MJG,
You sure read and post a lot about forecasting.
And it seems that about once a year you break down and make a forecast of your own,
albeit with many disclaimers.
You posted this – “…it is my opinion that the ‘Sell in May’. And ‘Go away’ axiom
is not currently functional in our present marketplace. At least for now (things change),
it belongs in the dustbin of history. I will stand firm. I will definitely not sell in May and
not go away.”
Your post appeared as the market was achieving a new high; the S&P 500 index reached
1669.16.
No disrespect meant to your investment approach, just thought that it was remarkable timing on your part.
Comments
MJG will certainly respond in an appropriate fashion. My take is he's a very long-term oriented investor who probably adhers closely to Warren Buffett's doctrine of "forever" representing the best holding period.
Regards
[One of our] board members suggests that "a plethora of academic and industry generic studies" prove that it's best to just stay put, as extensive mathematical models of the past indicate that this is the best course. Personally, I doubt that any such model is capable of factoring in all of the various unique and potentially destabilizing forces swirling around right now:
• Mideast (pick your favorite disaster/war/potential war area)
• Europe (Euro, yes/no?), Britain (in/out?), "austerity" (yes/no/maybe/sort-of?), recession (again/still), EU banking issues (save the banks, yes/no/some/it depends/who, us ??)
• Fed (more QE?, yes/no/maybe?)
• automated rapid purchasing/selling
• lack of employment recovery.
That's just a few too many unpredictable variables for me. Past performance is no guarantee of future results, as they like to say. The other fella may turn out to be right, but I think that the odds are a lot worse than apparently he does. Plethora or not- time to take some money off the table.
I presume you are the same poster who earlier called himself Flack. If so, I hope the 200-day moving average technique that you deploy, and also teach your students, is still satisfying your investment aspirations.
I honestly mean that since there is no single market strategy that suits all market participants and their diverse goals and risk tolerances.
I sense a heavy dose of sarcasm mixed with just a touch of envy in your less than friendly posting. That’s too bad since emotional overreaction will often be the ruin of a well designed portfolio and its management.
I submit that your mockery of my “timing” is totally unwarranted. Although I did do some chart-based market timing in the 1960s, I have not pursued a “timing” approach since the early 1980s. Hank has it mostly right that I presently invest using a long-term horizon, but not a “forever” timeframe.
My postings have been almost exclusively focused in an educational, teaching direction. I do not tout or advocate any particular holding or investment system. As a matter of full disclosure, I document my thinking on any topic so that the reader can assess and judge any biases I have inadvertently introduced into my reporting.
I never take the position that anyone should do as I do. I do not know enough about you or any other MFO member, and I propose that you surely do not know enough about me.
In my entire investing career, which spans just under 6 decades, I have never deployed the sell-in-May tactic although I have been aware of that axiom for at least half that period. My reasoning was and is simple. Even in the summer doldrums, equities are still attractive over a bond position most of the time.
The markets surely turned ugly during Fed Reserve Chairman Bernanke’s recent remarks. Did I expect such a dramatic sell-off? No. Does it matter to me? No. It’s an overreaction to something that might or might not happen. Just like the Fed, we’ll all wait and see just how the economy evolves. Your post may well be very premature in that respect.
I will likely do no trading until the late Fall. I last made an incremental adjustment to my bond holdings in early January when I shortened bond maturity by a healthy amount. Today, my portfolio is best described as a barbell approach. About 47 % in short term fixed income holdings and about 53 % in diversified equities. I have not checked my portfolio since the end of the first quarter and will not review it again until early July. Frequent trading (and frequent reviewing) is hazardous to end wealth.
You are correct that my most recent submittals have morphed from a statistical advocacy to now emphasize forecasting issues. It is certainly a fact that I am not an expert in that discipline. I simply have been studying it for the last several months and have been posting my discoveries in that arena.
The bulk of the evidence is that forecasting wizards are a very rare bird, and mostly lack persistent success. I find the Tetlock work under IARPA funding to be intriguing with some likelihood of advancing forecasting methods in the future. We would all benefit if that goal is even partially achieved.
The bottom-line is that you misrepresent me and the purpose of my posting that you incompletely referenced. There was no intentional “timing” on my part. I do not time the markets and I especially do not time my postings. They just happen when I am inspired to post. Any perceived timing correlation is purely accidental, purely a random event. Remember that correlation is not causation.
Your posting has an unhealthy, gleeful, childlike, hate tone to it. That speaks more about you than about me or my limited investment prowess such as it is.
I hold no grudges and sincerely wish you and your students continued investment success.
Best Regards.
Lecturing about what methods investors SHOULD use is, I think, increasingly futile in this day and age. Human nature is what it is, and you're not going to see education in regards to personal finance in schools anytime soon. People are going to invest how they're going to invest.
Hi Scott,
We’re precisely on the same page with respect to individual investor philosophies, policies, strategies, and tactics. Each should and will follow his own North Star. And we wish him luck and success on his journey.
I suspect we’re on the same page with respect to education and learning although we might express it a little differently. In my case, I’ve been an investor for a very long time and continue to learn, sometimes formally, but mostly these days from experience. The MFO website is both a learning and educational opportunity.
So financial education is a continuous process. Today, I am definitely not the Magee and Edwards chartist that I was in the late 1950s. Also this site hosts many neophyte investors who likely learn from the plethora of opinions that are proffered here.
I believe we are not on the same page with your “personal finance in schools” forecast. I do concur that its present overall state is awful. We are currently graduating an unhealthy high percentage of mathematically illiterate young folks out of our High Schools. That needs to change, and it is slowly changing.
I’m more optimistic than you in this area. There is absolutely no reason why rudimentary probability theory and statistics can not be introduced and learned at the High School level. Gambling, sports odds, and stock market games can stimulate interest and acceptance. It did so for me in the early 1950s, and it is doing so now, although in a painfully limited way.
Respectfully.
How in the world did you get “sarcasm”, “unwarranted”, “misrepresented”,
“unhealthy”, “childlike”, “touch of envy”, and finally, “hate tone” from my simple post?
You forgot to call me an acrimonious misanthrope.
I’m not challenging you. Why does everything I say strike you as a personal attack?
I was merely pointing out a coincidence of timing between your post and the peak
of the market.
Before you dash off another wordy reply, can we just agree to let it go?
"I believe we are not on the same page with your “personal finance in schools” forecast. I do concur that its present overall state is awful. "
It is.
"We are currently graduating an unhealthy high percentage of mathematically illiterate young folks out of our High Schools. That needs to change, and it is slowly changing."
It is?
"I’m more optimistic than you in this area. There is absolutely no reason why rudimentary probability theory and statistics can not be introduced and learned at the High School level."
I'm not optimistic - I think - as much as realistic. There is no reason why those things cannot be introduced, but they haven't been. I think there would be huge interest in allowing children and teens to follow a stock or two and report as to their thoughts and reasoning and results. There are plenty of programs online and on mobile phones that allow this. Schools, however, need broad reforms and improvements in this country and I'm not even really seeing that, much less offering financial education.
I've said before that I'd guess a majority of people who are knowledgeable about investing are self-taught or were taught by a family member. It's fascinating to me that it's not taught in schools (maybe the industry doesn't want it taught?), but I remain hopeful (although not particularly optimistic) that it will eventually be down the road.
Mona
Gentlemen, I wish to offer a comment on the state of mathematics education in American high schools.
I was a bit puzzled by your exchange, since my son, who just finished up his freshman year in public high school, just finished a unit on probability and statistics. This is not exceptional. Statistics and probability constitute one of the core areas of mathematics education laid out in the now widely adopted Common Core State Standards for Mathematics. See http://www.corestandards.org/Math
Whatever you may think of the top-down standardization movement in education, it is addressing the concern about including education in basic probability and statistics in the high school experience of every young American.
It is fair to wish that education in personal finance (that included key empirical findings from behavioral economics on things like loss aversion, anchoring and self-herding). Unfortunately the same urge to standardize that has to some extent started to address the need for education in probability and statistics makes it hard to add a new standard (such as one for education in personal finance) at any level of public education.
Cheers.
gfb
While we're at it - I sometimes get a bit befuzzled by all the different handles. ... There's Old Joe, Plain Joe, Joe 42, John & John N, Mike, Mike M, & Mike W - to cite a few. ... Reminds me of an old beer commercial. Hope folks enjoy.
Hi Scott,
Thank you for taking time away from your professional pursuits to reply.
My assertion that the educational system is slowly changing to incorporate more math options is based solely on anecdotal personal evidence.
I consider myself a very fortunate person, especially with regard to educational opportunities. Although I was raised in a very poor environment (our home had no central heating and food was often scarce), I did graduate from a New Jersey high school in 1953 that offered probability and statistical segments in its senior Advanced Math classes. Additionally, honor students were provided the opportunity to take Differential and Integral Calculus lessons. That preparation served me well in college.
Fast forward now to the early 1980s in a Southern California high school. All our gang (three boys) had probability and statistics exposures in their various math classes. It is my understanding that this was commonplace in that era. One of my guys even played a stock market game in history class when exploring the Great Depression and its financial impact. I don’t know if these anecdotal experiences are repeated today.
From Greg’s posting, it appears that progress along these lines is intact, and may even be accelerating. That’s goodness.
I hope so since a familiarity with collecting and interpreting statistical data, and then converting that data analysis into probabilistic likelihood scenarios is essential to success.
Thanks for all your fine MFO postings, and especially for participating in this discussion.
Best Wishes.