ContrarianJeff's Account Talk

[juliebeb]

My concern is that if I am too conservative now, I won't recoup my substantial losses, but I guess I just have to reset my point of observation and assume, this is what I have now and how am I going to get it to grow, without losing more. But if the market will start heading up to its former levels, I don't want to miss out. And if now is the time to buy because the stocks are low, I don't want to miss out on that either.:worried:

 

[KevinD]

As a beginner trying to get a feel for the TSP, and it appears you are interested in experimenting, I suggest being very conservative in the equity funds, maybe 60 G, 10 F, 10 C, 10 S, 10 I, until you get a little more comfortable with it all.

I suggested something similar in my account talk thread here and was encouraged to learn more about what I was doing and why before just throwing money in any old fund.

Read the article XL-entLady posted here. Very good article.

 

[juliebeb]

Thanks. I will look at those links.

I understand the concept that I can gradually move percentages into G even after my two IFTs and that I can make fractional adjustments to match my selected allocations. Thanks.

 

[juliebeb]

I suggested something similar in my account talk thread here and was encouraged to learn more about what I was doing and why before just throwing money in any old fund.

Read the article XL-entLady posted here. Very good article.

I read the article and watched a youtube video that was linked. Made me wish that I was all in G right now until the market settles down. I am just afraid that if I go into G, I will miss a rally that may occur later in the month because I won't have any IFT's left. I hate this IFT limit thing. It really hurts at a time like this.:worried:

 

[ContrarianJeff]

I subscribe to a philosophy of investing called contrarian investing (hence, the name). It basically says that the crowd is wrong most of the time. At market peaks, almost everyone believes that the market is going to continue going up. At market bottoms, almost everyone believes the market will continue going down. No system of investing is perfect, but I've found that technical analysis coupled with contrarian investing is the best way to maximize risk vs. reward. Since learning about contrarian theory and following it (and subscribing to some investment services that know a lot more about this stuff than I ever will), I've consistently beaten the market averages. This year, I'm up a little over 6% while the S&P 500 is down 24%. It's rare for me to beat the markets by 30 percentage points, but that can happen in bear markets.

By the indicators that I follow, which have proven to be very reliable over a long period of time, I believe we should be at or near an intermediate term market bottom. The vast majority of investors are not real excited about the market right now. I just looked at the TSP Talk tracker page--I've never seen that many people be in the G or F fund. People are terrified, and I'm terrified, and we should be. Things look scary. But that's the best time to buy--it's also the hardest time to buy. Emotions play a huge role in investing. Of course, this time could be different. Maybe we will keep falling over the next few months--no person knows the future. But I have found that trusting these indicators rather than doubting them is the best way to improve my odds of making money.

As far as C, S or I . . . I'm only moving in and out of C for a while. I actually believe that Europe is going to get hit harder than the U.S. in the near future. The Euro is crashing. I'm staying away from the I fund. Also, in bear markets, small companies usually have a more difficult time than large ones. Small companies are attractive for growth. But in this economic environment, there is no growth. None. The best a company can hope for is to survive. And big companies become more attractive to large investors because of their stability. They benefit by being seen as safe-havens. The S fund was substantially outperforming the C until recently, and now the C is beginning to catch up.

 

[ContrarianJeff]

By the way, my comments obviously were not meant to be taken as advice. I don't want to advise anyone what to do with their money. I have enough stress just dealing with my own! So, don't make a move based on something I said. I'm just explaining my rationale for being in cash virtually the whole month of September and now moving to the C fund.

I will give you this advice, though. If you're willing to spend some money, I would strongly encourage you to subscribe to http://www.sentimentrader.com/
I think it's about $250 per year. But it is worth every penny. I think they've got a 2 week free trial. If so, give it a spin.

 

[ContrarianJeff]

I'm moving from 100% C to 100% G as of COB 11/03. Going up in the North Georgia mountains to enjoy God's handiwork for a week--away from internet, phone, TV, etc. I don't want to even think about the markets, so I'm getting out for a while.

I expect to get back into C or S pretty soon, but I kind of doubt we're going to get much more upside this week. Then again, I've been so wrong so often, it's really ridiculous!

 

[Birchtree]

Stop by the Dillard House and enjoy a great meal.

 

[ContrarianJeff]

FWIW--I'm taking a chance and going 100% S fund as of COB today. The market has a tendency to put in intermediate term bottoms after situations like today: 2 days of being down 2% or more and then a gap open of 1% down. Also, the VIX gapped up over 10% this morning, and that has often been a sign of an intermediate term bottom. Having said all that, I'm not confident in this trade at all (but I'm a long way from retirement and my risk tolerance is high).

 

[poolman]

FWIW--I'm taking a chance and going 100% S fund as of COB today. The market has a tendency to put in intermediate term bottoms after situations like today: 2 days of being down 2% or more and then a gap open of 1% down. Also, the VIX gapped up over 10% this morning, and that has often been a sign of an intermediate term bottom. Having said all that, I'm not confident in this trade at all (but I'm a long way from retirement and my risk tolerance is high).

Hope you don't mind. Vix Chart.

 

[ContrarianJeff]

Thanks, Poolman. The chart helps. From Nov. 20 to 27, the VIX dropped over a third from a peak during 5 sessions, formed a tail, and then moved up over a third from the bottom of the tail on Dec. 1 (with a huge gap up on that day). That day marked an int. term bottom. Jan. 20 to 28 saw a 6 session decline of about a third from a peak, then a tail, and now over 3 sessions it's up a third with a big gap up this morning. Not an exact repeat, but there seems to be some "rhyming" here--we'll see.

 

[mojo]

Well Done Jeff. Nice bump so far!

 

[poolman]

Hope you don't mind. Vix Chart.

Real Time Chart.

 

[ContrarianJeff]

Thanks, Mojo. I'm hoping for a bump through the end of the week. But I just saw that Disney is getting hammered after hours--down 10%, so tomorrow may begin with a gap down.

Here's my take on the markets--fwiw. Technically, the markets are a wreck. Broken thru almost all support except the Nov. lows. The economy is in shambles. Deflation is here. Retail, commercial and residential real estate, autos, construction, finance, tech--all of it is unbelievably awful (the only glimmer of hope I see is in energy and healthcare). I think nationalizing the banks is eventually a certainty. Great depression stuff--no doubt. That's all bearish.

The thing is, everybody knows this. That's the good news from a contrarian's perspective. The news is great at the top and terrifying at the bottom. And right now it is very scary. Sentiment is the worst it has ever been by most accounts (fyi--I subscribe to Sentimentrader, which I highly recommend). People are flat out terrified to buy stocks, and understandably so. I just glanced at the allocation among TSP Talk members, and hardly any of us have any significant exposure to stocks. I remember looking through that list a year and a half ago and seeing hardly anyone in G or F. And among investors and traders, I've never seen so many people virtually certain that the market will soon hit new lows. That's bullish.

On a very short-term basis--as in hourly, it looks like we hit some seller's exhaustion yesterday morning. A decrease in selling, however, doesn't make prices rise--more buyers do. And as of now, we still don't have any significant buying. (The VIX has to drop back to "normal" levels or folks will continue to sit out.) But a lot of times waiting on significant buying means missing a big move up. That's the quandry. For my mother's retirement account--which I manage, I've got her all in cash. I've got to be conservative for her to live. But since I can be more aggressive (20+ years until retirement), I'm in.

Blessings!
Jeff

 

[ATCJeff]

Thanks, Mojo. I'm hoping for a bump through the end of the week. But I just saw that Disney is getting hammered after hours--down 10%, so tomorrow may begin with a gap down.

Here's my take on the markets--fwiw. Technically, the markets are a wreck. Broken thru almost all support except the Nov. lows. The economy is in shambles. Deflation is here. Retail, commercial and residential real estate, autos, construction, finance, tech--all of it is unbelievably awful (the only glimmer of hope I see is in energy and healthcare). I think nationalizing the banks is eventually a certainty. Great depression stuff--no doubt. That's all bearish.

The thing is, everybody knows this. That's the good news from a contrarian's perspective. The news is great at the top and terrifying at the bottom. And right now it is very scary. Sentiment is the worst it has ever been by most accounts (fyi--I subscribe to Sentimentrader, which I highly recommend). People are flat out terrified to buy stocks, and understandably so. I just glanced at the allocation among TSP Talk members, and hardly any of us have any significant exposure to stocks. I remember looking through that list a year and a half ago and seeing hardly anyone in G or F. And among investors and traders, I've never seen so many people virtually certain that the market will soon hit new lows. That's bullish.

On a very short-term basis--as in hourly, it looks like we hit some seller's exhaustion yesterday morning. A decrease in selling, however, doesn't make prices rise--more buyers do. And as of now, we still don't have any significant buying. (The VIX has to drop back to "normal" levels or folks will continue to sit out.) But a lot of times waiting on significant buying means missing a big move up. That's the quandry. For my mother's retirement account--which I manage, I've got her all in cash. I've got to be conservative for her to live. But since I can be more aggressive (20+ years until retirement), I'm in.

Blessings!
Jeff

Agree 100%. Great post!

 

[Thunderhorse]

The thing is, everybody knows this. That's the good news from a contrarian's perspective. The news is great at the top and terrifying at the bottom. And right now it is very scary. Sentiment is the worst it has ever been by most accounts (fyi--I subscribe to Sentimentrader, which I highly recommend). People are flat out terrified to buy stocks, and understandably so. I just glanced at the allocation among TSP Talk members, and hardly any of us have any significant exposure to stocks. I remember looking through that list a year and a half ago and seeing hardly anyone in G or F. And among investors and traders, I've never seen so many people virtually certain that the market will soon hit new lows. That's bullish.

Welcome back to the in crowd Jeff!
T'horse

 

[ContrarianJeff]

I'm expecting a pullback next week of at least 1% to 2%. In the past, I would have bailed to the G fund this morning. But I don't want to use up all my IFT's this early in the month. (Thanks TSP for the rule change! Grrrrrrr!) So I'm going to remain in the S fund for the foreseeable future. I may use my ETrade account to short the market while my TSP is long---effectively keeping my entire account in cash.

It looks like the new trading rules within the Sentiment Survey are worth considering. Good work, guys.

I think there has been another thread discussing the merits of a "buy and hold" strategy. That may have worked fine during secular bull markets. But, right now, I think "buy and hold" is a perfect recipe for wealth destruction. I think a better strategy is to buy the dips and sell the rips.

 

[mojo]

King of the mountain! Nice. I would have bailed today if I was you but then again I was to scared to play. Well done jeff.

http://www.tsptalk.com/tracker/tsp_user_balance_all.php

 

[Thunderhorse]

I'm expecting a pullback next week of at least 1% to 2%. In the past, I would have bailed to the G fund this morning. But I don't want to use up all my IFT's this early in the month. (Thanks TSP for the rule change! Grrrrrrr!) So I'm going to remain in the S fund for the foreseeable future. I may use my ETrade account to short the market while my TSP is long---effectively keeping my entire account in cash.

It looks like the new trading rules within the Sentiment Survey are worth considering. Good work, guys.

I think there has been another thread discussing the merits of a "buy and hold" strategy. That may have worked fine during secular bull markets. But, right now, I think "buy and hold" is a perfect recipe for wealth destruction. I think a better strategy is to buy the dips and sell the rips.

Nice work Jeff.


Early next week is going to be interesting to say the least.

 

[ContrarianJeff]

Great chart. What you get when you buy and hold--even with dividends--for ten years. (NYTimes)