Markets

23 replies [Last post]
jkl1v1n6's picture
Offline
Joined: 2008-10-06

I pulled this off the Marketwatch website.  Not sure it means anything but it was a little interesting.  I'm just trying to find light in the darkness!
 
On Monday, the Dow closed at 6,763, a level not seen since 1997. If nothing else, the breach of 12-year lows is unusual. Other than Monday's retesting of 1997 lows, such a crossing has occurred only twice before, on Dec. 6, 1974, and April 8, 1932.
"What we found intriguing is that the 12-year lows were breached at a critical juncture in the bear markets," JPMorgan Chase & Co. equity analysts Thomas Lee, Bhupinder Singh and Daniel McElligott wrote in a late Monday research note. The breaches were very close to the final lows, they said.
In 1932, the April 8 finish came three months before the market hit its bottom, while 42 years later, the Dec. 6 breach marked the exact end of the 1974 low.
"We do not want to intimate that just because we are visiting levels seen 12 years ago, the bear market needs to suddenly reverse. But since 12-year lows have happened only twice in the history of the index and at important junctures in bear markets, we have to take notice," the JPMorgan Chase analysts said.
Kate Gibson is a reporter for MarketWatch, based in New Y

snaggletooth's picture
Offline
Joined: 2007-07-13

How often have 20, 50, and 100 year lows been breached?

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

That's what I hate about statistics.  Events become somehow linked when they happen more than once.  You know how many statistics I have seen on the "average" length of a recession, or the "average" bear market, or the "average" size of a recovery, or the "average" return in the stock market over the last 2,000 years?  There is NOTHING "average" about any of this stuff.  They are all individual circumstances.  What doe sthe 1932 depression have to do with the 1973 recession or the current recession?  NOTHING!  They all occured for different reasons and occured in completely different eras. 
 
Like Snags said, we could easily hit a 20-year low (or 15 or 18 or 22....).

Borker Boy's picture
Offline
Joined: 2006-12-09

Good point. I've totally discontinued the use of all those "historical facts."
 
If they have an annuity, I remind them why we bought it. If they have funds, I commend them for reinvesting dividends and capital gains during this tough market and buying more shares at lower prices. Then I tell them we will recover.
 
I'm sick of statistics and predictions.
 

Doksee's picture
Offline
Joined: 2009-03-02

I like the image of walking into a room and turning on the light, and watching about a thousand roaches (bears)  take cover. That what happens when trillions of funny money flood the market, and scared cash runs for equity. Sometimes it happens.
Large cap ETF yields are around 4%, with PE ratios around 10 or eleven. Money doesn't stay scared and dumb forever. Simple stats are the best.

Sam Houston's picture
Offline
Joined: 2008-12-01

The problem with PE ratios is that you are looking at forward E to today's P.  Bear markets get washed out at 6-8, and with E continuing down the dark hole, we may be a long way away from a bottom.  Posted purely for discussion purposes.

Sam Houston's picture
Offline
Joined: 2008-12-01

Back to the original post, anybody who compares the Dow in the past to the imposter that we have now would cause me to stop reading as they are a moron (directed at the author of the article, not the OP).  If tomorrow, AA, BAC, C, and GM all went to zero and the other 26 Dow components were flat, the index would lose about 90 points, wiping out almost $36mmm in market cap.  If on the other hand, IBM dropped $12, wiping out $16mmm in market cap (assuming again the other components were flat), this would also cause about a 90 point drop in the index.  Why anyone lends any credence to the Dow as it currently is comprised when talking about the past is beyond me.

jkl1v1n6's picture
Offline
Joined: 2008-10-06

First let me say that I don't believe analysts should be using statistics for their decision making process of when and what to buy/sell. 
"Events become somehow linked when they happen more than once."  B24, that's what stats are!  Stats are nothing more than an expression of probability.  I guess I look at it like this.  Babe Ruth played in 2503 games, he had 8398 at bats with 2873 hits.  That gives him a lifetime average of 342.10.  Of those 2873 hits, 714 where home runs.  Meaning statistically he hit a home run on average 1 out of every 4 at bats.  Now we know that if he didn't have a home run in the last three that it didn't mean he would hit one in the next at bat but the probability that he would soon hit one raised with each at bat. 
I really am with everyone when they say they are sick of the statistics about current markets vs previous markets and I no longer use them with my clients.  I do think however that "statistically" the longer this bear market goes the closer we are to a recovery.  We're certainly not getting further from a recovery.  And that's what I believe the analyst above was trying to point out, not that it's going to happen in the exact time frame of the other two previous 12 year lows.
My two cents, in this economy worth about one cent.

jkl1v1n6's picture
Offline
Joined: 2008-10-06

I refuse to argue with you ICE because you are with out a doubt way more intelligent than I will ever be.  I remember debating this sometime in my college years.  I have had too much malted hops and barley during and since.  I know that it's a round robin of whatever objection I will come up with it will always be that there are two sides to a coin, therefore only two possible outcomes.  In theory it is correct but in practice it does not always land on heads. 
 
Like I said you will prove me wrong because I'm no where near as smart as you.  I already have a diminishing self-esteem issue due to this current market I don't need to feel worse about myself.  I bow to you!
 
Hope things are going well with you!
 
jkl1v1n6  

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

jkl1v1n6 wrote:
First let me say that I don't believe analysts should be using statistics for their decision making process of when and what to buy/sell. 
"Events become somehow linked when they happen more than once."  B24, that's what stats are!  Stats are nothing more than an expression of probability.  I guess I look at it like this.  Babe Ruth played in 2503 games, he had 8398 at bats with 2873 hits.  That gives him a lifetime average of 342.10.  Of those 2873 hits, 714 where home runs.  Meaning statistically he hit a home run on average 1 out of every 4 at bats.  Now we know that if he didn't have a home run in the last three that it didn't mean he would hit one in the next at bat but the probability that he would soon hit one raised with each at bat. 
I really am with everyone when they say they are sick of the statistics about current markets vs previous markets and I no longer use them with my clients.  I do think however that "statistically" the longer this bear market goes the closer we are to a recovery.  We're certainly not getting further from a recovery.  And that's what I believe the analyst above was trying to point out, not that it's going to happen in the exact time frame of the other two previous 12 year lows.
My two cents, in this economy worth about one cent.
 
I hear what you're saying.  My point really was that by listening to "talking heads" with their BS statistics, we convinced ourselves, since like the end of 2007, that the recession would be "over soon" and kept our clients in it.  So we just listened to statistics that prove nothing, versus looking at more empirical evidence.  You need to look at the CAUSE of the recessions, depressions, bears, bulls, etc. and put them in context.  Had people focused mroe on the derivatives market and the oncoming housing/mortgage crisis, we would have seen that this in fact was not going to be your garden-variety recession.
 
In this case, we used meaningless stats as a proxy for real analysis.
 
To go back to my baseball analogy...it's like picking up a free agent star pitcher and paying him $15mm a year, but forgetting to ask why he was released....oh yeah, he has a "slightly" torn rotator cuff.  I guess his stats don't mean sh!t anymore.

bspears's picture
Offline
Joined: 2006-11-08

Funny how I got slammed, along with others, when I mentioned I removed clients from the market.  Everyone talked about how I didn't have a crystal ball and I was hurting my clients...all the bullcrap being spewed...My business is doing well and I'm almost giddy I went with my common sense and not the same spew this industry spews...Take anything your b/d says, or mutual fund wholesaler, with a grain of salt!

jkl1v1n6's picture
Offline
Joined: 2008-10-06

B24 wrote:jkl1v1n6 wrote:
First let me say that I don't believe analysts should be using statistics for their decision making process of when and what to buy/sell. 
"Events become somehow linked when they happen more than once."  B24, that's what stats are!  Stats are nothing more than an expression of probability.  I guess I look at it like this.  Babe Ruth played in 2503 games, he had 8398 at bats with 2873 hits.  That gives him a lifetime average of 342.10.  Of those 2873 hits, 714 where home runs.  Meaning statistically he hit a home run on average 1 out of every 4 at bats.  Now we know that if he didn't have a home run in the last three that it didn't mean he would hit one in the next at bat but the probability that he would soon hit one raised with each at bat. 
I really am with everyone when they say they are sick of the statistics about current markets vs previous markets and I no longer use them with my clients.  I do think however that "statistically" the longer this bear market goes the closer we are to a recovery.  We're certainly not getting further from a recovery.  And that's what I believe the analyst above was trying to point out, not that it's going to happen in the exact time frame of the other two previous 12 year lows.
My two cents, in this economy worth about one cent.
 
I hear what you're saying.  My point really was that by listening to "talking heads" with their BS statistics, we convinced ourselves, since like the end of 2007, that the recession would be "over soon" and kept our clients in it.  So we just listened to statistics that prove nothing, versus looking at more empirical evidence.  You need to look at the CAUSE of the recessions, depressions, bears, bulls, etc. and put them in context.  Had people focused mroe on the derivatives market and the oncoming housing/mortgage crisis, we would have seen that this in fact was not going to be your garden-variety recession.
 
In this case, we used meaningless stats as a proxy for real analysis.
 
To go back to my baseball analogy...it's like picking up a free agent star pitcher and paying him $15mm a year, but forgetting to ask why he was released....oh yeah, he has a "slightly" torn rotator cuff.  I guess his stats don't mean sh!t anymore.
 
I agree 100%!  Hopefully our gov't has found or will find a way to fix torn rotator cuffs!

Sam Houston's picture
Offline
Joined: 2008-12-01

bspears wrote:Funny how I got slammed, along with others, when I mentioned I removed clients from the market.  Everyone talked about how I didn't have a crystal ball and I was hurting my clients...all the bullcrap being spewed...My business is doing well and I'm almost giddy I went with my common sense and not the same spew this industry spews...Take anything your b/d says, or mutual fund wholesaler, with a grain of salt!
 
+1.  Take comfort in the fact that your clients benefited.  Ignore what everyone else says.  Being correct is the reward and clients who had advisors with the balls to make a move are better for it.

Doksee's picture
Offline
Joined: 2009-03-02

C'mon, this is BS. Market time this, get lucky, then market time that (oops). Time the whole market, rotate sectors, just create your own managed fund (which one never slipped). Losing sight of reality here. Snake oil. There will be panic buying, and those on the sidelines will catch part of it. Over time, figure cap gains, trading costs, opportunity costs (could have stayed fully invested in properly allocated dividend producing portfolio(, mistakes: your case for market timing is weak. The time and energy is better spent on marginally productive activity. The science of fear and greed.

Sam Houston's picture
Offline
Joined: 2008-12-01

Doksee wrote:C'mon, this is BS. Market time this, get lucky, then market time that (oops). Time the whole market, rotate sectors, just create your own managed fund (which one never slipped). Losing sight of reality here. Snake oil. There will be panic buying, and those on the sidelines will catch part of it. Over time, figure cap gains, trading costs, opportunity costs (could have stayed fully invested in properly allocated dividend producing portfolio(, mistakes: your case for market timing is weak. The time and energy is better spent on marginally productive activity. The science of fear and greed.
 
 
Blah, blah, blah.  Tell that to your clients.  My clients got a different story over a year ago.  My story is better.

Doksee's picture
Offline
Joined: 2009-03-02

Okay, Sam. If you're an experienced (and educated) CFP or a CFA or a professor of finance at University of Chicago, and you figured out how to time the market, I'll respect your "story". Otherwise, Spears brand of thinking for himself is just lucky BS. I'm just pointing out the obvious.

Sam Houston's picture
Offline
Joined: 2008-12-01

Not a CFP, nor a CFA.  I do not know what the market it going to do in the future, so therefore I am not a market timer.  I will miss tops when getting clients out, I will miss bottoms when getting clients in.  If you call this market timing, I am slow and quite unskilled.  I realize that markets typically move in general directions for periods of time.  I call these trends.  When the market is in a positvie trend, the odds of making money in stock is increased.  When the market is in a negative trend, the odds are against you.  I simply play the odds.

Doksee's picture
Offline
Joined: 2009-03-02

Hey, if it feels good, do it. I'm not trying to sound snooty, because I pulled allocations back by 10-20% from equity into fixed in anticipation of a recession - starting about two years ago. These allocations still fit within mostly "moderate" overall risk profiles. Maybe we're talking about the same thing.
 
" Funny how I got slammed, along with others, when I mentioned I removed clients from the market.  Everyone talked about how I didn't have a crystal ball and I was hurting my clients...all the bullcrap being spewed... "
 
Spears, the purpose of education is to save you and your clients from yourself. Dude, you can get sued for guessing. Did you make sure to change your client profiles to conservative to cover your butt? Are any CFPs or CFAs here honestly timing the market? This is an example why we want everyone to be licensed.

Sam Houston's picture
Offline
Joined: 2008-12-01

I did not anticipate anything.  I know that sounds confrontational, but don't take it that way.  I do not guess are anticipate.  I cut client equity positions by 75-80%.  I did not change any investor profiles.  I offered advice and a recomendation that was far more conservative than their investor profile because in my opinion the risk in equities had increased and we needed to reduce exposure.  This opinion was based on factors in the price action of equities.  I told clients up front what would happen if I was wrong.  If I am wrong and the markets went up, they would make less.  If I was right, and did not make the move, they would lose more.  It is up to the client to choose.   Most, not all, clients took my advice.

Doksee's picture
Offline
Joined: 2009-03-02

That's cool. A lot of people who are (probably) smarter than you and I missed it. A lot of people who are not as smart as us timed the market, and have learned the wrong lesson. As far as investor profiles, if someone is "moderate" and (Spears) takes them to cash, and Spears is wrong and misses a 40% run that finally comes after ten years, is he liable for missing out equity returns? It's a rhetorical question, I don't care what spears does. But he's sort of playing the same game as that guy who sends a dog around with a note taped to its back. Sometime the note says "fixed", and sometime it says "variable". And the dog just runs around. At least the guy with the dog kinda knows what he's doing.

Sam Houston's picture
Offline
Joined: 2008-12-01

I understand exactly where you are coming from.  It does not matter what we do, a client can sue us and win for just about anything.  If I am going to get sued, it will be for doing what I feel is right for my clients, offering professional advice beyond "hang in there, we are one day closer to a bull market", and having the stones to use my knowledge. 

Doksee's picture
Offline
Joined: 2009-03-02

Yeah, well I think that is the ultimate test. As long as your clients are happy. After all, they're "clients". He we choose, in an uncertain world to allocate moderately and hold. So I respect those who are more tactical. After all, even lessons learned at 9/11 were severely tested. For myself, I'll be using more total market stuff on the fixed like the Vanguard Total Market Bond ETF (BND). This is my biggest learning, vs. active bond management in funds. Thanks for the discussion!

Please or Register to post comments.

Industry Newsletters
Investment Category Sponsor Links

 

Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×