# 200 point drop



## MoreMiles (Apr 20, 2011)

We have not seen a 200+ drop for a while. It is finally happening today. Is it time to buy in this dip? Or wait for more? What do you think?


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## tygrus (Mar 13, 2012)

I think the next Fed statement will be telling. Did they taper too soon?

And the corporate profits are really skewed. They are using their cash on hand for share buy backs to enhance the EPS. Thats not true revenue growth. The cash is also being used to enhance efficiency through technology. Apple just brought back its Mac production from overseas, but its all done by robotics now so still no jobs. 

We are going to see if companies can earn more when their customers have less disposable income. Interesting economic experiment. Where is that trickle down policy now?


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## Synergy (Mar 18, 2013)

Toss a coin - heads: buy on this small dip, tails: wait for 5-10-15% correction. I'm sitting on my cash for a little longer to see how things play out.


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## none (Jan 15, 2013)

I cashed out all of my Canadian investment before the new year and just never got around to buying again. TDW makes it a real pain trying to transfer cash from our unregistered account to her TFSA. TDQ -> my RBC --> Her RBC --> her TDW.

Anyway, I missed out on sonce nice gains on the Canadian index. Hopefully this will correct enough for me to correct that error.


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## Pvo (Jul 4, 2013)

holding 50% cash and waiting for the drop, hoping that this is the start of it.


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## atrp2biz (Sep 22, 2010)

Hoping the S&P 500 hits 1500. That would be my entry point with cash on the sidelines. We might get there with all the turmoil in the emerging FX markets.


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## OptsyEagle (Nov 29, 2009)

atrp2biz said:


> Hoping the S&P 500 hits 1500. That would be my entry point with cash on the sidelines. We might get there with all the turmoil in the emerging FX markets.


Good to know. So it is confirmed. The stock market will bottom and turn back up at precisely 1505. Thanks for the tip. lol.

That's how it tends to work with my market timing anyways.


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## atrp2biz (Sep 22, 2010)

1500ish


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## richard (Jun 20, 2013)

When you see a big daily drop the correct course of action is to flip a coin like Synergy said. Anyways it's really about a 1.4% drop so that's noticeable but not unusual. One thing we know for sure is that the price today is better than it was yesterday.

Hey remember all the people in December 2012 who were recommending waiting for a correction in the US market? That was probably a good idea what with the fiscal cliff and all. Anyone know what ended up happening there?


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## PatInTheHat (May 7, 2012)

I'm adding to some positions today that have gotten beaten up quite a bit from my entry points (MET, WLP) but keeping some cash on the sidelines. We are due for a 5-10% correction but I also expect the markets to rally quite quickly from it.


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## BoringInvestor (Sep 12, 2013)

richard said:


> Hey remember all the people in December 2012 who were recommending waiting for a correction in the US market? That was probably a good idea what with the fiscal cliff and all. Anyone know what ended up happening there?


I remember all the doom and gloom around that time pretty well - that's when I started my portfolio: http://canadianmoneyforum.com/showthread.php/16247-Couch-potato-lazy-portfolio-tracking-my-progress.


To the OP - if you're buying and holding and your time horizon is long, today is inconsequential.
Keep calm and carry on.


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## mike06 (Aug 4, 2011)

If history has taught us anything its that if youre a long term investor dips are buyable and holding a ton of cash waiting for a significant pullback is usually a losing decision.


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## PatInTheHat (May 7, 2012)

mike06 said:


> If history has taught us anything its that if youre a long term investor dips are buyable and holding a ton of cash waiting for a significant pullback is usually a losing decision.


Well said.


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## none (Jan 15, 2013)

It's true but damn it's a hard truth to fully subscribe to.


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## gibor365 (Apr 1, 2011)

mike06 said:


> If history has taught us anything its that if youre a long term investor dips are buyable and holding a ton of cash waiting for a significant pullback is usually a losing decision.


How can you describe "a significant pullback " ? Is it 3%, 5%, 10%, 20% ....? over what period of time? I don'r see it possible to predict even close where is the bottom....


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## mike06 (Aug 4, 2011)

gibor said:


> How can you describe "a significant pullback " ? Is it 3%, 5%, 10%, 20% ....? over what period of time? I don'r see it possible to predict even close where is the bottom....


That is the exact point I was trying to make...


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## Siwash (Sep 1, 2013)

good buying ahead!!


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## Jon_Snow (May 20, 2009)

At times like this I'm glad I have lots of cash on hand, and even more glad that my divy's will keep rolling in.... this will be interesting to watch.


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## GoldStone (Mar 6, 2011)

mike06 said:


> If history has taught us anything its that if youre a long term investor dips are buyable


Is it what your learned in 2008?


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## gibor365 (Apr 1, 2011)

GoldStone said:


> Is it what your learned in 2008?


No , history has taught us that if you were buying at the bottom in 2008, you would be millionaire  , but didn't teach us how to identify the bottom 
Seriousy, I just don't understand investors who gonna sit on cash until S&P falls to 1500..... if if it never falls there (that is pretty realistic scenario)?!


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## mike06 (Aug 4, 2011)

GoldStone said:


> Is it what your learned in 2008?


Yes, precisely. If you continued to consistently put money into the market you are miles ahead right now even after one of the worst periods in history for equities.


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## GoldStone (Mar 6, 2011)

My point was, you don't know what you are looking at. Is it a dip or a correction? If the latter, how big is it going to be? Buying "the dip" early on in 2008 wasn't the best decision (even though it worked well in the long run).

The only way to time this that I'm aware of is to follow a fixed asset allocation with some wide rebalancing bands. You don't rebalance whenever you see a dip. You rebalance when equities fall below the target by a meaningful amount. Yes, you may miss a small dip, but that doesn't matter in the long run.


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## richard (Jun 20, 2013)

That's why trying to make money by buying on dips is a gamble. Not to mention that most of the assets you would hold while you wait have a much lower return so you can lose a lot by waiting too long. Back to flipping a coin 

There are two good times to buy. The second best time is right now. The best time is in the past when prices were lower. So if you can't go back to 2009 and buy at those prices, then today (or tomorrow) is a good time to buy.


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## mike06 (Aug 4, 2011)

GoldStone said:


> My point was, you don't know what you are looking at. Is it a dip or a correction? If the latter, how big is it going to be? Buying "the dip" early on in 2008 wasn't the best decision (even though it worked well in the long run).
> 
> The only way to time this that I'm aware of is to follow a fixed asset allocation with some wide rebalancing bands. You don't rebalance whenever you see a dip. You rebalance when equities fall below the target by a meaningful amount. Yes, you may miss a small dip, but that doesn't matter in the long run.


Nobody said anything about rebalancing everytime you see a dip. I said that all dips are buyable - ie. if you have cash just sitting on the sidelines just put it to work and dont worry about waiting for that 5, 10, or 20% correction that everyone seems to be waiting for and in the meantime have missed out on one heck of a bull market.


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## Westerly (Dec 26, 2010)

Although I have a 15 yr history in acct'g and tax, I'm relatively new to the investment game (so don't follow my trail I moved aprox 10-15% into cash late December and have now re-invested. My forward thought is if there is substantial additional pullbacks it will be good timing for my RRSP contributions come February. In my late 40's, I have a ways to go to build up my nest-egg. I've also used today to buy/sell a couple stocks that I had sold or invested in based on their short-term prices. COS, EMA, MFC, MRG.UN, BBD.B and some others. I really wanted to buy more POT today but couldn't pull the trigger. Funny enough, I really wanted to sell it 1-2 weeks ago and also couldn't bring myself to do it. Hmmm... friggin cartel. 

Anyway, I'm not big on holding cash. I see my mortgage as a really good, tax efficient, GIC; if I want to hold cash I'll pay the mortgage down and keep my available LOC. Where else can I make 3-3.5% after-tax, risk free. All the best next week.


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## doctrine (Sep 30, 2011)

I would say, don't react either way on a drop like this. Markets could rebound. They could really tank though. Imagine if today was repeated every single day next week, 5 days x 200 point losses. And then again the week after, followed by a bounce back and then more massive losses. And that could continue for months. If you're confident in your investments, you're better off waiting; if it's truly a real correction, there will be plenty of time to invest more money. I would hate to invest a lot of money after a 200 point drop because I thought it was an opportunity, then watch the TSX drop another 1000-2000 points.


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## Belguy (May 24, 2010)

I made a major stock purchase---on Wednesday. This is further evidence that I should not buy lottery tickets. LOL.


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## tygrus (Mar 13, 2012)

Unfortunately, the run up in the markets from 2009 until 2011-12 was retail and institutional investors buying back in after the dip and a lot of stimulus cash funneling in as well. There was no noticeable improvement in the economy over this period, yet markets rose higher.

The run up from 2012-2014 has been mostly mom and pop getting back in for fear of missing out. So if the markets get trimmed back 10-15%, mom and pop get squeezed again, retail take the gains and buys back in on the dip and all is good again.


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## sags (May 15, 2010)

Down 300 points this past week, I think they said about the US market.

Today is just today..........but if it continues to slide a few more days..........people will start to panic and sell.

Memories from the Great Recession are still fresh, and people won't wait long to get out.

The greatest fear is a liquidity crisis..........such as we had in 2008.

Banks don't trust banks etc.........and everyone hangs on to their cash.

Big retailers have been hit hard since last fall. Christmas was a big bust.......and they really count on Christmas sales.

There was a lot of shipping during the Christmas season........but apparently the quantity of "returns" was very high as well.

The consumer appears to be AWOL.

If housing and construction starts to roll over............big problems.


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## alex52 (Dec 12, 2013)

*Timing the market is a losing game*

buying the right stock and hold for the long term, seems to work.


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## gibor365 (Apr 1, 2011)

Belguy said:


> I made a major stock purchase---on Wednesday. This is further evidence that I should not buy lottery tickets. LOL.


Stock?! I thought you were buying only ETFs  Actually I did on Wed and Thu 2 minor stock purchases....added CVX and initiated position in KO


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## Siwash (Sep 1, 2013)

I'm a TOTAL Newb to investing and probably know nothing about investing, but most of the lit I've read on investing has stated that you shouldn't pay much attention to this stuff if you're a long term investor.. if you have the means to invest, do so not matter what the prices… and trying to time the perfect time is a wasteful strategy…

Did I misunderstand this?


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## Belguy (May 24, 2010)

Really, the most important thing is to have a target asset allocation that you can stick with through all market conditions that will save you from selling in a panic whenever the markets tank. Trade only for rebalancing purposes whenever your target asset allocation gets out of balance.

To gibor: Actually, my purchases were all ETF's.


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## humble_pie (Jun 7, 2009)

not a good time to buy imho


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## Sherlock (Apr 18, 2010)

Siwash said:


> I'm a TOTAL Newb to investing and probably know nothing about investing, but most of the lit I've read on investing has stated that you shouldn't pay much attention to this stuff if you're a long term investor.. if you have the means to invest, do so not matter what the prices… and trying to time the perfect time is a wasteful strategy…
> 
> Did I misunderstand this?


You are absolutely correct, people who sit on large amounts of cash in anticipation of a big drop usually end up sitting on cash too long because there's always someone predicting a downtown and usually they're wrong and even when theyr'e right they still would have been better off just keeping the money in the market and collecting dividends.


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## Canadian (Sep 19, 2013)

I predict more selling over the next little bit. Recent economic data and this drop are enough to make a lot of investors skittish and sell to lock in gains. I see it as a good opportunity to sit back, build up some cash, and see how the economic/earnings landscape pans out (I won't be selling just because of the market losses).


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## humble_pie (Jun 7, 2009)

Sherlock said:


> You are absolutely correct, people who sit on large amounts of cash in anticipation of a big drop usually end up sitting on cash too long because there's always someone predicting a downtown and usually they're wrong and even when theyr'e right they still would have been better off just keeping the money in the market and collecting dividends.



no, wrong

dare i say this is just more ... ah ... more _something_ ... from a bidet backsplash artist


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## richard (Jun 20, 2013)

Siwash said:


> I'm a TOTAL Newb to investing and probably know nothing about investing, but most of the lit I've read on investing has stated that you shouldn't pay much attention to this stuff if you're a long term investor.. if you have the means to invest, do so not matter what the prices… and trying to time the perfect time is a wasteful strategy…
> 
> Did I misunderstand this?


You got it right. If you aren't prepared for a drop it's never a good time to invest in the stock market. If you are, waiting is a gamble that most people will lose.


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## andrewf (Mar 1, 2010)

Belguy said:


> Really, the most important thing is to have a target asset allocation that you can stick with through all market conditions that will save you from selling in a panic whenever the markets tank. Trade only for rebalancing purposes whenever your target asset allocation gets out of balance.
> 
> To gibor: Actually, my purchases were all ETF's.


Hey Belguy, are you still sticking to an asset allocation? Because if you have been rebalancing, you would if anything have been selling stocks and buying fixed income .


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## humble_pie (Jun 7, 2009)

no, he got it wrong. I for one harvested cash commencing in june 2007 when coventry failed. For years there had been countless signs & warnings - some from distinguished economists & investment bankers in the US such as Barton Biggs - that everything to do with mortgages was bubblelicious. Even a dumb crumb like myself could read their views. Coventry rang the bell.

for 18 months i collected cash, then began re-buying stock at the tail end of 2008. For about 3 months this looked perilous. But it worked out fine & dandy.

right now i'm not selling but i'm not buying either.

cmf forum has had this ongoing argument for years & years. It's always the new investors & the small investors who whine that stock-picking does not work, market timing does not work, stock-pickers always lose, market-timers always lose.

what's vastly entertaining is to watch these very same novices gradually convert themselves, over a few years here in cmf, into close to speculators.


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## newfoundlander61 (Feb 6, 2011)

I usually buy extra in most large dips, seems to pay back down the road. My weekly purchase still continues regarless of what the market does.


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## richard (Jun 20, 2013)

humble_pie said:


> no, he got it wrong. I for one harvested cash commencing in june 2007 when coventry failed. For years there had been countless signs & warnings - some from distinguished economists & investment bankers in the US such as Barton Biggs - that everything to do with mortgages was bubblelicious. Even a dumb crumb like myself could read their views. Coventry rang the bell.


What's harvesting cash? Selling everything or just letting dividends accumulate? If you made a big gain out of this then you had to make a big bet. Being within a few months of the top and bottom is unusually good precision. How many of those distinguished economists and financiers started calling for a crash years before it actually happened? How many kept predicting more disasters after the crash? If you're ever looking for 1000% raise you could easily take their jobs 



humble_pie said:


> cmf forum has had this ongoing argument for years & years. It's always the new investors & the small investors who whine that stock-picking does not work, market timing does not work, stock-pickers always lose, market-timers always lose.


You had good timing. Most investors were much more afraid in 2009 than they were in 2007. And they had a good reason since there were a lot more distinguished people talking about the end of the world at that point. Encouraging them to time the market is giving power tools and a can of gasoline to a kid and hoping they end up building a working riding mower.



humble_pie said:


> what's vastly entertaining is to watch these very same novices gradually convert themselves, over a few years here in cmf, into close to speculators.


Let's just hope they read the right parts... if they stumble into the wrong thread they'll be selling everything twice a month. Just out of interest, since you don't spend a lot of time in those threads, what warning signs do you see now?


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## Sherlock (Apr 18, 2010)

Humble pie's opinion is incorrect.


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## Addy (Mar 12, 2010)

Sherlock said:


> Humble pie's opinion is incorrect.


In my opinion his opinion is correct.


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## Nemo2 (Mar 1, 2012)

Addy said:


> In my opinion his opinion is correct.


Isn't Humble a 'she'?


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## Addy (Mar 12, 2010)

Nemo2 said:


> Isn't Humble a 'she'?


Are you implying his opinion is not as valuable because he is a she?! :biggrin:


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## My Own Advisor (Sep 24, 2012)

doctrine said:


> I would say, don't react either way on a drop like this. Markets could rebound. They could really tank though. Imagine if today was repeated every single day next week, 5 days x 200 point losses. And then again the week after, followed by a bounce back and then more massive losses. And that could continue for months. If you're confident in your investments, you're better off waiting; if it's truly a real correction, there will be plenty of time to invest more money. I would hate to invest a lot of money after a 200 point drop because I thought it was an opportunity, then watch the TSX drop another 1000-2000 points.


Excellent points.

I keep a bit of cash on hand for dips, but not much. I like to be invested as much as possible since I have no idea what tomorrow's markets will bring and I haven't met anyone (or read about anyone) that can accurately predict them either.


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## Nemo2 (Mar 1, 2012)

Addy said:


> Are you implying his opinion is not as valuable because he is a she?! :biggrin:


Hey, I'm easily confused, y'know.


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## cstyles (Nov 14, 2012)

Bumping this back up for more discussion, TSX getting hammered again today, down over 187 points and looks like it will get worse as the day goes on. Will be interesting to see how this week pans out, and what kind of buying opportunities present.


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## Hawkdog (Oct 26, 2012)

Good time to put in some stink bids. you never know. 
I am looking at BNS.


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## Hawkdog (Oct 26, 2012)

Sherlock said:


> Humble pie's opinion is incorrect.


I disagree.

"Be fearful when others are greedy. Be greedy when others are fearful."

Read more: http://www.marketfolly.com/2009/09/top-25-warren-buffett-quotes.html#ixzz2rcix3yp8


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## Canuck (Mar 13, 2012)

I jumped into BNS on Friday, being that it had gone down a lot in a few days, bloody hell


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## GoldStone (Mar 6, 2011)

BNS is funny. Year to date, it dropped as much as emerging markets.

Who needs an emerging markets ETF when you can own BNS?


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## richard (Jun 20, 2013)

Hawkdog said:


> I disagree.
> 
> "Be fearful when others are greedy. Be greedy when others are fearful."
> 
> Read more: http://www.marketfolly.com/2009/09/top-25-warren-buffett-quotes.html#ixzz2rcix3yp8


The problem is that there's always someone afraid of something. Right now a lot of people are afraid that a lot of other people are not afraid enough of some vaguely-specified things and may or may not be too greedy. Figuring out whether to be fearful or greedy can be a very confusing exercise.

Another quote on that page illustrates it well: "The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable." That's Uncle B telling you not to think you know what the market will do over the next year.


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## Toronto.gal (Jan 8, 2010)

> Figuring out whether to be fearful or greedy can be a very confusing exercise.


Sure, but it becomes less confusing if you can avoid the disgruntled as well as the overly joyous crowd; & tons of other noise.


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## humble_pie (Jun 7, 2009)

i disagree that i might be a gal who's incorrect


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## leeder (Jan 28, 2012)

People tend to become fearful and greedy at the wrong times. Take last year, when the markets were up about 30%, there had to be some who sold out early because they fear a crash is imminent. These people may have missed out on additional gains at the latter part of the year. Conversely, others may have gotten greedy when they entered the market late last year because they see others doing well with their investments, only to see their returns dropping right now. 

It's harder to say than do, but maybe it's best to ignore our greed, fear or any other emotions and just contribute to your portfolio regularly. During those regular contributions, you may be putting in money when the market is at new highs or when it is at its lows. As long as you stick with an appropriate investment plan (something that you're comfortable with in both boom and bust cycles), investors will do well down the road.


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## Pluto (Sep 12, 2013)

Dip January 2014

Buy this dip now? A guide for the perplexed. 

It is not time to buy this dip. There is no proof it is a dip, a correction, or will develop into a full blown bear market. 
I don't buy the theory that if you are a long term investor, it doesn't matter when you buy. It sounds like mutual fund sales talk. 

Look at the best for your guide: - 

For instance, Sir John Templeton. His advice was buy at the time of maximum pessimism. Over the years he managed near 20% annual compound returns on his flagship fund. People who buy anytime based on the false belief that it doesn't matter don't get 20% compounded returns. Is this a time of pessimism? No. we are only about 3% below the peak at a time of investor delight, and complacency. So, according to Templeton, this is a bad time to buy in North America. 

Warren Buffet: Apparently in the 1980's for many years he desired Wells Fargo. But he didn't buy because it was too expensive. Then in the early 1990's the US experienced the Savings and Loan's crisis. That was a time of maximum pessimism especially for financial stocks. That's when Buffet started buying Wells Fargo as due to the Savings and Loans crisis, shares of Wells Fargo were low also. 

Both Templeton and Buffet claimed to be value investors, and not market timers. But the denial that they were market timers did not mean 'buy anytime because it doesn't matter if you are in for the long haul'. Too, Buffet apparently has had about 75% in just 5 stocks. It looks like he does not care to much for diversification. He cares more for quality + low price. 

I believe your plan should be: 1. determine what a quality stock is, then make a list of about 1/2 dozen you really like. 2. Wait for a time of maximum pessimism and buy them. 3. When the price rises to the point they are no longer good value, stop buying. 4. don't buy again until value appears. 5. However, if you feel you have to add to your position, add on dips. 

To support this perspective:



http://www.marketwatch.com/story/5-...-should-avoid-2013-12-11?reflink=MW_news_stmp



http://www.usatoday.com/story/money/personalfinance/2013/12/10/buffetts-secrets-uncovered/3956763/


http://www.fool.com/investing/general/2013/12/30/warren-buffetts-super-simple-retirement-advice.aspx


A Buffett quote from the latter reference:

"Among the various propositions offered to you, if you invested in a very low cost index fund -- where you don't put the money in at one time, but average in over 10 years -- you'll do better than 90% of people who start investing at the same time." 

Clearly averaging in over 10 years requires patience and is contrary to the view that if you invest long term, you can buy anytime. Buffett doesn't say when in the ten years to buy. That's where Templeton comes in: over the ten years, buy during times of pessimism because that is when the best price for quality stocks appears. 

PS. 1. This bull market *could* end up being one of the greatest bull markets ever. However, right now, the market looks like a run on sentence with no punctuation. Time for a comma, semi colon, colon, or maybe even a period. 

PS 2. I believe the best time to buy is during a bear market. However, sometimes there is a bear market within a bull market. Right now there seems to be a bear market in commodities that is interesting. Uranium and other miners might be a place to look. Have a look at what is on the radar of Jim Rogers. 

PS. 3. I'm with Humblepie. In May 2008 I got rid of the last of my stock. Unemployment was low, and euphoria over the leaders, not the least of which was POT, was very obvious. The psychological indicators all said this is a top. That cohered with low unemployment, which also indicated a top. By October I was buying again. By march 2009 I was on margin. The first week of March 2009, by monitoring a chart of the S&P 500, was an obvious selling climax, a mirror image of a blow off top: Prices spiked way below the 50 day MA and the 200 day MA, reflecting the intense fear that correlates highly with abundant value. Those who say you can not time the market just never took the time to learn. No one can teach it to you, you have to seek how to do it your self. Once you know how to do it yourself, you are no longer a victim/follower of the diverse views of the guru's. Right now, US unemployment is in the 7% area, but dropping fast. It isn't as low as it usually goes before a major top. Too, I don't see out and out euphoria, the mirror image of maximum pessimism. I just see happiness and complacency. So the unemployment and the psychology indicators are not strong or extreme enough to be an obvious major top. Timing tops and bottoms is an approximation, not a mathematically precise formula. Any one who expects absolute precision of the exact top and exact bottom in advance, will likely give up, and buy anytime. Too bad. 

Moreover, Investors Business Daily, in their daily article, "The Big Picture" has consistently and accurately identified the beginning and end of bull markets. Their published record clearly contradicts the claim that the market can not be timed. To find out how to tell a dip, from a full blown bear market, study "The Big Picture" articles, and William O'Neil's writings on market direction. 

But aside from market timing, the essence is Value. Buffett and Templeton honed their eye for value, and when they saw it, they bought. When they didn't see it, they didn't buy. If we do the same, we will be better off.


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## Toronto.gal (Jan 8, 2010)

Pluto said:


> I don't buy the theory that if you are a long term investor, it doesn't matter when you buy......But aside from market timing, the essence is Value. Buffett and Templeton honed their eye for value, and when they saw it, they bought. When they didn't see it, they didn't buy. If we do the same, we will be better off.


I could not agree more!


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## Sasquatch (Jan 28, 2012)

I've learned a long time ago that timing the market doesn't work. Sure, sometimes you get lucky but usually no worky.
I just bought into MAW 105 last week with a considerable amount of cash. So it's dropping a bit right now, it'll come up again, no big deal  I can wait it out!!


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## GoldStone (Mar 6, 2011)

Pluto said:


> A Buffett quote from the latter reference:
> 
> *"Among the various propositions offered to you, if you invested in a very low cost index fund -- where you don't put the money in at one time, but average in over 10 years -- you'll do better than 90% of people who start investing at the same time."*
> 
> Clearly averaging in over 10 years requires patience and is contrary to the view that if you invest long term, you can buy anytime. Buffett doesn't say when in the ten years to buy.


I think you misinterpreted the quote. Buffett was talking about an average person doing regular DCA contributions from a paycheck. A person who DCAs into a low cost index fund does better in the long run (> 10 years) than 90% of people who invest differently.

That quote doesn't refer to an investor who sits on a large sum of money thinking what to do with it.

In any case... this is just a minor quibble. It's not very relevant in the context of this thread.


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## Pluto (Sep 12, 2013)

GoldStone said:


> I think you misinterpreted the quote. Buffett was talking about an average person doing regular DCA contributions from a paycheck. A person who DCAs into a low cost index fund does better in the long run (> 10 years) than 90% of people who invest differently.
> 
> That quote doesn't refer to an investor who sits on a large sum of money thinking what to do with it.
> 
> In any case... this is just a minor quibble. It's not very relevant in the context of this thread.


I see your point. He probably was referring do dollar cost averaging.


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## richard (Jun 20, 2013)

Pluto said:


> For instance, Sir John Templeton. His advice was buy at the time of maximum pessimism. Over the years he managed near 20% annual compound returns on his flagship fund. People who buy anytime based on the false belief that it doesn't matter don't get 20% compounded returns. Is this a time of pessimism? No. we are only about 3% below the peak at a time of investor delight, and complacency. So, according to Templeton, this is a bad time to buy in North America.
> 
> Warren Buffet: Apparently in the 1980's for many years he desired Wells Fargo. But he didn't buy because it was too expensive. Then in the early 1990's the US experienced the Savings and Loan's crisis. That was a time of maximum pessimism especially for financial stocks. That's when Buffet started buying Wells Fargo as due to the Savings and Loans crisis, shares of Wells Fargo were low also.
> 
> Both Templeton and Buffet claimed to be value investors, and not market timers. But the denial that they were market timers did not mean 'buy anytime because it doesn't matter if you are in for the long haul'. Too, Buffet apparently has had about 75% in just 5 stocks. It looks like he does not care to much for diversification. He cares more for quality + low price.


What's the difference between value investing and market timing? If your stock goes up you can call it value investing, if it goes down you can say that you succumbed to market timing 

Jokes aside, both investors that you mentioned bought individual stocks after extensive study that allowed them to have a better idea of what was going on than just about everyone else. It's common to see a single stock go up 100% or down 80% in a year so the opportunities and risks to them are great enough to reward patience and knowledge.

For an average investor who owns an index fund, mutual fund, or a collection of dividend payers or bank stocks that act a lot like an index fund the decisions are different. They face smaller gains and faster recovery from losses. In addition their knowledge is likely to be well below many other investors, especially if they take it from the media or forums. If they wait they are more likely to miss out on gains than to avoid losses, and even when the time is right they will come up with some other reason to continue waiting. As Buffet himself says if you invest what you have in an index fund as soon as you get it then 90% of investors won't be able to touch your results.

If you were able to call the day of the market bottom then it's great that you followed that instinct. Anyone who doesn't have enough background to do that will find it a lot cheaper to admit their ignorance than to pay for a degree in market timing. Personally I suspect you're right that things are not extreme enough for a big drop in the near future. If it goes far enough then even a correction might not take it below today's prices. But all I really know is that the market will keep going up until it doesn't go up anymore. In that I will never be proven wrong


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## uptoolate (Oct 9, 2011)

Pluto said:


> I see your point. He probably was referring do dollar cost averaging.


He was probably also referring to the fact that a low cost index fund does better than the vast majority of actively managed funds and better still than those investing in them over the long run.


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## Rusty O'Toole (Feb 1, 2012)

richard said:


> What's the difference between value investing and market timing? If your stock goes up you can call it value investing, if it goes down you can say that you succumbed to market timing
> 
> Jokes aside, both investors that you mentioned bought individual stocks after extensive study that allowed them to have a better idea of what was going on than just about everyone else. It's common to see a single stock go up 100% or down 80% in a year so the opportunities and risks to them are great enough to reward patience and knowledge.
> 
> ...


This is an interesting question. Buffet started out as a value investor, I believe he started investing clients' funds in 1954. In 1969 he announced he was retiring. He could no longer find anything worth buying, the whole market was overpriced and the new go-go style of investing seemed crazy to him. He could not cope with the new paradigm.

1969 was the top. He got out at the exact moment the market peaked.

5 years later he announced that he was out of retirement. Everywhere he looked, there were bargains in stocks. His quote was " I feel like an oversexed guy in a harem"

1974 was the bottom. 

In other words he timed the market perfectly without even trying to, just by knowing the difference between prices being way too high and way too low.


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## Rusty O'Toole (Feb 1, 2012)

Buffet also says he likes to buy stock in good companies when it is selling for 50% off book value - but you must be prepared to see it drop 50% from there.


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## dogcom (May 23, 2009)

Utilities like XUT might look better right now they are down and didn't take part in the last year run up and could be a defensive buy at this time.


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## richard (Jun 20, 2013)

All right, so Warren Buffet and two CMF members have amazing market timing skills  All 3 of them should keep on doing what they've been doing.

Now I know that Buffet was giving people warnings about the market in the 90s... but strangely I can't remember much from 2007 even though that's when I started investing. Anyone know what he was saying then?


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## snowbeavers (Mar 19, 2013)

Don't try and time the market. I remember the "fiscal cliff" of Jan 2013 when everyone was talking doom and gloom. I bought in regardless as I had a significant amount of cash to invest and things have panned out okay.


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## Islenska (May 4, 2011)

I always try to time the market, trick is not to get in a position where you have to sell in a down market.

And not to bemoan capping gains too early, now that is hard on the nerves!:rolleyes2:


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## lonewolf (Jun 12, 2012)

It takes a lot of money to keep the market well oiled. Why do gamblers that asume the market can not be timed paying so much for the oil ? If a gambler thinks the market can not be timed why even play when it cost money to put money on the table ????

I have no problem with buying when everyone is @ or near a peak of being greedy & selling when everyone is @ a peak of being fearfull. Got to love those PUTS


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## humble_pie (Jun 7, 2009)

lonewolf said:


> I have no problem with buying when everyone is @ or near a peak of being greedy & selling when everyone is @ a peak of being fearfull. Got to love those PUTS


wolf some might think you've got this a bit backwards or maybe even confused.

but actually it's cartesian logic, the way you have PUT it each:


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## lonewolf (Jun 12, 2012)

humble_pie said:


> wolf some might think you've got this a bit backwards or maybe even confused.
> 
> but actually it's cartesian logic, the way you have PUT it each:


 Hi Humble

I went both long & short the market with in a day of the all time high & I will most likely make money on both sides of the market. Went with an in the money Dec 2014 put with a delta between .8 & .9 cant remember the exact level. The first 5er down go with in the money puts @ the top of a wave 2 out of the money puts will be the big money maker.

Also went long Xilinx market on open Jan 2 with a sell date of Market on close of Mar 7. The xilinx seasonal trade has a track record of 100% wins over last 23 years with an average profit of 17%.

Not sure of the exact odds but they are most likely higher then 1 in a million to get that kind of a win ratio i.e., based on googling coin tosses there is an aprox 33.9% in 1,000,000 chance of getting 20 heads in a row & 1 in 33.554,432 chance of getting 25 heads in a row with a series of coin tosses. I remember reading a few years back that the market is up a fib 61.8% of the time.


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## Pluto (Sep 12, 2013)

Rusty O'Toole said:


> This is an interesting question. Buffet started out as a value investor, I believe he started investing clients' funds in 1954. In 1969 he announced he was retiring. He could no longer find anything worth buying, the whole market was overpriced and the new go-go style of investing seemed crazy to him. He could not cope with the new paradigm.
> 
> 1969 was the top. He got out at the exact moment the market peaked.
> 
> ...


Yes, it is interesting. He denied being a market timer, yet according to the history you cite, it looks like he timed the market. I suspect this may have to do with definitions of "market timing". If one defines market timing as figuring out in advance when and at what point level the market will top out, and bottom out, he doesn't do that. As you state, he looked at value, when he saw it he bought, when he didn't see it, he didn't buy. When he denies being a market timer, I think he is denying he tries to figure out *in advance* when value will appear. Instead, he just waits for it to happen, then strikes. Same thing with Templeton.


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## Pluto (Sep 12, 2013)

richard said:


> The problem is that there's always someone afraid of something. Right now a lot of people are afraid that a lot of other people are not afraid enough of some vaguely-specified things and may or may not be too greedy. Figuring out whether to be fearful or greedy can be a very confusing exercise.
> 
> Another quote on that page illustrates it well: "The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable." That's Uncle B telling you not to think you know what the market will do over the next year.


Richard, 

Someone always being afraid of something isn't what Templeton meant when he said "maximum pessimism". There are Perma-bears, investors who are always fearful no matter what. Ignore them. The most recent time of maximum pessimism was 2009. Then the market started to "climb the wall of worry". Once one learns to distinguish the Maximum pessimism phase from the climbing a wall of worry phase, it isn't the problem you seem to think it is. Worry last year over taper talk was not maximum pessimism, for instance. It was part of the wall of worry phase. As time passes, gradually most worry will dissipate. If and when we move into the euphoric phase, we will be left with negative comments by the Perma-bears, which we ignore anyway, and some astute voices claiming the market is overvalued. If you notice the euphoria, and listen to the few astute voices, you can time the market (approximately). It doesn't require an expensive formal education. One to 1/2 dozen books and practice is all it takes. Joe Kennedy sold in 1926 some 3 years early apparently based on a psychological indicator. By 1933 no one said he was wrong, even though he was way too early. I think it is possible to get more accurate.


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## lightcycle (Mar 24, 2012)

Pluto said:


> The most recent time of maximum pessimism was 2009.


The problem is that the timing of maximum pessimism or max euphoria is always divined after the fact.

Some who get it right often attribute their timing to skill, when it's most often just luck. All it would take is a further drop from when they established their position and suddenly the opportunistic join the ranks of the pessimistic - and now that time becomes the new "time of maximum pessimism".


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## Pluto (Sep 12, 2013)

lightcycle said:


> The problem is that the timing of maximum pessimism or max euphoria is always divined after the fact.
> 
> Some who get it right often attribute their timing to skill, when it's most often just luck. All it would take is a further drop from when they established their position and suddenly the opportunistic join the ranks of the pessimistic - and now that time becomes the new "time of maximum pessimism".


Prevalent pessimism can be observed as it happens. You don't have to wait until it is over. For instance using the bulls/Bears ratio and keeping a mental note of past extremes you can tell if present sentiment is at the extremes. So I don't really think any lag in observing it is significant. Moreover, with experience one does not need Bull/Bears ratios. Prevalent pessimism becomes evident just from images and statements in the media. 
There is no proof that Templeton's 20% annual compounded rate of return was luck. Similarly with Buffett. 
Buying at times of abundant value, usually a time of prevalent pessimism, not buying and perhaps lightening up during times of over valuation, usually times of investor optimism, is a procedure, not a stab in the dark that relies on luck. 

Suppose someone observes that in October 2008 prices of quality companies are lower than they were the previous May. Why is that observation luck? Then supposing, based on that observation, they buy at the lower prices. Why is that act luck? All they are doing is making common sense observations, and acting on it. Doesn't seem like luck to me. As you sate, "All it would take is a further drop from when they established their position and suddenly the opportunistic join the ranks of the pessimistic..." You are *assuming* they would join the ranks of the pessimistic when there is no law of the universe that says they *must* join such ranks. 

1. Knowing that times of undervaluation/pessimism don't last for ever, why would you automatically become pessimistic? So one got in a bit early, if you bought quality, why worry? 
2. Knowing that you bought quality - companies with survival and recover to former highs capability, why would you automatically join the ranks of the pessimistic? Why wouldn't you be delighted with the opportunity to buy more on margin at this even lower point? 
3. Why would you establish your position so quickly? Why not spread out your buy points during pessimistic/undervalued times? Hopefully you would have three or four buy points spread out over some months or a year, and buy quality on days/weeks of terrible market pounding. 


But all the timing stuff aside, if you can identify quality companies, and only buy them when their price represents good value, and decline to buy when their price is not good value, you don't need sentiment indicators, and other market timing devices. The latter are accessories to the essence. I think a problem is, abundant value appears during times of pessimism and fear, so many don't buy. Then they under perform the averages. Then they rationalize it by saying they were just unlucky. With that thought process, they have excused themselves from doing anything to improve. If you dismiss the best as lucky, you are undermining your ability to hone your eye for value.


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## richard (Jun 20, 2013)

Pluto said:


> Prevalent pessimism can be observed as it happens. You don't have to wait until it is over. For instance using the bulls/Bears ratio and keeping a mental note of past extremes you can tell if present sentiment is at the extremes. So I don't really think any lag in observing it is significant. Moreover, with experience one does not need Bull/Bears ratios. Prevalent pessimism becomes evident just from images and statements in the media.
> There is no proof that Templeton's 20% annual compounded rate of return was luck. Similarly with Buffett.


I think we all agree that Buffet has made some great choices and we know he was talking a lot about why it was a good idea to buy stocks in 2009-2010. Was he telling people to sell in 2007? Is he saying that now? If so I haven't heard about it. At the extremes it certainly is easier to make a decision. Between those anything could happen. If you're saying the market is not at an extreme now then we agree on something  

The market is driven by sentiment and within a certain range that sentiment can go up or down depending on the news and investor psychology. Investor psychology is driven by news and recent market performance. Since the media is overwhelmingly focused on negative things now a few positive surprises combined with the recent run-up could push us to an extreme. I don't say that because I expect it to happen this year, but because it's one possibility that is overlooked too easily.



Pluto said:


> But all the timing stuff aside, if you can identify quality companies, and only buy them when their price represents good value, and decline to buy when their price is not good value, you don't need sentiment indicators, and other market timing devices.


That's very well said. If you can't do that then market timing is likely to be a costly exercise, keeping in mind that broad funds behave differently than individual stocks. Anyone who makes decisions based on what strangers on a forum, or the media, say is likely to hurt themselves. Even if they get the right recommendation today what will they do in 3 months? When you go that way making one decision isn't enough (especially if you got out of the market and you're waiting for the right time to get back in). If you're going to tell them what to do today you need to keep telling them for a long time to come. If you're offering that it's very kind of you 



Pluto said:


> The latter are accessories to the essence. I think a problem is, abundant value appears during times of pessimism and fear, so many don't buy. Then they under perform the averages. Then they rationalize it by saying they were just unlucky. With that thought process, they have excused themselves from doing anything to improve. If you dismiss the best as lucky, you are undermining your ability to hone your eye for value.


This is exactly what happens when people try to time the market without doing the work to understand what they're doing. If you're willing to do the work it's great that you're profiting from your knowledge. Many others don't have the time or the motivation to learn it all. The first step for them to improve is to be more passive and learn that the opinions they hear from others are worth just as much as they paid for that opinion.


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## dogcom (May 23, 2009)

I think if you listen to strangers on the forum or listen to the talking heads or experts and put in little thought of your own then you would probably get the same results good or bad.


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## dogcom (May 23, 2009)

I mentioned utilities looked cheap compared to the overall market and they have a decent dividend. Look at XUT compared to SPY over the last month since the first taper and you can see how the defensive move helped. That was a simple timing exercise and you didn't need to go with cheaper gold miners or any crazy stuff like that. Of course if the Fed panics and reverses tapering then all bets are off and the market will probably take off again.


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## lightcycle (Mar 24, 2012)

Pluto said:


> Prevalent pessimism can be observed as it happens. You don't have to wait until it is over. For instance using the bulls/Bears ratio and keeping a mental note of past extremes you can tell if present sentiment is at the extremes. So I don't really think any lag in observing it is significant.


Prevalent pessimism is not the same as "maximum pessimism", a term you used previously.

The problem with gauging prevalent pessimism is that you don't know where you are on the downward trend until it's over. Even if you deploy traunches over time, dipping into margin at your perceived end, you may still catch the (very long) blade of the proverbial falling knife, and then have to wait for a considerably long time sliding down the left side of the V and then climbing the other side until you break even. Worse still if you're paying carrying costs during that time.

Having said that, I think a lot of good investors do gauge value based not just on fundamentals, but on overbought/oversold conditions. However, to claim that you can put a stake in the chart and declare maximum pessimism while you're still in the midst of things is understating the role of luck when things do work out.

A lot of people have timed things very well in the last big capitulation. Them attributing this to their skill is a self-deception, when all it takes is an airplane flying into a skyscraper, a global natural disaster or a deep-reaching financial scandal to further the market decline.


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## lonewolf (Jun 12, 2012)

Everything that exsists including the market has a precise nature & must act in accordance with its nature. When people say the market can not be timed are they just joining the herd by memorizing & repeating that which the herd is saying. The market has to act in accordance with its nature. Understand the markets nature & the market can be predicted. I do not fully understand the nature of the market so I can not predict it with 100% accuracy.

Even if the nature of the market is fully understood, the investor would still have to develope the precise nature to act in accordance that would allow them to make money in the market. @ some point the perfect system would hit critical mass. There would be a limited supply to that which the market could provide.


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## none (Jan 15, 2013)

^ are you high?


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## Pluto (Sep 12, 2013)

richard said:


> I think we all agree that Buffet has made some great choices and we know he was talking a lot about why it was a good idea to buy stocks in 2009-2010. Was he telling people to sell in 2007? Is he saying that now? If so I haven't heard about it. At the extremes it certainly is easier to make a decision. Between those anything could happen. If you're saying the market is not at an extreme now then we agree on something
> 
> The market is driven by sentiment and within a certain range that sentiment can go up or down depending on the news and investor psychology. Investor psychology is driven by news and recent market performance. Since the media is overwhelmingly focused on negative things now a few positive surprises combined with the recent run-up could push us to an extreme. I don't say that because I expect it to happen this year, but because it's one possibility that is overlooked too easily.
> 
> ...


1. I'm not aware that Buffett ever made buy and sell calls. Back in late 2008 he was quoted on CNBC as having said he sees a lot of value in stocks. Recently, a few months ago, I heard on the media Buffett being quoted as having said he doesn't see a lot of value in stocks right now. 
2. The market is not primarily driven by sentiment. Essentially, the market is driven by earnings. All the other stuff, eg sentiment, interest rates, are relevant, but secondary. 
3. The media is not overwhelmingly focused on negative things right now. In late 2008 and 2009 it was overwhelmingly focused on the negative. After March 2009 people started worrying about "a triple bottom", and "the next leg down". Once those specific worries dissipated the market moved into the climbing the wall of worry phase, which is not an overwhelmingly negative phase. The best prices/value is available before the wall of worry phase begins. The fragments of negativity we see and hear now, is part of the wall of worry phase - brief periods of concern and hyper-vigilance, broken up by good news, back to business. Hence the little bits of volatility - up one day, down the next. 
4. People can save themselves a lot of work learning it all by focusing on the best. What did they do to be successful? Then do what they did. Templeton and Buffett are not the only ones, but they are a great place to start. Read about them, then start to incorporate what they did into what you do. For instance, read enough about Buffett to answer questions such as, What made him buy KO? When did he buy it? Why did he buy it then? What made him buy Wells Fargo? When did he buy it? What made him buy it then? It doesn't take a lot of time and effort to get the answers. 

The essence is value: Buy quality companies at a good price. If you don't see that in the market, don't buy. Then, the obvious question is, What's a quality company? How does one know if it is a good price? By focusing on such essential questions, one can save a lot of time learning. And if one can nail down a short list of quality companies *before* the next market debacle, when it comes, you can buy with confidence in the midst of extreme fear and pessimism.


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## andrewf (Mar 1, 2010)

lonewolf is always unintelligible. At least he is not talking about investing based on astrology.


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## Four Pillars (Apr 5, 2009)

none said:


> ^ are you high?


Lonewolf is actually Rob Ford.


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## Pluto (Sep 12, 2013)

lightcycle said:


> Prevalent pessimism is not the same as "maximum pessimism", a term you used previously.
> 
> The problem with gauging prevalent pessimism is that you don't know where you are on the downward trend until it's over. Even if you deploy traunches over time, dipping into margin at your perceived end, you may still catch the (very long) blade of the proverbial falling knife, and then have to wait for a considerably long time sliding down the left side of the V and then climbing the other side until you break even. Worse still if you're paying carrying costs during that time.
> 
> ...


I'm sorry the word "maximum" has turned out to be an issue. I'll give a Templeton example to try and clarify. In the mid 80's something very bad happened to Union Carbide - or I should probably say they did it to themselves by a bozo management move of sacrificing safety for profits. The stock started to plunge. Templeton started buying on the way down, and buying at the bottom (even though the bottom was not known until after the fact), and buying part of the way up. I can't remember how far down it went, but it was something like a 50% drop in the stock price. He was dollar cost averaging during a time of maximum pessimism. When he started buying on the way down, and when he stopped buying on the way up implicitly defined what he would consider "maximum pessimism". I think he realized that judging times of maximum pessimism was an approximation, and doesn't require absolute precision. I didn't mean to imply it required total precision to to be effective. 

As far a luck goes, times of pervasive pessimism are times where reliance on luck is at it's lowest, provided one is buying quality. Pervasive pessimism, and coincident lower prices, is not a *gague* of value, its a *time* when value appears in abundance. Value is a quality company at a low price. In my view, the don't catch a falling knife is valid sometimes. It loses its validity as the bear market progresses. By march 2009 it was a jaded overused phrase, that looked like a buy signal. The S&P 500 was pared back to 1996 levels. How often does the S&P lose 12 years of growth? A buyer at that time could be wrong, but if they were what could be the extent of the error? The odds were that any error would be small. It was a very safe time to borrow to invest. Have faith when in the valley of death.


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## dogcom (May 23, 2009)

Using one stock to compare maximum pessimism is very dangerous because we don't know how far a stock blow up with all its troubles. Look at RIM, Laidlaw and Nortel as just a few examples of this. One needs to be very close to a value stock in many ways to find a great buy.


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## lightcycle (Mar 24, 2012)

Pluto said:


> The stock started to plunge. Templeton started buying on the way down, and buying at the bottom (even though the bottom was not known until after the fact), and buying part of the way up.


The fundamental problem I was trying to get across is that:

1) Funds are not unlimited, even with margin. Sooner or later, you'll run out of dollars to cost-average.
2) It is unknown where the bottom is, despite all your anecdotes of people who luckily caught it. There are tons more people try to call the bottom and end up holding the bag until the end of the capitulation.

I understand when you say that the risk is lower if you buy as stocks fall, but that kind of advice is as nebulous and meaningless as saying, "buy low, sell high" - a common investing axiom known to all, *yet* so many get it wrong. Simply because people don't know for a fact when low and high is until they're staring at points-past on a historical chart.


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## Brian Weatherdon CFP (Jan 18, 2011)

Best time to invest is when we have money. Volatility is a friend if we invest systematically, and act to reduce risk while remaining prudently invested. 

Timing markets is a poor sport, best done in hindsight. And frankly I feel we'll have a good 2014 for the most part: I believe it


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## lonewolf (Jun 12, 2012)

none


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## lonewolf (Jun 12, 2012)

None
seriously I can see why you think that why waist time trying to understand the market when the only thing that matters is price.

The smoke & mirrors that Buffet & others talk about i.e., value is just a waist of time why focus on BS value when you can go straight to the source price.

Anyone that is involved with government sachs I would never trust.


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## Pluto (Sep 12, 2013)

lightcycle said:


> The fundamental problem I was trying to get across is that:
> 
> 1) Funds are not unlimited, even with margin. Sooner or later, you'll run out of dollars to cost-average.
> 2) It is unknown where the bottom is, despite all your anecdotes of people who luckily caught it. There are tons more people try to call the bottom and end up holding the bag until the end of the capitulation.
> ...


lightcycle, 

As to point 1. that's precisely the time you should run out of money, provided you are buying quality. 

I think I see the fundamental problem you speak of, and your implicit solution. Your point 2. means, I think, any duration of time with real or paper losses is unacceptable. Implicitly, then, your solution is to never buy stocks, because anytime you buy, the stock could go down, and you'd be in a loss situation, and you wouldn't know where the bottom is going to be. 

If I misunderstood 2. and you are a stock buyer, then you do accept the risk of real or paper losses. If you do accept the risk, then isn't the fundamental problem a matter of managing risk by reducing the amount, and duration of real/paper losses? And if you accept that, what is your risk management proposal?


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## Synergy (Mar 18, 2013)

Pluto said:


> If you do accept the risk, then isn't the fundamental problem a matter of managing risk by reducing the amount, and duration of real/paper losses? And if you accept that, what is your risk management proposal?


Cut your loses and run, DCA and hope for the best or hold and do nothing.


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## lightcycle (Mar 24, 2012)

Pluto said:


> If I misunderstood 2. and you are a stock buyer, then you do accept the risk of real or paper losses. If you do accept the risk, then isn't the fundamental problem a matter of managing risk by reducing the amount, and duration of real/paper losses?


I am a stock buyer. And I made out quite well from 2009-2013.

However, I am willing to admit that this was through no skill of my own, but luck. I did buy and leverage in the big capitulation, didn't catch the bottom, but rode it down and up to some good gains. But for every play like that that I could boast of, there are just as many examples of when I didn't get it right. 

It's this fundamental blindness that I see a lot of investors deceive themselves into thinking they can predict tops & bottoms or perceive relative & absolute pessimism/optimism, and thus think they are good at market timing.

Because they purposely forget all the money they lost. All the times they got it wrong.

People are extraordinarily exceptional at self-deceit.



> And if you accept that, what is your risk management proposal?


What many others on here have advocated: regular purchases of a broad-based ETF. If I had stayed the course and made regular purchases through the peaks and valleys of the market's gyrations, I would be more ahead than I am right now.


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## leeder (Jan 28, 2012)

Sit back and enjoy the slide!


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## gibor365 (Apr 1, 2011)

leeder said:


> Sit back and enjoy the slide!


When slide is too steep I become dizzy


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## james4beach (Nov 15, 2012)

If you liked the TSX at 14,000 then you've gotta love it at 13,000 !

This is a tiny decline so far. TSX has another -4% to go before it even reaches its 200 day moving average. That still wouldn't threaten the up-trend.

Something important though. If an investor is feeling pain at the losses they're currently having, *it means they have too much stock exposure*. If you're in this situation, then reduce your stock exposure until you reach a comfort point. This is an individual decision to make


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## none (Jan 15, 2013)

Yeah, it's not even back to where it was a month ago.


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## andrewf (Mar 1, 2010)

S&P is getting close to its 200 day SMA. We'll see whether we're in for a minor correction or a big one. Either is fine with me!


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## none (Jan 15, 2013)

Yeah, I was filling silly for having cashed out all my CAN equities Dec 30th but now in hindsight it seems to have been a good idea.

Of course, it really only depends when I buy back in and see if I can catch the knife. Oddly the only reason I haven't bought back in sooner is because of slow transfers from TD to RBC.


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## Canadian (Sep 19, 2013)

none said:


> Yeah, I was filling silly for having cashed out all my CAN equities Dec 30th but now in hindsight it seems to have been a good idea.


Didn't you do this more for tax minimization and less speculation, though?


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## none (Jan 15, 2013)

Oh absolutely - sorry I didn't mean to imply that it was speculation. Although I have a very vocal gut I do try my best to ignore it. For example, I bought in all of my sons RESP last Thursday (oops). I'm just waiting to bring the money over from TDW To RBC so I can send it over to my wife to send back to TDW. The money is going into her TFSA and RRSP and then I was going to rebalance it all at once. All luck - no brains in that decision (besides the tax trigger).


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## Canadian (Sep 19, 2013)

In the short term I often feel like I don't have good timing. There's always a lower price I could have purchased - but hindsight is 20/20, right? Once I put the feelings behind me and let time do its thing, it almost always works out. I don't attribute it to timing skills, though. I thank most of my gains to due diligence and a few sprinkles of luck.


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## underemployedactor (Oct 22, 2011)

andrewf said:


> S&P is getting close to its 200 day SMA. We'll see whether we're in for a minor correction or a big one. Either is fine with me!


I believe Dow closed below it's simple moving average today.


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## Nemo2 (Mar 1, 2012)

Canadian said:


> In the short term I often feel like I don't have good timing.


I, (all to often), have perfect timing.......I know to the second when a stock's going to drop or rise.......right after the 'filled' notification for buys & sells. :upset:


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## Canadian (Sep 19, 2013)

I firmly believe that one has a better ability to make a rational decision, after the decision has been made. :friendly_wink:


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## Siwash (Sep 1, 2013)

Those were some big drops today…. looks like a correction is underway…

I still haven't purchased my e-Series… waiting for process to complete with TDW. Maybe this is a good thing.. if drops continue I might be in a good buying position.


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## Belguy (May 24, 2010)

It's back under the bed for me. Let me know when the decline is over.


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## none (Jan 15, 2013)

Just out of dumb luck I got out at a peak and back in at a trough this summer when transferring my kids resp over. I got lucky once at least!


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## marina628 (Dec 14, 2010)

I sold off about 15% of my stocks but not because of what is happening in markets , I planned to take some profits off the table as soon as we got in a new tax year.


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## Synergy (Mar 18, 2013)

I'm sure there's lots of "closet sellers / market timers" on this board:biggrin:

I plan on holding and will be adding to my positions and starting some new ones in the near future.


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## dogcom (May 23, 2009)

As long as the Fed keeps tapering one must stay defensive and in cash for the simple reason that QE makes the stock market rise and no QE will do the opposite. Of course you will get bounce back rallies but the trend will be down until they stop or reverse tapering.


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## Synergy (Mar 18, 2013)

dogcom said:


> As long as the Fed keeps tapering one must stay defensive and in cash for the simple reason that QE makes the stock market rise and no QE will do the opposite. Of course you will get bounce back rallies but the trend will be down until they stop or reverse tapering.


That's another coin toss, nobody really knows how things are going to play out or why things played out the way they did. Don't forget about the post hoc fallacy - "post hoc, ergo propter hoc". In the long run it may all turn out to be nothing but "noise", or not. Place your bets.


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## bayview (Nov 6, 2011)

Some clues about the market....


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## dogcom (May 23, 2009)

Synergy they are removing a lot of money from the market by tapering so I think it is a far better bet then a coin toss that removing money will make it harder for the market to climb. This is not a conspiracy theory but a simple liquidity thing that has had a great upside push to the market. In fact everyone in the mainstream media and everywhere has been saying since they started QE 1 that it supports the stock market, so it is not noise.


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## Canadian (Sep 19, 2013)

I'm not buying anything right now, but that's mostly because I'm accumulating cash for future purchases. It's just convenient that we're starting to see a bit of a pullback now [size yet to be determined]. Back in November or December I never would have predicted a late January like this, though - my crystal ball is in the shop.

That being said, I'm not selling anything either. I plan on sitting back, collecting and DRIPing my dividends, and then splurging on some stocks I've been eying for a while once they [hopefully] reach my target prices.


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## richard (Jun 20, 2013)

dogcom said:


> Synergy they are removing a lot of money from the market by tapering so I think it is a far better bet then a coin toss that removing money will make it harder for the market to climb. This is not a conspiracy theory but a simple liquidity thing that has had a great upside push to the market. In fact everyone in the mainstream media and everywhere has been saying since they started QE 1 that it supports the stock market, so it is not noise.


No, all it takes is one person buying a stock at a higher price and the market goes up. $100 is enough to move the market.


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## richard (Jun 20, 2013)

bayview said:


> Some clues about the market....
> 
> View attachment 413


The Fed does all that work... and all they really needed to do was shut down Hollywood?


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## Pluto (Sep 12, 2013)

lightcycle said:


> I am a stock buyer. And I made out quite well from 2009-2013.
> 
> However, I am willing to admit that this was through no skill of my own, but luck. I did buy and leverage in the big capitulation, didn't catch the bottom, but rode it down and up to some good gains. But for every play like that that I could boast of, there are just as many examples of when I didn't get it right.
> 
> ...


 OK, now I can see your perspective more clearly. Dollar cost averaging on some etf is not a bad way to go at all. It's partly consistent with what I propose. For instance, dollar cost averaging buys more stock when prices are low, and less when prices are high. That's on the right track. (Incidentally, you buy more during times of pessimism, and less during times of optimism.) 

Supposing an investor practiced Dollar Cost Averaging from 2000 to 2009 with etf's. then he checked and found that

1. the units he bought around 2002-3 and 2008-9 where the most profitable. and he observed,

2. that his etf's paid dividends, and that the yield was highest around 2002-3 and 2008-9, and the yield was lowest near market tops. Then he started thinking. he realized he was in the red most of the time with the units he bought when the dividend yield was small, and in the black most of the time with the ones he bought when the dividend was larger. He concluded that the units with the larger dividend was better value since he got more income, and capital appreciation from them. He calculated the median dividend yield and he realized that if he had suspended DOC buying when the yield dropped below the median, and resumed DOC buying and averaging in his saved cash when the dividend yield was above the median he could make more money. Then he decided to adjust his DOC plan a little, by making a new rule: if the yield of his etf's went below the median, he would still save money, but suspend buying units until the yield went above the median. When the yield went above the median, he would increase his automatic purchases by averaging in the cash he saved during his suspend buying time. 

3. After adopting that tiny adjustment, he realized, that by doing this he was now like a value investor. He was in the same ball park as Buffett and Templeton, and he ignored all the accusations of being a market timer, and people telling him he couldn't do it. Everything was still automatic, because the new median dividend yield rule was clear, and it didn't involve any charts, squiggly lines, moving averages, or crystal balls. 

4. Now suppose the market was really cooking, and the leading tech stocks had p/e's over 200, and he noticed that the current dividend yield on etf's was really tiny, and by looking at historical data, he noticed it had rarely been that small. and he thought, gee, what if I sell some? What bad could happen? After all, markets don't go up for ever. If he sold some when dividend yields were tiny, and bought back when his median dividend rule was triggered, it was Buy low, Sell high. now he could be accused of being a market timer, when, in fact, all he did was hone his eye for value. When value was poor, he let someone else have some of his. When value was good, he bought. 


I am not saying is that the median dividend yield is the most profitable cutoff point. If anyone is intrigued by this strategy, and tries it, they should do their own research, thinking and figuring to draw their own conclusion about the best cut off point. After they do that, and implement it, they have made a tiny adjustment that enhances their DOC strategy.


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## richard (Jun 20, 2013)

I look forward to seeing you report back in 10 years telling us how that worked out


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## andrewf (Mar 1, 2010)

Dollar value averaging has more merit, I think. It accomplishes much the same thing and prevents you from staying out of stocks for 20 years if valuations stay a bit too high.


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## lightcycle (Mar 24, 2012)

Pluto said:


> I am not saying is that the median dividend yield is the most profitable cutoff point. If anyone is intrigued by this strategy, and tries it, they should do their own research, thinking and figuring to draw their own conclusion about the best cut off point. After they do that, and implement it, they have made a tiny adjustment that enhances their DOC strategy.


What's DOC?

Companies raise and cut dividends all the time. If you're basing your investing just on yields, then you may be missing out on gains if you sell right before a company announces a dividend raise just because the yield is getting smaller. And when do companies raise divs? In growth periods.

And the converse is also true. Look at so many investors chasing yield, "Oooh, 15% looks like an attractive time to buy!". And then find out yields are high because the economy is still on a downward trajectory, and the divs get cut right after your last traunch on margin. Then you're stuck holding the bag for god knows how long.


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## Synergy (Mar 18, 2013)

dogcom said:


> Synergy they are removing a lot of money from the market by tapering so I think it is a far better bet then a coin toss that removing money will make it harder for the market to climb. This is not a conspiracy theory but a simple liquidity thing that has had a great upside push to the market. In fact everyone in the mainstream media and everywhere has been saying since they started QE 1 that it supports the stock market, so it is not noise.


I see your point. However, the general consensus / hope is that the economy may be able to improve enough to sustain itself as the fed continues the taper. This may or may not happen, the markets may or may not continue to fall. This is where I'm stuck at a coin toss. I'm not confident enough to predict that the markets will continue to fall as the feds continues to taper. I'm more comfortable giving it a 50% probability.


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## richard (Jun 20, 2013)

Markets, profits, and the economy are three separate things. I only care about one (when it comes to my portfolio).


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## Pluto (Sep 12, 2013)

Canadian said:


> I plan on sitting back, collecting and DRIPing my dividends, and then splurging on some stocks I've been eying for a while once they [hopefully] reach my target prices.


Smart man. 
1. You know what you want to buy
2. you have a price you are willing to pay. If that price is in a realistic range of value, everything will work out fine. You are reducing your risk (reliance on luck) by assessing what price is a good value.


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## Pluto (Sep 12, 2013)

lightcycle said:


> What's DOC?
> 
> Companies raise and cut dividends all the time. If you're basing your investing just on yields, then you may be missing out on gains if you sell right before a company announces a dividend raise just because the yield is getting smaller. And when do companies raise divs? In growth periods.
> 
> And the converse is also true. Look at so many investors chasing yield, "Oooh, 15% looks like an attractive time to buy!". And then find out yields are high because the economy is still on a downward trajectory, and the divs get cut right after your last traunch on margin. Then you're stuck holding the bag for god knows how long.



DOC is a typo. should be DCA - dollar cost averaging. thanks for pointing it out. You'd make a good secretary. 
Look lightcycle, you said you made out ok in 2008-9, then you kick your self around the block for years after for failing to buy at the exact moment of capitulation. I don't get it. Since you did alright, why kick yourself around the block? 

As to the other point, you were talking about dollar cost averaging etf's that presumably paid dividends, and that you would have been better of if you had done that all along. Show me an actual etf that demonstrates your concerns over using yields to approximate good value vs poor value, so I have a real life example of what you are talking about. 

Too, since you decided to abandon your previous approach in favour of DCA, which is better, it shows you can change for the better. That's a good sign.


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## richard (Jun 20, 2013)

Pluto said:


> As to the other point, you were talking about dollar cost averaging etf's that presumably paid dividends, and that you would have been better of of you had done that all along. Show me an actual etf that demonstrates your concerns over using yields to approximate good value vs poor value, so I have a real life example of what you are talking about.
> 
> Too, since you decided to abandon your previous approach in favour of DCA, which is better, it shows you can change for the better. That's a good sign.


Here's a study showing that DCA should be avoided if possible: https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf. Do you have an example of an ETF and yield target that demonstrates it's better to stay out of the market when the yield is too low?


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## Canadian (Sep 19, 2013)

Pluto said:


> you have a price you are willing to pay. If that price is in a realistic range of value, everything will work out fine. You are reducing your risk (reliance on luck) by assessing what price is a good value.


Having entry and exit prices are one of the most important things to consider before buying a stock IMO. Of course these don't have to be fixed - I have a long time horizon and plan on holding all of my purchases for a while, so these targets are always dynamic respective of company performance and macro conditions.


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## Canadian (Sep 19, 2013)

richard said:


> Here's a study showing that DCA should be avoided if possible: https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf. Do you have an example of an ETF and yield target that demonstrates it's better to stay out of the market when the yield is too low?


The problem with DCA comparisons is they compare $X amount invested now or the same amount invested in increments over a time period. This isn't exactly realistic because we don't receive all of our future earnings at once. By nature we are forced to DCA - whether it is in building a portfolio of multiple stocks or purchasing multiple tranches of a single stock over an elongated time frame. I've never known anyone to make one lump sum investment and leave it until retirement. Even if one invests _all_ their money at once, eventually most will sell and reinvest. If that reinvestment is made in two individual stocks on two different days, that is dollar cost averaging an overall portfolio.

I'm not arguing that one should keep cash on the sidelines, but I do think one should only invest when they see the value is appropriate (via a personal price target, yield, etc). I'm not an indexer so please don't compare what I'm saying with index investing.


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## lightcycle (Mar 24, 2012)

Pluto said:


> Look lightcycle, you said you made out ok in 2008-9, then you kick your self around the block for years after for failing to buy at the exact moment of capitulation. I don't get it. Since you did alright, why kick yourself around the block?


Because if I'm being totally honest, I've got as many losers as winners. Over the long run I'm ahead, but as I mentioned earlier, if I had just invested on a regular basis, without worrying what the market was doing on a daily basis, I would be more ahead than I am now.

And BTW, just because the Dollar Cost Averaging seems to be the no-brainer way of making a profit over the long run, doesn't mean I eat my own dogfood. I still have a sizeable slush fund that I gamble away on the markets because it keeps me interested in what's happening.

However, I'm under no illusion that I am a good market timer and that I could end up losing or be sitting on dead money for a long time. It's speculation money, pure and simple.


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## richard (Jun 20, 2013)

Canadian said:


> The problem with DCA comparisons is they compare $X amount invested now or the same amount invested in increments over a time period. This isn't exactly realistic because we don't receive all of our future earnings at once. By nature we are forced to DCA - whether it is in building a portfolio of multiple stocks or purchasing multiple tranches of a single stock over an elongated time frame. I've never known anyone to make one lump sum investment and leave it until retirement. Even if one invests _all_ their money at once, eventually most will sell and reinvest. If that reinvestment is made in two individual stocks on two different days, that is dollar cost averaging an overall portfolio.
> 
> I'm not arguing that one should keep cash on the sidelines, but I do think one should only invest when they see the value is appropriate (via a personal price target, yield, etc). I'm not an indexer so please don't compare what I'm saying with index investing.


This is about indexes, not individual stocks. It shows that if you have money it's better to invest it now and keep it invested for as long as possible. Choosing DCA, selling because the market went up or down, or delaying purchases is market timing and it's a gamble that you will usually lose. 

If you're looking at individual stocks then a 200 point drop in the market is irrelevant to you because only the prices of your stocks matter.


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## Canadian (Sep 19, 2013)

It's impossible not to DCA during index investing, though. We earn and invest money in increments throughout our lives.

I don't recommend hoarding cash as it is saved, however. There is a large opportunity cost associated with doing so when one has a long time horizon. If I were an indexer I would probably have an automatic purchase of index units with every paycheck.



richard said:


> If you're looking at individual stocks then a 200 point drop in the market is irrelevant to you because only the prices of your stocks matter.


This isn't always true. A big down day in the markets implies that _most_ holdings are down. Diligent individual stock investors are mindful of broader sectors and indices, not only the stocks they currently own.


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## Pluto (Sep 12, 2013)

andrewf said:


> Dollar value averaging has more merit, I think. It accomplishes much the same thing and prevents you from staying out of stocks for 20 years if valuations stay a bit too high.


20 years? That's never happened. More like 1 - 2 years, on occasion. Or is this a forecast? Trying to fool some people?


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## Pluto (Sep 12, 2013)

Canadian said:


> Having entry and exit prices are one of the most important things to consider before buying a stock IMO. Of course these don't have to be fixed - I have a long time horizon and plan on holding all of my purchases for a while, so these targets are always dynamic respective of company performance and macro conditions.


Again, you make sense. Entry and exit don't have to be fixed - they are dynamic relative to company performance and economic conditions.


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## andrewf (Mar 1, 2010)

Pluto said:


> 20 years? That's never happened. More like 1 - 2 years, on occasion. Or is this a forecast? Trying to fool some people?


Depends what you mean. CAPE was above median values for the 90s and 00s, with a brief tick down to sub-median values in 2009.


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## Pluto (Sep 12, 2013)

lightcycle said:


> Because if I'm being totally honest, I've got as many losers as winners. Over the long run I'm ahead, but as I mentioned earlier, if I had just invested on a regular basis, without worrying what the market was doing on a daily basis, I would be more ahead than I am now.
> 
> And BTW, just because the Dollar Cost Averaging seems to be the no-brainer way of making a profit over the long run, doesn't mean I eat my own dogfood. I still have a sizeable slush fund that I gamble away on the markets because it keeps me interested in what's happening.
> 
> However, I'm under no illusion that I am a good market timer and that I could end up losing or be sitting on dead money for a long time. It's speculation money, pure and simple.


1. Stop gambling. If you buy *quality* at a good price, you aren't gambling. 
2. I suspect your losers are not quality. Consider getting rid of them and buying quality at a good price. One criteria for quality is stocks that, based on their history, have always recovered from previous recessions by keeping up or bettering the index; or,
3. Get rid of the losers and start dollar cost averaging the etf you wrote of. 
4. Pick up a copy of One up on Wall Street, and read the section "Cocktail Party". Use that technique at social gatherings, then compare the results to what the market does. 
5. You shouldn't kick yourself around the block. Bad experience is a is a learning opportunity, not a reason to fire yourself from the job. 
6. Sitting on dead money doesn't mean your timing is bad, it means you used money on stocks that were not quality.


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## dogcom (May 23, 2009)

One thing I find odd or troubling is all these dead bankers showing up from apparent suicides in the past few weeks. The markets really haven't dropped all that much so I wonder what is up with this. 

http://www.zerohedge.com/news/2014-01-31/third-banker-former-fed-member-found-dead-inside-week

The article above is a little old from Jan. 31/14.


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## lightcycle (Mar 24, 2012)

Pluto said:


> 5. You shouldn't kick yourself around the block. Bad experience is a is a learning opportunity, not a reason to fire yourself from the job.
> 6. Sitting on dead money doesn't mean your timing is bad, it means you used money on stocks that were not quality.


LOL. I thought we were talking about the market timing. I wasn't aware I was asking for advice.

But I got your message loud and clear, consider the matter dropped.


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## dogcom (May 23, 2009)

Fourth financial services executive bites the dust from an apparent suicide caused by shooting himself in the head and torso with seven or eight nails from a nail gun. One thing I wonder is how does someone get off 7 or 8 shots to the head and torso with a nail gun and it is still considered a suicide. 

http://www.zerohedge.com/news/2014-...ive-found-dead-self-inflicted-nail-gun-wounds

Maybe he shot to far away in the first few shots to the head and looked like hellraiser as none of them went through the skull until he did it right on the seventh or eighth shot. 
http://www.imagesjournal.com/issue09/reviews/hellraiser/


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## marina628 (Dec 14, 2010)

Maybe it really is time to sell and join Belguy under the bed


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## Butters (Apr 20, 2012)

marina628 said:


> Maybe it really is time to sell and join Belguy under the bed


Its been a good end to this week, you really think its going to end?
Whens the next taper?

US going to hit that debt ceiling anytime soon?


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## Rusty O'Toole (Feb 1, 2012)

SheaButters said:


> Its been a good end to this week, you really think its going to end?
> Whens the next taper?
> 
> US going to hit that debt ceiling anytime soon?


They have been hitting the debt ceiling at shorter and shorter intervals since the 90s. They raised the limit to $17.2 trillion on Friday. That should tide them over for a few more weeks.


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