Why do People Think the Market can be Effectively Timed?

[william the wie]

If half of the trades claimed in this forum involved actual money then a lot of people have discovered that the fast way to become a millionaire is to start out as a billionaire. The first step to getting a leg up is to get out of debt but no one discusses how to do that on this or any other board I have posted on. I was wondering why that subject and how to get into the market on the cheap was not a sub-forum of the stock market forum? Any idea why? Or has it been tried and failed?

 

[the207life]

Because value investing is boring for most people. Its natural to want immediate results and unfortunately that distracts people from thinking long about the term. A mistake people learn over time which unfortunately is an expensive one.

 

[Brucethethinker]

My little thread is about investing with $5000, and I post every trade within minutes of when I make it. I bought UCO at $6.25, I could have waited and gotten it at $6 but $6.25 isn't bad. Rather than explain how to make 25% per year in an extremely low risk method, I'm just showing it. I want immediate results, and selling covered calls gives me that!

 

[william the wie]

OK let's say you hit.. You now have a $6,250 portfolio. What good does it do you since you're telling tens of thousands about how to crowd you out of the market? Back when the DRIP market had less fees normal returns were somewhere north of 30%. When you bought shares direct from the company treasury you got a discount of 5% off market price. You could get out after X-div. With dividends you could theoretically make 120% off buying utility companies. Even during the 2000-3 bear market I never made as little as 25% but I didn't run my mouth about how I was making hay while the sun was shining, which it no longer is.

The only reason anyone is telling you to tone it down is that you are committing financial suicide by keyboard. Anyone, who knows, will tell you the basics. But that is it, bragging bites you in the butt so don't do it.

Soros and others will do bragging but Paul Tudor Roberts II has probably spent more than Soros ever made keeping his own name out of the news. He was on the right side of the 87 crash, the Nikkei crash and probably every other crash since but after the Nikkei he ended up on one of those richest lists and except for his TED lecture I'm unaware of any public splashes he has made in the last 20 years. Even the best are not good enough to get away with what you are attempting to do.

 

[Delta4Embassy]

All things repeat themselves. Even Pi if you go far enough.

 

[william the wie]

All things repeat themselves. Even Pi if you go far enough.

Prove that. No repetition in 10,000 decimal places. The pattern recognition circuits in our brains will impose patterns where none exist but that does. For example at the 95% confidence level the stock market has a 97% correlation with normal distribution. Would you care to guess the number of lives of the universe it would take to account for 87, 2000-3 bear market or the 2008 meltdown if that correlation were usefully true? Hint, if you want to deal with the conjoint probability of all three get acquainted with googles.

 

[SteadyMercury]

All things repeat themselves. Even Pi if you go far enough.

Pi is an irrational number, therefore it doesn't repeat.

I'd love to see the proof you used to show it repeating.

 

[Brucethethinker]

One can't time the market perfectly, but one can increase one's chances. When the stock is down, wait for it to go down some more. Then, when you're sure it can't go down any more, but a little. If it goes down some more, but some more. Eventually you'll buy at the bottom, assuming you haven't run out of money. That's why you only buy a little. Keep cash ready, cash is good. This is how I bought UCO at $6.25 a money ago, it's at $9 now.

 

[CoachWitch]

I think the reason behind this is that people are looking for short term investment and more dividend.

 

[william the wie]

I think the reason behind this is that people are looking for short term investment and more dividend.

Not disagreeing but bragging rights is a big factor as well.

 

[Mac1958]

Because value investing is boring for most people. Its natural to want immediate results and unfortunately that distracts people from thinking long about the term. A mistake people learn over time which unfortunately is an expensive one.

That pretty well nails it.

A study by DALBAR shows that the average "active investor" - the guy who tells you about all his great trades - has averaged a 3.49% gross return over the last 20 years. That guy doesn't tell you about all his lousy trades.

People believe the crap they see in magazines and teevee and the internet, and constantly chase trades. Foolish. They also try to invest in one of the zillions of "new" and sexier securities like the leveraged and exotic and "alternative" ETFs and take a beating on those too.

Pick a few (and I mean 8 or less) good mutual funds, diversify, dollar cost average, re-balance annually, stay calm.

It doesn't need to be that complicated.

.

 

[william the wie]

Worse yet intelligent speculation is even more boring than fundamental investing and here's why:

92% of all market moves are within two SD of trendline.

6+% of all moves are down by more than 2 SD so without a positive carry it takes a 16 year budget to have a 95% probability of positive returns on broad market puts and while positive carry is possible that does not add a lot of excitement to the mix.

 

[Brucethethinker]

Damn Willy, I really tried to follow what you're saying but I don't get it.

 

[Brucethethinker]

Because value investing is boring for most people..

I'm a contrarian. What's a good company? Walmart is, so everyone buys the stock, there is no upside, and you really can't make any money with it. And, you really don't know what is a good company, you have to rely on what they tell you. I agree that most active traders don't do well, and forget about their lousy trades. I work hard to not fall into that trap. I've lost my fanny on lots of my trades, but not on UCO, crude oil.

 

[Zander]

Nobody can "time the market".

The key to making money in the stock market is not "market timing, but "time in the market". The longer the better.

 

[william the wie]

Damn Willy, I really tried to follow what you're saying but I don't get it.

OK, you are overthinking so let's go stupid.

The really primitive part of the human brain can count to three but does have a model of the normal, bell shaped, curve of distribution.

The verbal part of the brain can only use the primitive brain's math skills and those parts of math that act like language, mostly equations.

Therefore one of two things happen when people look at the stock market :
They see a variant of normal curve distribution and go with buy and hold
Or they see patterns that may or may not exist in reality.

Those two types of behavior destabilize the market along with three calendar causes of poor results:
Investing only in May to November which will result in effectively no returns over 10 year of longer periods. (too many people on vacation.)
The presidential election cycle. (Big turnover of people in DC creating uncertainty)
And the census cycle. (Changes the value of treasuries and munis.)

but these causal factors work at cross purposes to create periodic turbulence.

The big money is made from the turbulence, which cannot be predicted, so a positive carry turbulence hedge is needed.

Is that clearer?

 

[Brucethethinker]

Well, I'm getting all kinds of positive carry. I have my first car loan, because my rate is 1.9%. I can make that in a month in the market. And gotta love that turbulence, that's what generates those big premiums for calls.

 

[william the wie]

If you are paying out you have negative carry on your car loan.

 

[SharpArrowhead]

It's like why people think they can win the lottery. They only see the winners on TV, not all the losers. Similarly we only see the winners like Buffet and genius investors. We don't see the losers of stock pickers.

 

[Brucethethinker]

We don't see the losers of stock pickers.

That's so true. I'd love to see a tv show about day traders. I believe day traders all lose their money eventually. You can't beat the high-frequency-trading computers.