MrJohnRoss' Account Talk

[RealMoneyIssues]

10 UPCOMING ECONOMIC RELEASES:
Here is the schedule for the rest of the month:

1) Initial University of Michigan consumer sentiment survey for February (2/10),
2) January retail sales and December business inventories (2/14),
3) January industrial output and the January 25 FOMC minutes (2/15),
4) the January PPI and January housing starts and building permits (2/16),
5) the January CPI and the Conference Board’s Leading Economic Indicators index for February (2/17),
6) January existing home sales (2/22),
7) January new home sales and the final University of Michigan consumer sentiment survey for the month (2/24),
8) January pending home sales (2/27),
9) January durable goods orders, the December Case-Shiller home price index and the Conference Board’s February consumer confidence poll (2/28),
10) The second estimate of Q4 GDP plus a new Beige Book from the Fed (2/29).
The January consumer spending numbers come out on March

Looks like it will all be positive and we will shoot up for another month. Woohoo !!!

 

[Birchtree]

I suspect that if the VIX taps out below the 18 level sometime today the SPX will close out above the 1352 level - I think. It's a good day to be long.

 

[MrJohnRoss]

Sounds good for the C fund to outperform the S fund and the I fund to outperform both. BAC just locked $8 a share - I made my most recent purchase at $7.95 and will stump for more at $9.

I've previously shown a chart that the S Fund is outperforming the I Fund. This still holds true. (It's also evident on the Autotracker).

Below is a chart of the S Fund vs the C Fund. Remember, when S outperforms C, the line slopes higher.

As you can see, the S Fund is outperforming now, and when the markets have heading higher (see Oct) (see Jan)

When the markets fell last Aug & Sep, the S Fund fell more than the C Fund. You wanted to be in cash.

Generally speaking, in a strong market (like we've had so far this year), the S Fund has been the place to be.

 

[Birchtree]

Of course you are correct if you think in terms of percentages and their gains. But if you think in terms of share value and the number of shares owned the gains are different. If you throw $1K at the C fund you end up with 60 shares versus 43 shares for the S fund. You may get a bigger percentage gain in the S fund but take in less money, where the same percentage gain in the C fund will increase your dollars. Does that make sense? The objective is to accumulate shares via dollar cost averaging for most members.

 

[MrJohnRoss]

Of course you are correct if you think in terms of percentages and their gains. But if you think in terms of share value and the number of shares owned the gains are different. If you throw $1K at the C fund you end up with 60 shares versus 43 shares for the S fund. You may get a bigger percentage gain in the S fund but take in less money, where the same percentage gain in the C fund will increase your dollars. Does that make sense? The objective is to accumulate shares via dollar cost averaging for most members.

Sorry Birch, that makes no sense to me.

I'd rather make (as an example) 20% on my expensive shares vs 10% on your cheap shares.

$100,000 x 20% = $120,000
$100,000 x 10% = $110,000

I'll take door number 1.

Perhaps you're thinking of simply accumulating as many shares as possible. In that case, yes, you would have more shares, but you wouldn't have more money than me.

As a trader, I simply want to increase my percentage gain as much as possible, sell when the markets tell me to, then buy back in when things turn around.

Rinse and repeat.

 

[MrJohnRoss]

Back in June 2009, the Dow got rid of GM and put in CSCO. Where would the Dow be if AAPL had been added to the index instead?

Current Dow in blue.

Woulda coulda shoulda in red.



Chart courtesy Bespoke.

 

[MrJohnRoss]

Hmmm... I guess I'm not the only one wondering why the Baltic Dry Index is falling off a cliff.

Worldwide shipping is obviously down very significantly. Short read, but good info here:

http://theeconomiccollapseblog.com/archives/why-is-global-shipping-slowing-down-so-dramatically

 

[Birchtree]

Currently $100K will buy me 6000 shares and $100K will buy you 4340 shares of the S fund. At a gain of 20% on your holdings will give you 860 shares and I'd get 600 shares with a 10% gain. But if you move that percentage to 15% for me then I'm at 900 shares - doing better with a lower percentage because my costs are lower and my share number is higher. The number of accumulated shares is the important variable - where percentages can be misleading. That's why a DCA strategy may show better than what the tracker shows. For simplicity the tracker only considers gains in percentages and that's still a good equalizer. But in reality a 30% gain on no money is still no money.

 

[RealMoneyIssues]

Currently $100K will buy me 6000 shares and $100K will buy you 4340 shares of the S fund. At a gain of 20% on your holdings will give you 860 shares and I'd get 600 shares with a 10% gain. But if you move that percentage to 15% for me then I'm at 900 shares - doing better with a lower percentage because my costs are lower and my share number is higher. The number of accumulated shares is the important variable - where percentages can be misleading. That's why a DCA strategy may show better than what the tracker shows. For simplicity the tracker only considers gains in percentages and that's still a good equalizer. But in reality a 30% gain on no money is still no money.

huh?

 

[Birchtree]

Is that all there is? C fund is at $16.66 and S fund is at $23.01. I'd rather have more shares and settle for lower percentage gains and still perform in terms of $. Perhaps JTH will sign in and express his opinion.

 

[Mapper]

huh?

x2 :worried:

 

[Mapper]

5 shares of X @ $20/share = $100
a 2% gain is $0.40/share meaning you now have $100 + $0.40(5) which = $102

10 shares of Y @ $10/ share = $100
a 2% gain is $0.20/ share meaning you now have $100 + $0.20(10) which = $102

That's the beauty of using percentages

Edit: of course this is more complicated if you start compounding dividends paid...but if each pays the same % dividend, then nothing changes.

 

[JTH]

For simplicity the tracker only considers gains in percentages and that's still a good equalizer. But in reality a 30% gain on no money is still no money.

I'd rank that in your top ten quotes (the good ones.) I could not agree with you more, percentages can be very misleading and the Auto Tracker does not take wealth accumulation into account, instead it puts us all on an equal footing, we are not equal...

 

[Mapper]

I'd rank that in your top ten quotes (the good ones.) I could not agree with you more, percentages can be very misleading and the Auto Tracker does not take wealth accumulation into account, instead it puts us all on an equal footing, we are not equal...

but buying $100k of C shares will accumulate less wealth over the course of a month than $100k of S shares
IF
S increases by 5% and C increases by 3% during that month

You multiply the value of the shares by the % gain, not the number of shares.

 

[Birchtree]

The value of shares will fluctuate from day to day, where as the number of shares will remain integral and constant unless there is IFT movement.

 

[Mapper]

I can only guess you guys are comparing value changes in real $$ not %. In which case having more shares is important...that is to say both C and S increase in real value by $0.20/share. Well yes, then you clearly would be better off having more shares of the the cheaper index. That's why when comparing share/index movements you use % not actual value.

 

[RealMoneyIssues]

but buying $100k of C shares will accumulate less wealth over the course of a month than $100k of S shares
IF
S increases by 5% and C increases by 3% during that month

You multiply the value of the shares by the % gain, not the number of shares.

Bingo...

 

[MrBowl]

The Autotracker has its limitations because of the complicated math needed. I think Tom went with % because it is the easiest and likely the most fair, but I've always been curious what the equation is. Ever wonder why, if for example, you are at -7% and you are 100% in the C and it goes up 0.42% and when you check the Tracker that night you're sitting at -6.65%? For some reason you didn't improve by the entire 0.42%. This happens all the time in the Tracker, and I've noticed that my gains and losses are more similar to the actual fund gain or loss when I'm closer to the zero line. That's because of the complicated math probably used in the Tracker's equation, but I and wondering in print here.

If Tom started us each on Jan 1 at $1000 and applied it to whatever funds we were in and used real share prices and their daily $/share changes, I'm sure his work load would go through the roof. But, you'd also see that regardless of share price, % gain is the one and only performance element you should be concerned about. Don't get me wrong, I am very pleased with this site and the Autotracker.

Whether I get one share of Apple or 10 shares of a stock at $47 I want the one that increases by the largest % because that translates to more value.

In terms of the TSP notice that our share holdings go out to the 10,000th place, so we don't have to wait until we have enough $ to buy shares by the whole number, we are always accumulating partial shares. In the real world it's different because if I have $600 I can still only buy 1 share of Apple, but I can buy 12 shares of a stock at 1/10th the price/share. If I had an inkling that they would go up by the same % then buying the cheaper one would make sense because I would be able to purchase single shares of the cheaper one more quickly. In the long run that would matter.

What I've always wondered is what happens with dividends in the S&P 500? Are there none? If you own shares of all 500 stocks you do get dividends, but does the actual index reflect that? Does SPY reflect it? And, therefore, does the C fund reflect that?

 

[MrJohnRoss]

Yes, I could care less about share price, whether it's Berkshire Hathaway at $119,475 per share, or a $2 stock.

You may own more shares than me, but I guarantee that if I earn 50% to your 20%, my MBA (Massive Bank Account) will be much bigger that yours.

 

[MrJohnRoss]

Yes, the C Fund reflects the S&P dividend rate, currently around 2%. The S&P 500 index itself does not.