As a follow-up to
@rforno’s “newbie” thread, it might be interesting to reflect on what the board looked like during 2008 - right in the middle of an eventual 17-month decline in the S&P (greater losses globally and in some domestic sectors). The period is known as
”The Global Financial Crisis” and is also sometimes referred to as
”The Great Recession”. Even money market funds had become unsafe and investors began fleeing until the government exercised extraordinary authority to backstop them.
It is easy in hindsight after these rare episodes to say: “Do nothing”, “Let it ride …” , “Just don’t look. It won’t really matter 20 years from now.” These are all intelligent responses. But is that how it really was?
Anybody recall the general tenor at Fund Alarm (predecessor to MFO) back then? And what the smart, well informed, articulate posters were generally saying? Was the general feeling one of “I’m sitting tight.”… “I’m not making any moves.”, “I’m not even looking because longer term everything will be great.”
Possibly some were reading / participating on other investment forums, or possibly some recall what their friends, family members, co-workers and / or neighbors were saying and doing.
Comments
This page is from 12/29/08. Free sign up may be required. This is as close to a true time machine as one can get.
https://web.archive.org/web/20081217024432/http://www.fundalarm.com/wwwboard/wwwboard.html
Here's another sample, this one from March 17, 2008
https://web.archive.org/web/20080317021554/http://www.fundalarm.com/wwwboard/wwwboard.html
In it is this thread: To get to these discussion board pages you can start with this page. It has links to archived versions of the www.fundalarm.com page for 2008.
https://web.archive.org/web/20080701000000*/www.fundalarm.com
From one of these achived pages, click on the Discussion Board link under "Join In" to get to a page like the sample above.
of remarks during that period. I'll use the Wayback Machine to investigate further.
17 straight months (mostly straight down without much of a reprieve) is a very long time. Assuming the members of a board like this (or FA) generally well versed in investing and well aware of current conditions … do they behave rationally - or do they succumb to panic & pessimism?
@Ted once boasted of calling the end to the ‘07-‘09 bear market a few weeks early. However, I don’t think you could pull up back pages of FA and check what people said like you can at MFO.
I don't mind being out for several days if it's a fake one, but I want to be out a lot longer in real meltdowns.
+1
Recently listened to an interview which touched on the subject. From an experienced investor: “I don’t need to look at my statement daily.” He went on to say that every 3 months was enough.
Making the same point, I think, by substituting ”statement” for ”portfolio”.. Ain’t that the truth?
From an experienced investor: 'I don’t need to look at my statement daily.'
He went on to say that every 3 months was enough."
I check fund performance via M* Portfolio Manager almost daily.
There is no good reason for me to do this since I seldom trade.
Bad habits are sometimes difficult to break!
Nah, I am logged in & checking things most every day, and that's fine. But I don't fixate on inter-day performance, so at least for my mindset, it's no big deal. By contrast, I'm sure for most retail investors, they shouldn't check every day b/c they may not have the mindset/discipline/knowledge to know that 'doing nothing' often is the best course of action.
Gold has been the preferred inflation hedge down through the ages. Investors have long prized the disaster insurance the precious metal provides during market panics and inflation surges when governments debase their currencies in response to crises.
Gold futures were trading well above $900 an ounce last week as investors were disappointed by the lack of details in the Treasury Department's latest plan to rescue the financial system.
Investors have been piling into the largest gold ETF, SPDR Gold Shares (GLD). The amount of gold held by the ETF continues to set new records -- it is now backed by about 1,000 metric tons of the precious metal. SPDR Gold Shares has an expense ratio of 0.4%, although investors pay broker commissions to buy and sell ETFs.
SPDR Gold Shares is one of the largest ETFs, with about $30 billion in assets. Although it is the biggest precious-metals ETF, several other exchange-traded products are tied to gold, silver and platinum, for example. Some provide leverage. Others such as Van Eck Market Vectors Gold Miners ETF (GDX) track miner shares. Investors need to be aware that gains on some futures-based commodity ETFs and ETNs can be taxed at a higher rate than those on funds indexed to stocks.
3. Currency ETFs and shorting Treasurys
The bursting of the credit bubble has led to a nasty correction across the board for assets -- stocks as well as commodities such as gold and oil plunged in unison. Only Treasury bonds provided safe haven last year.
Some think the flight to Treasurys has created a bubble in U.S.-backed debt and driven yields to artificially low levels. One contrarian but risky way to profit from an unwinding of any Treasury bubble is to sell Treasury-bond ETFs short, wrote MarketWatch senior columnist Mark Hulbert in recent commentary for Barron's. See full story at Barrons.com.
Furthermore, ProShares UltraShort 7-10 Year Treasury (PST) and ProShares UltraShort 20+ Year Treasury (TBT) are leveraged ETFs designed to rise when prices on Treasury bonds fall. Read previous story on shorting U.S. Treasurys.
Another way to hedge weakness in the U.S. dollar is buying foreign currency exchange-traded products. However, investors are exposed to the risk that inflation isn't confined to the U.S. and spreads around the globe.
Individuals can bet directly against the greenback with PowerShares DB U.S. Dollar Bearish Fund (UDN). The ETF's tracking index is designed to duplicate the performance of being short the U.S. dollar against a basket of foreign currencies.
There are dozens of other currency ETFs and ETNs. Rydex Investments oversees a suite of ETFs tracking foreign coinage, such as CurrencyShares Euro Trust (FXE).
Barclays manages a similar lineup of ETNs that includes iPath EUR/USD Exchange Rate ETN (ERO). Other firms sponsor currency-themed products, and WisdomTree Investments Inc. offers ETFs that operate like money-market funds pegged to foreign countries. They invest in non-U.S. money market securities and seek to give investors yield and exposure to currency fluctuations relative to the U.S. dollar.
by WhiteSoxWinner on February 25, 2009 at 09:38:09:
In Reply to: Ping WhiteSox Winner posted by Dave on February 25, 2009 at 07:54:22:
Hi Dave,
I think you're making the right move by switching to ETFs.
You might think about a core and explore approach, where index ETFs are the core of your portfolio and the explore part is reserved for active funds or other strategies.
It's important to remember there's no accurate way to hedge an active fund or even an index mutual fund. With the ETF, one can buy insurance via put options -- which would offset any losses in your long ETF positions. To me, it's not gambling, anymore than buying insurance on your automobile or home is gambling. Why not protect your portfolio or at least have that flexibility? ETFs give you that choice. Even if you don't use it, it's still there for you.
I don't own the Fairholme Fund, but I'm a fan of Bruce Berkowitz. He recently sold Berkshire Hathaway, which tells me he's got more guts and backbone than all of America's portfolio managers combined. If you're going to bet on fund managers, stick with the radical kooks that don't hug their benchmarks.
Maybe Investor or one of the other FundAlarmers can provide some research links, but there's no academic or statistical proof that active mutual funds perform any better during bear markets than straight index funds. Such views are rooted in marketing propaganda and mischievious myth. The active funds that do "protect" their shareholders during a bear market, often end up underperforming during bull markets because of their cash drag and mis-timing. A tiny percentage of active funds may protect their investors during a bear market, but knowing them in advance is impossible.
Regarding your asset allocation, just ask any one of us for an opinion on your ETF mix. Most FundAlarmers will be delighted to give you their opinion. Your mix of ETFs should match your investment time table, your age, your level of risk acceptance, your income needs, and any other financial considerations.
I own XLU, which is a Utility Sector ETF. Sector Funds are OK, but for you, it's probably best to use a core and explore method. You would make broad index ETFs like VTI, BND, CWI, TIP, RWR the portfolio's foundation, then you could add explore or satellite positions in sector ETFs around that.
Most of the major ETF Provider Websites like iShares.com, SPDR.com, and Vanguard.com/etf are good resources and have valuable information/tools on portfolio construction with ETFs. I also like to read ETFGuide.com and they have a portfolio service too.
Good investing to you, friend.
WSW
I really like this line …
”Your mix of ETFs should match your investment time table, your age, your level of risk acceptance, your income needs, and any other financial considerations.”
That was standard mantra for many years in discussing investment choices. It wasn’t about making the most money but rather about matching investments to your own needs and risk tolerance. You don’t hear that much (or as much) anymore. Same here. It’s so damn easy to tap an icon on whatever hand-held device I’m already on - and up pops everything. This habit (of looking during the day) has helped occasionally, as when some more speculative hold enjoys a big intraday bump and I can quickly trim some off. But watching is largely a waste of time.
Were I to look only every 3 months I’d probably pull back the risk profile in advance. Add more cash / short term bonds. Carrying less risk would make it easier not to look, but would also impact performance negatively I think.
While you can’t pull up the entire discussion, those headers (many from December ‘08) reveal a lot. I’ve excerpted a few consecutive lines which make reference to the ongoing “flood.”
Trying hard to avoid a depression... - Fundmentals 13:28:52 12/16/08 (7)
Like the analogy too, but the last time it rained for 40 day & 40 nights, few were left standing (nm) - rayf 16:42:54 12/16/08 (2)
Re: Seems like it's already been a lot more than 40 days and 40nights... -nm - Old Joe 16:55:47 12/16/08 (1)
You're right, of course... - rayf 17:35:50 12/16/08 (0)
Wonderful set of analogies. - Shostakovich 14:02:33 12/16/08 (1)
Re: Wonderful set of analogies.... Yes, I thought so also. -nm - Old Joe 14:11:32 12/16/08 (0)
Re: Trying hard to avoid a depression... - JR 14:01:47 12/16/08 (0)
Re: Now you've surely done it... said the forbidden "D word" right out loud! -nm - Old Joe 13:42:35 12/16/08 (0)
Notice that @Old_Joe hasn’t changed any.
-
And thank you @msf …
Your excerpted comments from March 2008 are revealing. Some anxious posters are speculating the following day will be another ”Black Monday” - as in ‘87. Must be watching the futures on Sunday evening. (Siri confirms March 16, 2008 was a Sunday.)
Geez - These guys had nearly another 12 months of this still ahead. Sound like nervous wrecks already!
On the hindsight, market had peaked in Fall 2007, some fractures developed in Spring 2008 (canary in the coal mine?), and full blown collapse followed in Fall 2008.
I think that I first noticed Wayback Machine in a post by @msf - thanks. Now I am a big fan of Wayback Machine / Internet Archives. It's run by a nonprofit that is under attack by some greedy publishers - the charge is copyright violation that all digital-libraries face. Unfortunately, Wayback Machine has been forced to un-archive some stuff due to adverse court rulings, but it's continuing the fight. Wayback Machine has a natural sampling frequency of millions of websites. For my part, when I visit Wayback Machine, I also manually archive several websites that I visit for additional captures for those. As a practical matter, it archives the main webpages and related links, but stops if links are redirects (to other links).
StockCharts SP500 7/1/07 - 6/30/09 (change dates if display defaults),
https://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2007-01-01&en=2009-06-30&id=p25401887723
And the chart in your link is still active for use for that date! I entered other tickers and parameters to chart without problems. Duh, I've never thought about trying 'wayback date' changes to StockCharts.
All that being said, we have a few managers/funds that we have used for what we would consider a long time. Among them are Thornburg Value and International Value, Artisan MidCap Value and Mid Cap, Diamond Hill Small Cap and Long-Short, Permanent Portfolio, Artio International, Artisan International, First Eagle Overseas, some of the Matthews funds, Oppenheimer Developing Markets, and several of U.S. Global's funds: Global Resources, World Precious Minerals, and Eastern Europe. One we have held only a few years is Ivy Asset Strategy, but we have a lot of confidence in its two top managers and expect it to be a core holding for a long time.
On the bond side, we have used Loomis for what seems like forever. Our other big holding has been Templeton Global Bond, and what a great manager it has.
But with all of this said, we don't know what tomorrow will bring. So flexibility remains a key component of our strategy. We have a whole asset class of "Alternative Strategy" for which we allocate 15-20% as a way of reducing volatility and adding low or negative correlation to portfolios. And we also have a "Tactical Sector Strategy" class that gives us a 10-15% allocation to overweight specific sectors. We hope that these two parts of our portfolios will give us a boost in good markets and a cushion in bear markets.
Note - The date Derf provides is Dec ‘09. If that’s accurate the comments cited were made about 9 months after the end of the ‘07-‘09 bear market.
I prefer to use longer smoother steadier trends myself as they're easier to spot. And as FA said, it's not picking the absolute bottom nor top with a longer trend. With a 4 or 5 year trend, there's plenty of money to be made from between the 20 and 80 yard line - you don't have to go endzone to endzone. And again, all you're trying to do is to improve the returns of your portfolio over that of the 'great unwashed.'
Now a couple of tactics. First you need to have an exit strategy and you must follow it. Even if it 'stops you out' prematurely, you MUST follow it. With stocks you can set Stop Loss points, but you can also set mental stop loss points with mutual funds. For volatile sectors, you can use 10%-15% give back from your high. For more staid sectors, you could use 5-10%. Your call but FOLLOW IT.
When riding a trend, I scale in and scale out. Some go all at once, but I go incrementally. Perhaps I'm just a chicken. Ok.
For example, 6 months ago, I started noticing China via CAF. After watching this for a few weeks where it continued to diverge from the rest of asia and other markets, let's say I decide to play it. My intention is to invest $10K (round numbers for example). Ergo, I invest $2500 first and watch it for a week or so. If it makes me money and stays in the green, I go ahead and invest another $2500 . . . and watch it for a week or so. If it continues green I drop the remaining $5000. And watch it.
Scaling OUT is the same in reverse. Let's say I'm using 10% pull back from the highs for my 'stop loss'. It does so. I sell 25% of my holdings and watch it. If it drops some more, I sell another 25% and watch it. If it drops some more, I sell the rest. Note that depending upon how steep the drop, you may just bail much more quickly. And you MUST exit when the market says. I don't care what your feelings are, all that matters in this case is what the Captain says. You can always find another trend, but you simply do NOT want to give back all your gains.
And that is the trap that many fall into - they identify the trend, climb on board, ride it up and fail to get off and ride it back down. This leads to net/net zero. feh. This is why you must follow your exit strategy faithfully.
The nicest thing about trend or momentum investing is that you can still have a very passive buy & hold porfolio with much of your money - say 90% and just play with 10% and improve your returns over that of the average.
peace,
rono
Added : From May 2009 I'm wondering how rono is doing ?