Why I'm in the market

In my opinion the key to investing is very simple be in the market when the indicators are positive and be out when they're negative. Now your thinking that sounds great but what Indicators is he talking about? Looking at the s&p chart would be where I'd start. Is it rising is it making higher highs and higher lows which is positive or is it making lower lows and lower highs which is negative. Now its not always going to be black and white and its during those periods you have to be very patient,you might get whipsawed a little bit but in my opinion it's better than taking the big hit to your portfolio.

That is a great starting point and at least gives you some kind of guide. It makes absolutely no sense to stay fully invested when you see it trending down. And it makes no sense to be totally out of the market when it's trending up. This is something you should definitely consider for your 401k. There are no tax consequences to selling. Let's say you have $200,000 in your 401k, and the market starts trending down. What sense does it make to ignore it? Why not move at least some part of it to cash? And let's say the market quickly reverses, what harm have you done? You've preserved your capital. And you get back in and you follow the same process. If you avoid the big downs like the aftermath of the dot com years or the real estate bust you'll be way ahead of the game. Instead what happened is you got so freaked out you pulled all your money out of the market and are now sitting in moneymarket earning zero or in bonds to afraid to do anything. You either need to learn how to manage your money or find someone that knows what there doing .

I know alot of people are out of the market and have sworn never to get back in. With moneymarket at zero and 30 year bonds at a little over 3% stocks are not something you should ignore. You just need to find someone to teach you what to do or find someone competent to manage your money.

Right now the market is trending higher. It went as low as 1080 area and ran up to the 1230 area.It than proceeded to pull back to the 1200 area before reversing back up to the 1290 area. So you can see that presently its made a higher low and a higher high. Until than changes its a good idea to be in the market.

Who are the real Millionaires

This is pretty interesting

http://systematicrelativestrength.com/feed/

Even more has come out of stock funds and into bond funds

So far this year investors are piling into bond funds and out of stock funds.

So I guess they think interest rates are going to continue to go down or they think that bonds are safer than stocks.

When they get their October statements they might be surprised at the value of their bonds

If not now than when?

If not now than when?

If your out of the market which I know alot of people are than now is the time you should be considering going back in. If your listening to the news as your indicator than you'll probably never get back in. But if you look at a simple chart like the s&p 500 you can see its making higher highs and higher lows. That alone is a good reason to get back in. Now don't get me wrong things can change at anytime that's why I keep emphasizing that you have to have a plan of what to do when things are going up and what to do when things are going down

This is the part most people miss and when I say most people I'm referring to most advisors. this is why they tell you you can't time the market,that you have to stay the course.Because they are either to lazy to follow what's going on or they are to busy trying to sell someone else instead of managing your money.

Why you need to be very careful of analysts

This is one reason that you need to find someone that knows what their doing. Someone that knows how to read a chart.

This stock was over $300 in july and has been pretty much on a downward trend ever since,yet the chart to the right shows that out of 32 analysts only 5 had it as an underperform and ZERO had it as a sell.

The stock is netflick and today alone its down over $40 at $77.

Are you in or are you out?

One of the main reasons brokers,financial planners etc say to stick with the plan is that investors that got out of the market never know when to get back in. I am pretty sure that anybody that got out of the market,and if you look at the mutual fund flows,a lot of money has come out this year, hasn't gotten back in.. Now there sitting there thinking should i get back in, or i know if i get back in the market is going to crash.

This is why a simple plan of when to be in and when to be out comes in handy. relative strength is a pretty good indicator of when it is a good idea to be in and when its prudent to be out or at least more cautious.

As you can see from the chart above the flow of money has been out of us equity and into bonds for the most part.

Why asset allocation doesn't work in case you haven't noticed

from Mike Shell-- I love this

Asset allocators may try to use similar terminology to describe their methods of asset allocation which are actually not at all a part of active risk management as we define it. Deciding on a policy for spreading capital across different assets and markets is not active risk management. The only risk that asset allocation strategies manage is selection risk: the possibility of an individual position losing value. If you don't have a large exposure to that stock, you may not have a large risk exposure but you'll also have little exposure to a capital gain. Active Risk Management tactics may increase and decrease the exposure to gain and loss by buying and selling. Asset allocators are more concerned with eliminating the risk of a individual position by diversifying it away. Asset allocators diversify away the "alpha" which is the excess return that is possible from a large winner and they seek only the market-driven risk and reward (the beta). Asset allocators are therefore fully exposed to the largest risk: market risk. During bear markets and financial crisis that have occurred many times in the past, all markets tend to fall together at some point. When markets like stocks, bonds, real estate, all fall together diversification and asset allocation methods are of no use in controlling downside losses. The only way to actively control downside losses is to change the exposure. Active risk management systems that control risk are necessary before large losses occur.

Time to jump back in the water

Well it finally happened the trend based on comparing the relative strength of the s&p 500 to money market has turned in favor of stocks. It had turned down to favoring money market on august 4th when the s&p was at 1200.07. During that time the s&p had gotten as low as the 1080 area. Currently it is at 1238.25, up 3.18% from where I got out. But like i've said that is my main indicator that means to be very cautios when going into equities. i also pay close attention to the actual s&p chart and when that turns up I start edging back in. So I was cautious,meaning worrying about capital preservation but I didn't miss all of rise.

The game plan from here is to look at small cap,mid cap and large cap and determine which of these 3 sectors is the strongest and overweight that sector with less money in the other sectors.

I will also look at strong individual sectors,such as gold,oil, whatever and allocate smaller amounts to those individual sectors.

My plan is to now be of the mind set to buy the dips.

Be aware that experts can be wrong, and that you yourself can be wrong.

This is a nice little article that talks about being careful with who you do business with

http://blogs.wsj.com/marketbeat/2011/10/20/investors-beware-overconfidence-and-not-just-your-own/

Rebalancing article

Here is another article from the wall street journal that talks about rebalancing your portfoilo.

http://online.wsj.com/article/SB123637573235256849.html

The gist of the article is sometimes it works and sometimes it doesn't.

What does work is staying with what is working until its not working anymore.

Doesn't it make more sense to stay with what is outperfoming rather than take money out of it and put it into something that isn't working.

Using relative strength and following the trend just seems so much smarter.

when you look at all of these different studies they talk about if you "did it over 10 years or 20 years" but the point is that you and I are for the most part concerned about NOW--meaning if it goes down 20% NOW but history shows that if you hold it over 10 years you will be up some % by the 10 th year--do you really care? do you know what's going to happen as far as your needs during that 10 years?

I was there during 2001 and 2002 when the tech bubble burst and people were retiring only to see their portfolio's drop by 20-30 -40 %--The s&p went from the 1500 area down to the 800 area. Do you think those people could afford to wait until today to get anywhere near back to even?

Now doesn't this make sense?

This is what I believe is the right way to manage your money

http://license.icopyright.net/user/viewFreeUse.act?fuid=MTQxOTY1OTI=

The times they might be changin

We're getting close to a change in plans

Following the plan means its almost time to get fully invested into stocks. As I have said my plan is quite simple. When the relative strength of stocks when compared to the relative strength of money market favors stocks I get fully invested. We are very very close to that happening. Once that happens the next step in the plan involves allocating money to the strongest sectors. I use a comparison of large cap mid cap and small cap as my first comparison. The strongest of those 3 sectors gets overweighted. Meaning in simple terms if I was going to use only those 3 sectors instead of putting in 33 1/3 into each I would put maybe 50% into the strongest. It makes little sense to allocate equally. I continue to monitor the relative strength of all sectors to stay with the strongest sectors.

To recap where we've been over the last year:

On 10/5/2010 when the s&p was 1160.75,. relative strength was favoring stocks over money market. On 8/4/2011 there was a change to where money market was now favored and it was time to get out of stocks. The s&p on that date(8/4) was 1200.07. approximately 3.38% higher.

today as I type this the s&p is 1211.28 . What i did avoid was the big sell offs that sometimes turn into much larger selloffs.

The change hasn't occured as of yet . As I have been saying i use other indicators to try to get back in before the main change in relative strength. As of today i am approximately 20-30% invested in stocks.

Your bond fund could lose 25%

I know alot of people have been moving their money into bonds thinking there safe.

This article points out that a 3% rise in interest rates could lead to a 23% drop in the 10 year bond and a 40% drop in the long bond

http://www.smartmoney.com/invest/stocks/how-to-bet-on-rising-rates-1317917417577/?link=SM_clm_sum

The Market aand where I stand

On aug 4, my main indicator which is comparing the s&p 500 to cash on a relative strength basis went to favoring cash.. What this told me is that to be safe you needed to be out of the market and in cash. The s&p on august 4th closed at 1200.07. Since that time,over 2 months ago, the s&p has gotten as high as 1230.71 and as low as 1074.77. As I write this the s&p is at 1194.45 even after a big day like yesterday.My indicator is still favoring cash over equities but some of the charts are starting to look better.

As always its all about Capital Preservation. I'm not interested in trying to guess the bottom. When my indicators turn there will be time to get fully invested

Hot to get rich

I don't know if it works but i'm grateful i'm sharing it with you

http://www.jamesaltucher.com/2011/10/how-to-use-gratitude-to-get-rich/

Average mutual fund lost 16.7% in 3rd qrtr

Don't you think you should be doing something about this? especially with your 401k. Wouldn't it have made sense to move the money into cash when the trend turned down?

http://www.fundmymutualfund.com/2011/10/average-us-mutual-fund-lost-167-in-q3.html

steve jobs

Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. —Steve Jobs, 2005

Predictions are worthless

This is a great article and something I have harped on before, predictions are worthless

http://systematicrelativestrength.com/2011/10/05/expert-forecasts/

Employees of mutual fund company suing their employer???????

How pathetic is this? Employees of Ameriprise are filing suit against Ameriprise because of the funds in their 401k? What does that tell you?

http://moneywatch.bnet.com/investing/blog/fund-watch/how-bad-are-these-funds-their-employees-sue-for-being-made-to-own-them/701/

I'm probably wasting my time but What the Heck!!!!!!!

If you've ever read this blog I'm pretty sure by now that you know I can't write and worse I'm a lousy speller and grammatically I'm clueless.
The only reason I write this is to try to convey 25 years of experience. I've made plenty of mistakes along the way but I've also learned a lot. Hopefully there is someone out there that says" hey, this guy writes like a 5th grader but he seems to know what he's talking about. "
I've been trying to point out the absurdity of those financial people that say you can't time the market. They use that as their justifcation for sitting with mutual funds or stocks as they lose value day after day. They might be right about timing the market but that's not what I try to do. I look for trends and try to be on the right side of that trend. The trend is down has been down and to sit there and watch value go down everyday is just plain stupid.I'm sitting on a pile of cash and when the trend changes I'll be ready to redeploy that money. Will I get in at the bottom ? Absolutely not. Did I get out at the top? Absolutely not. But guess what? There is a lot of meat on that bone between tops and bottoms. And I can pretty much assure you that my clients are sleeping good knowing that I value capital preservation above anything else.

There are 2 kinds of financial advsiors,which one do you have?

There are 2 kinds financial advisors. One kind says you can't time the market, you buy and you hold and it'll all work out. The other kind says ,the trend is down let's lighten up and when the trend turns positive we'll redeploy the cash we took out.
Which of these 2 would you rather have manage your money.
In fact why do you even need the 1st guy? You can buy and hold on your own

And if you have the first kind, how has that worked out for you?

Recession unavoidable?

this guy is not very positive

http://finance.yahoo.com/blogs/daily-ticker/going-lot-worse-ecri-achuthan-says-recession-unavoidable-141929160.html

Who knows if he's right or wrong-the key point as far as investing goes is that the market is in a down trend.

At this point in time you should be very concerned about capital preservation