Death of Beta-Centric Buy & Hold Long-Only Strat.

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Gaddock's picture
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Joined: 2007-02-23

OUCH!!!!! Worst close in 12 years. I'm a hero to my clients (at the moment) that's not said with bravado.

fritz's picture
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Joined: 2006-01-12

brandnewadvisor wrote:Incredible Hulk wrote:A couple reasons. I'll start with my gut, based on what feels like capitulation from personal client interactions. Despair in the media, on wall street, in DC, and on main street all point to a "low point" for me. I went out to eat at a nice restaurant and it was completely full. I wait in line on Thursday (not a weekend) at Best Buy that is 20 deep. I spent $40 on some computer cord. The world is not ending. People are still spending. Every time (as if I've seen more than the (2000-2002 mrkt) there is 0 hope to be found and the bears are smiling as if they can't be wrong, then we are at/near the bottom. Investments cycle. The longs think we can't be wrong, then we are wrong for awhile. The shorts begin to think they can't be wrong, then they are wrong for awhile. My gut (whiich has been wrong) tells me we are there. From a fundamental standpoint. I think companies throw everything and the kitchen sink in for writedowns on the first quarter and pushes s&p earnings to $50-$55 an annualized basis giving us a current pe near 13. I think by 3rd or 4th quarter, the writedowns are no longer there and with even a slight uptick from all this money their throwing into the system we see quarterly earnings closer to $65 annualized. Based on future expectations, what will be then current valuations and having the worst behind us, I think 15 is a resonable PE for the market we finally see the cash flow in from the sidelines pushing us to 1000 on the s&p. I tell my clients I'm an eternal optimist. Unfortunately, I've been wrong the last decade, but I think the next decade looks very promising (see the optimism). Feel free to shoot holes through my reasoning. I spend my days selling against the media, I might as well sell against other brokers too.
 
15 is a historically reasonable P/E only when there is earnings growth and economic expansion - something we had for about 50 years.  That is not the case currently as the only way spending can rise is if it is from savings as there is no savings rate and no borrowing. 
 
This is all positive - just join the darkside and buy a short etf or put option.
 
btw - since the date of my first post my allocation that people called me stupid for is up about 9%...market is down 9%. 
15 PE?  No way going forward.  Who knows how low the "E" is going...but then the next shoe to fall will be the "P".  And when that goes down in 2010-2013 we will really be in for  a crap environment.  Spend some time looking at the 70's charts, companies growing earnings from 1973 to 1980 and stock traded dead flat.  That is usual action after this type of deal, first the E then the P gets hit.

Gaddock's picture
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Joined: 2007-02-23

If you look at the dividend levels for the S&P it NOW makes the S&P appear expensive, hard to believe but true.

Gaddock's picture
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Joined: 2007-02-23

brandnewadvisor wrote: This is all positive - just join the darkside and buy a short etf or put option.
 
btw - since the date of my first post my allocation that people called me stupid for is up about 9%...market is down 9%. 
 
I feel sorry for those that think going short is somehow wrong ... I'll never get that.
 
I sure would love to hear about the allocation model you are using.

fritz's picture
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Gaddock wrote:If you look at the dividend levels for the S&P it NOW makes the S&P appear expensive, hard to believe but true.
 
think they want to take out the low on the S&P here, if that does not trigger an end of the month phoney rally we are setting for a big leg down I think.  Agree S&P is not cheap, dont know how people think it is. Dividends being cut a record rate, does not look good. 
 
Looking at some names, IP, AA, DOW, GE, WHR, X, BDK, INTC...list could go into the hundreds making 10-20 year lows. 

Gaddock's picture
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Joined: 2007-02-23

I had a guy run a Z Score on every listed stock
SCAAAAAAAAAAAAAARY !!!!!
If if works like it's supposed to the fun has hardly begun.

Incredible Hulk's picture
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Joined: 2006-03-24

fritz wrote: brandnewadvisor wrote:Incredible Hulk wrote:A couple reasons. I'll start with my gut, based on what feels like capitulation from personal client interactions. Despair in the media, on wall street, in DC, and on main street all point to a "low point" for me. I went out to eat at a nice restaurant and it was completely full. I wait in line on Thursday (not a weekend) at Best Buy that is 20 deep. I spent $40 on some computer cord. The world is not ending. People are still spending. Every time (as if I've seen more than the (2000-2002 mrkt) there is 0 hope to be found and the bears are smiling as if they can't be wrong, then we are at/near the bottom. Investments cycle. The longs think we can't be wrong, then we are wrong for awhile. The shorts begin to think they can't be wrong, then they are wrong for awhile. My gut (whiich has been wrong) tells me we are there. From a fundamental standpoint. I think companies throw everything and the kitchen sink in for writedowns on the first quarter and pushes s&p earnings to $50-$55 an annualized basis giving us a current pe near 13. I think by 3rd or 4th quarter, the writedowns are no longer there and with even a slight uptick from all this money their throwing into the system we see quarterly earnings closer to $65 annualized. Based on future expectations, what will be then current valuations and having the worst behind us, I think 15 is a resonable PE for the market we finally see the cash flow in from the sidelines pushing us to 1000 on the s&p. I tell my clients I'm an eternal optimist. Unfortunately, I've been wrong the last decade, but I think the next decade looks very promising (see the optimism). Feel free to shoot holes through my reasoning. I spend my days selling against the media, I might as well sell against other brokers too.
 
15 is a historically reasonable P/E only when there is earnings growth and economic expansion - something we had for about 50 years.  That is not the case currently as the only way spending can rise is if it is from savings as there is no savings rate and no borrowing. 
 
This is all positive - just join the darkside and buy a short etf or put option.
 
btw - since the date of my first post my allocation that people called me stupid for is up about 9%...market is down 9%. 
15 PE?  No way going forward.  Who knows how low the "E" is going...but then the next shoe to fall will be the "P".  And when that goes down in 2010-2013 we will really be in for  a crap environment.  Spend some time looking at the 70's charts, companies growing earnings from 1973 to 1980 and stock traded dead flat.  That is usual action after this type of deal, first the E then the P gets hit.

Still feel the same way Fritz? You can come out of your bunker now. We are still 18 points away, but we are close enough for me to feel vindicated.

Ron 14's picture
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Joined: 2008-07-10

These guys are hiding under their desks right now. When they do return they will claim the bought in at Dow 7k.

Gaddock's picture
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Joined: 2007-02-23

Ron 14 wrote:These guys are hiding under their desks right now. When they do return they will claim the bought in at Dow 7k.
 
You think that Ron??? The hiding under the table babble that is. Since I made several post before yours am I included in 'these guys'??
 
Because we both know your statement is bullsh*t. Why even say something you know is bullsh*t? Do you use bullsh*t in your sales pitch?

Ron 14's picture
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Joined: 2008-07-10

Well this posted started months ago before the market hit rock bottom so who knows who predicted what. I do know that when the Dow was at 7000 I made a post that  all new money should go 100% equities and I was abused. I also see in here that you got out at 8k and although I may have missed it, I don't see when you got back in. I was mainly addressing Fritz because the post before me was calling him out. You and I have discussed what you do and it is apples and oranges compared to what I do.

Gaddock's picture
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Just checking Ron. FYI I consider myself to be reactive not predictive.

Ron 14's picture
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I know what you do. We have talked about it at length. I am trying to get middle class / upper middle class people to a decent retirement, nor more no less. Having discretionary trading of options available for 50k IRA's just doesn't make sense.

Gaddock's picture
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Ron 14 wrote:
I know what you do. We have talked about it at length. I am trying to get middle class / upper middle class people to a decent retirement, nor more no less. Having discretionary trading of options available for 50k IRA's just doesn't make sense.
 
That I agree with you 100%. That is a perfect candidate for a MF, CEF or even better a UIT. I guess one sets up a strategy that works for the kind of clients they attract. Accredited investors will usually want something very different. 

Ron 14's picture
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It has nothing to do with a strategy geared towards attracting a certain client. I have some clients with more than 500k. I don't change my philosophy to "impress" them because they may want something different. They can buy into me and how I go about things or not. Many of my clients have 100k with me and their 401k has 500k in it at their current job. They understand the overall plan and we work together on it. You can ride on your high horse about "accredited investors" all day. I will take my 250 households with 400k ( im obviously not there yet) and manage them with very little stress.   

Gaddock's picture
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Joined: 2007-02-23

I'm getting multi million dollar accounts referred to me due to performance and service. Again, your (general statement) strategy will get the clients it's appropriate for.
 
Does the truth put me on a high horse? I want fewer larger clients.
 
I love what I do and don't stress out about it. It's all mathematics. That's one large reason why I don't trade anything my clients trade as I don't want emotion involved.

Ron 14's picture
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You can hide behind the emotion card all you want. If your performance is repeatable and you have confidence in it, there is no reason to have a single client besides yourself. Either way, I am sure you will do well and I am sure I will also. You don't believe a word I say anyways so its meaningless to go around in this circle again.

Gaddock's picture
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Ron 14 wrote:
You can hide behind the emotion card all you want. If your performance is repeatable and you have confidence in it, there is no reason to have a single client besides yourself. Either way, I am sure you will do well and I am sure I will also. You don't believe a word I say anyways so its meaningless to go around in this circle again.
 
Ron ron ron ... "hide"
 
You ever make a trade with your own money?
 
WAIT!
 
Let me answer CLEARLY NOT.
 
IF you did you would understand. I have tried hypnotism, meditation, acupuncture and a few other things. I am simply incapable of removing my emotions from a trade I make with my own money that has any size to it. Guess what ... I'm human. Emotion will cloud your perceptions. I do not trade in anything I put my clients in for myself. Putting on a complex arb and DCA ing a weeks pay into a mutual fund are a million miles away from each-other
 
Why do you think they say an attorney that defends himself has a fool for a client???? or a Dr. giving himself a proper diagnosis?
 
 

Ron 14's picture
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I traded my own money for 7 years at the CME and CBOE.

Gaddock's picture
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Joined: 2007-02-23

In a word... Bullsh*t x 10.
 
Only to go knocking on doors for EDJ ???? HA!
 
I know many pro traders. I prop traded for several years before going retail. They/I hire(d) neuro-linguistic programmers all the time for this very reason. The fact that you are oblivious to this makes the first sentence TRUE!

Jebediah's picture
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Joined: 2009-07-10

Ron 14 wrote:
I traded my own money for 7 years at the CME and CBOE.

 
 
According to your own statement, if you were good at trading you wouldn't need clients.  Can we take this admission to mean you weren't good at trading?  That would explain your buy and hold mentality.

Ron 14's picture
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Gaddock wrote:In a word... Bullsh*t x 10.
 
Only to go knocking on doors for EDJ ???? HA!
 
I know many pro traders. I prop traded for several years before going retail. They/I hire(d) neuro-linguistic programmers all the time for this very reason. The fact that you are oblivious to this makes the first sentence TRUE!
 
I don't know how I can prove it to you, but I spent 10 years on the floor. 1 as a runner, 2 as a clerk, 7 as a trader. You don't need a series 7 to trade on the floor. Skills as a floor trader don't necessarily translate when it comes to being a financial planner and the experience doesn't count towards the CFP designation.  EDJ was a place that allowed me some freedom and the ability to get sales training and my 7. It is two totally different games. The open outcry trading pits have declined dramatically, thus the combining of the CBOT and CME.

Ron 14's picture
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Jebediah wrote:Ron 14 wrote:
I traded my own money for 7 years at the CME and CBOE.

 
 
According to your own statement, if you were good at trading you wouldn't need clients.  Can we take this admission to mean you weren't good at trading?  That would explain your buy and hold mentality.

 
 
When I was trading I didn't have any clients besides backers who put up half of the money. If you don't make money you don't last to the next month on the floor. So 7 years would mean I did fairly well. That allowed me to transition to the advising business and it gave me a nest egg to draw on as I build my book.

noggin's picture
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BioFreeze wrote: Ron 14 wrote:
I traded my own money for 7 years at the CME and CBOE. ...and now you're a baby broker in a bank branch.
Ouch!!!!

Ron 14's picture
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Incredible Hulk's picture
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S&P 500 <.SPX> RISES ABOVE 1,000 LEVEL; AT HIGHEST SINCE EARLY NOVEMBER, 2008 REUTERS

Please, hold your applause.

B24's picture
B24
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Joined: 2008-07-08

I'm calling a bottom.

noggin's picture
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Joined: 2004-11-30

When?

B24's picture
B24
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Joined: 2008-07-08

Hey, that's proprietary.  Only me, Jones, and American Funds know that answer.

noggin's picture
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Joined: 2004-11-30

I'm calling a top.

Ron 14's picture
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iceco1d wrote:noggin wrote:
I'm calling a top.

 
+1 - But still staying invested as I was 3 weeks, 3 months, 13 months, and 23 months ago.
 
 

noggin's picture
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Joined: 2004-11-30

I take it back. I'm calling a middle.....

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