the daily returns of the S&P500. The probability of a daily return being picked is the same probability/frequency that it occurred in the last 68 years. This mode is rigged. Any proposal for market timing requires correlated returns. "Technical" traders infer short-term trends form patterns like the shave-and-a-haircut an…

They could easily create a better simulation with a moving block bootstrap method. That is by sampling consecutive returns (for example for a whole week) and create a new time series with them.

Yep, I have a tool that is similar to this and this is what I did.

Unfortunately, if you are working with daily returns you need consecutive returns for way more than a week. You have correlated returns, in particular there are Friday-next Monday correlations that are important in the tails. You also have volatility clustering/asymmetries over daily periods (i.e. high volatility tends to be followed by higher volatility and the volatility responds differently to up vs down moves) and this tends to last way longer than a week.

It is very tricky stuff. In the real world, you will often find managers grouping based on their knowledge (i.e. X-Y was the 2008 crisis) and testing their portfolios against that. It is rather unscientific but it works (i.e. in this case, you might do something like a Markov model with a transition matrix of the daily probability of moving between volatility states, and then sample longer blocks from groups based on the state).

A simpler option (what I did) is to just look at yearly returns, and sample across countries (just using the US is horrible cherrypicking).

Re: Shall We Play a Market Timing Game? (2018)

#34

Post by [deleted] »

raphaelrk wrote: post #32

I don't have much experience in the market, but "invest in index funds" seems like a way to inflate the values of all the companies in the index fund, deserved or not, and I find it worrying that it's touted as an easy/simple way to make money. If there's a lot more index fund money than hedge fund / active money it would probably mess with prices, right? Is there any good analysis of when it would stop making sense…

[deleted]

Re: Shall We Play a Market Timing Game? (2018)

#35

Post by lend000 »

The "Buy and hold ETF" strategy of today is good advice until it isn't. Eventually, ETF holders will probably be exposed to a black swan like the NIKKEI 225 lost decade event (although it should probably be called the lost decades) [0].

My opinion is that buying and holding the index is better than picking stocks and timing the market unless you are a professional (you need to be doing it full time to gain a consistent edge, and even then it isn't guaranteed). However, even then, it is only good advice if equities is a small part of your overall portfolio. Blindly buying and holding the index is not smart if your net worth is 80% tied in equities -- you should diversify in bonds, real estate, precious metals, and other commodities.

[0] https://en.wikipedia.org/wiki/Japanese_asset_price_bubble

Re: Shall We Play a Market Timing Game? (2018)

#36

Post by loganfrederick »

raphaelrk wrote: post #32

I don't have much experience in the market, but "invest in index funds" seems like a way to inflate the values of all the companies in the index fund, deserved or not, and I find it worrying that it's touted as an easy/simple way to make money. If there's a lot more index fund money than hedge fund / active money it would probably mess with prices, right? Is there any good analysis of when it would stop making sense…

One key to the success of index funds is that the indexes will remove underperforming companies and replace them with growing companies. The argument for this enforced survivorship bias is that it's meant to provide a dynamic view of the economy changing. In practice, this also helps keep the returns of the indexes up and is a case of survivorship bias working out in the individual passive investor's favor.

https://jpm.pm-research.com/content/29/1/51

Re: Shall We Play a Market Timing Game? (2018)

#37

Post by vidanay »

Klinky wrote: post #26
vidanay wrote: post #15

I predict that the market will see a handful of the largest single day point increases within the next six to ten months. Just a prognostication on my part, it's worth exactly what you paid for it.

I'd expect percentage losses as deep as those seen in 2007/2008. This isn't just paper money drying up, it's the inability to physically work. It's not just a matter of injecting a ton of capital into the economy, literally that capital cannot do anything if people can't work. We'll also see hyperspecialization towards COVID-19 in the health sector, which could leave those industries vulnerable when COVID-19 finally…

The big difference is that 2008 was a systemic recession. This one will likely be situational.

Re: Shall We Play a Market Timing Game? (2018)

#38

Post by empath75 »

vidanay wrote: post #15

I predict that the market will see a handful of the largest single day point increases within the next six to ten months. Just a prognostication on my part, it's worth exactly what you paid for it.

Sure but the long term trend will be down for the next several months until the virus uncertainty clears up.

Re: Shall We Play a Market Timing Game? (2018)

#39

Post by empath75 »

remote_phone wrote: post #31
heartbeats wrote: post #30

Earlier quoted context omitted.

Agreed. I read about the coronavirus and decided to pull some of my money out - that's probably earned me 10% so far.

I read about coronavirus and bought puts when the market kept making new highs. I’m currently up $100k, with $80k already booked profits and riding the last $20k as a hedge against my new long positions. I also bought Gilead and Moderna and am up $15k and $5k, respectively. I believe we are near a short term bottom and will bounce in 1-2 weeks. Most of the bad news is out and I expect better news in the coming weeks…

I actually think the market is already somewhat pricing in the possibility of those drugs working, and that it will drop more after we find out it’s success is overblown.

Re: Shall We Play a Market Timing Game? (2018)

#40

Post by the_gastropod »

dpc_pw wrote: post #28

This is such a nonsense being pandered by people who make money on it. You, you can absolutely "time the market". You just can't do it exclusively based on the chart. The real world is still there, and it's important, you know? And Stock Market and savings accounts are not the only investment instruments available to people. And you don't have to be all in or all out. Maybe if you don't have time and skills to think…

> This is such a nonsense being pandered by people who make money on it.

Are you suggesting there’s more money in the market of selling index funds than there is in the market of selling you the idea that you can beat the index? Because I’ve got news for you...

> You, you can absolutely "time the market". You just can't do it exclusively based on the chart. The real world is still there, and it's important, you know? And Stock Market and savings accounts are not the only investment instruments available to people. And you don't have to be all in or all out. Maybe if you don't have time and skills to think about it, etc. then this makes you feel better about your "investments" because "there was nothing you could have done better". But it's still load of rubbish.

There have been countless studies done about this, and countless fools who tricked themselves, like scratch off players and gambling addicts, who think they’re winning. It’s exceedingly uncommon for investors to beat the market over 10+ year periods.

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