Timing the market

[PassiveReturns]

In my humble opinion, there is no one absolute way to reach our goal. Everyone is different, so I just feel that by stopping to time the market, it works better for me, for now.

[bongster31]

Hi,

I have read about the buy and hold investment strategy. It is a widely quoted, tried and tested method to achieve capital growth over the long run.

However, if we can guess the market peaks or bottoms and take action on our portfolio positions when that occurs, we can significantly increase portfolio performance. No one can predict the exact timing when the market will turn. But making a close enough guess may be possible.

Timing the market can be based on sentiments indicators. When over exuberance is detected, we can lighten up on stocks prior to the expected correction. When market becomes over pessimistic accumulating on stock positions will give a higher chance of good gains when the market rallies subsequently.

Like to have a view of the market timing strategy. Do you believe in the performance edge by market timing? Anyone tried it before or do you think the tried and tested buy hold strategy is still the best?

Hi,

there are mentions abt issues on market timing in certain good value books.. offhand i can think of is anthony bolton book investing agst the tides n investing the templeton way.. u might wanto take a look into the very insightly info provided by these great investors of all time.

cheers,
bongster31

[ag88]

other than looking out for investor sentiment, i noticed it is also quite possible to guess a market top by reading the economic tea leaves, e.g. economic events (e.g. monetary tightening, cooling measures etc), interest rates movements (e.g. libor - to catch the central bank(s) siphoning $ from mkt etc).
http://www.bloomberg.com/apps/quote?ticker=US0001M:IND
http://www.bloomberg.com/apps/quote?ticker=US0003M:IND
http://en.wikipedia.org/wiki/London_Inte...fered_Rate

not easy though, picked up some of the econ 101 tips from this guru:
http://krugman.blogs.nytimes.com/

among them a strong currency has a negative impact on exports & cause a bigger current account deficit + contractionary on the local economy

this leads me to suspect that we may be at or close to a mkt top for now
http://www.valuebuddies.com/Thread-SG-ec...on-in-2011

while it's hard to predict what the mkt would look like say next year, it pays to be defensive if 1 wants to take long positions like me

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TA which lots of traders swear by it is perhaps an artifact of investor sentiments
http://thepatternsite.com/visualcpindex.html
not to say that TA doesn't 'work', but more to the extend that it is useful to countercheck 1's prejudice of the market direction/trend be it using some sophisticated economic indicators etc

i'd think TA is very much a self-fulfilling prophecy which is put forwarded very eloquently by non other than : George Soros
http://en.wikipedia.org/wiki/George_Soros

Reflexivity, financial markets, and economic theory

Soros' writings focus heavily on the concept of reflexivity, where the biases of individuals enter into market transactions, potentially changing the perception of fundamentals of the economy. Soros argues that such transitions in the perceptions of fundamentals of the economy are typically marked by disequilibrium rather than equilibrium, and that the conventional economic theory of the market (the 'efficient market hypothesis') does not apply in these situations. Soros has popularized the concepts of dynamic disequilibrium, static disequilibrium, and near-equilibrium conditions.

Reflexivity is based on three main ideas:

1. Reflexivity is best observed under special conditions where investor bias grows and spreads throughout the investment arena. Examples of factors that may give rise to this bias include (a) equity leveraging or (b) the trend-following habits of speculators.
2. Reflexivity appears intermittently since it is most likely to be revealed under certain conditions; i.e., the equilibrium process's character is best considered in terms of probabilities.
3. Investors' observation of and participation in the capital markets may at times influence valuations AND fundamental conditions or outcomes.

"If men define situations as real, they are real in their consequences"

[brattzz]

I'm really bad at market timing, so given up trying that!

I just use dow jones index and STI index as a guide,

[Jacques]

Read a sentiment report on MarketWatch today.

Seems like all things are going well, with QE2 approaching and the US elections which the Republicans will win.

Do we have room for another rally, or is a correction around the corner? Any views? Are you planning to move more cash to stocks, rebalancing with a higher cash position, or staying put with a longer term view?

[Jon-san]

Historical valuation of Singapore counters seemingly to be at a fair value now, around 14+ as opposed to 15+ in recent decade.

Surprisingly, US valuation is actually slightly higher than Singapore, ie. Singapore is still cheaper(?) relative to US.

i'd like to clarify something, if you guys don't mind. i'm not very smart at detecting trends and reading numbers, but i do remember there being something about how US stocks tend to trade at higher valuations then local stocks. so would it be fair to use US valuations in comparison?

just my 2 cents. am learning from everyone in this forum. any comments much appreciated!

[Musicwhiz]

i'd like to clarify something, if you guys don't mind. i'm not very smart at detecting trends and reading numbers, but i do remember there being something about how US stocks tend to trade at higher valuations then local stocks. so would it be fair to use US valuations in comparison?

just my 2 cents. am learning from everyone in this forum. any comments much appreciated!

I personally prefer to compare valuations within the same industry rather than across markets in different regions. This is because, as you have rightly mentioned, of the differences in valuation "norms" among different stock exchanges. Thus one may inadvertently end up comparing apples with oranges.

Even then, my view is that peer valuation comparison amongst similar companies within the same industry may not yield valuable enough insights into whether a margin of safety is present. This is because ALL the companies within that industry could be over-valued, if that happens to be a "hot" industry. Hence, I think the more prudent method would still be to focus on specific company analysis, and to assess valuations as being fair or high/low given the operating environment and unique financial characteristics of that particular company.

[arthur]

i'd like to clarify something, if you guys don't mind. i'm not very smart at detecting trends and reading numbers, but i do remember there being something about how US stocks tend to trade at higher valuations then local stocks. so would it be fair to use US valuations in comparison?

just my 2 cents. am learning from everyone in this forum. any comments much appreciated!

MW was right in his reasoning that application of relative valuation model across particular industry is more sound than across countries.

In fact, I posted that valuation of Singapore being slightly cheaper than US as not being comparing their numbers 14+ vs. 15 but rather towards each country's respective historical valuation of past decade.. say 20 yrs min?

I have also read 2 articles by Robert Shiller, a very prominent economist and Ken Fisher, son of Phillip A. Fisher.

Both of them research on the effects of P/E valuation onto stock prices.

In their conclusion, Shiller found P/E does inversely correlate with stock prices while Fisher couldn't find any.

How could I draw any conclusion out of this? I respect both of them to a high degree. Thus, my opinion is to do the judgement myself on the biz fundamentals and the market sentiments.

That's all I can share.

[Kalos_2]

I started a True Blue ( Warren Buffet Type ) - Buy and Hold Investor. Over time , I found for Asia Market , it is better to know when to Buy and When to Sell. Now , I am a Value Contrarian.

Kalos

[Musicwhiz]

I started a True Blue ( Warren Buffet Type ) - Buy and Hold Investor. Over time , I found for Asia Market , it is better to know when to Buy and When to Sell. Now , I am a Value Contrarian.

Kalos

Pray tell, what is a value contrarian?