Down goes the Dow

dumb wrote:

Sort of why the DJIA has very limited value as an indicator of anything but the specific 30 stocks it lists for the specific time period they are listed.

Yeah, the Vanguard large-cap ETF is SO much better of an indicator that it is not even funny.

They take out Chevron; early in 1999 WTI is trading at prices not seen since 1974-75 . We all know what happens next. Then in 2008 they put CVX back in. From 11/99-2/08: CVX +99.87%, DJIA +15.66%: 2/08-3/14 CVX +39.21, DJIA +32.93. I have data on 250 stocks in the 1970s, including 25 Dow components. During the 70s the energy sector was the place to invest, cumulative return of over 250%. Yet the Dow with 3 oil companies only had a correlation of 19%. Exxon was up 79%, Standard Oil of California 121%, but Texaco was down 5.8%. ( the only down major for the decade) Meanwhile; Sohio +323%, Philips +298%, Mobil +139%, Conoco +256%, Standard Oil of Indiana +229%, Charter Oil +1000%. The oil service industry was hot also with Schlumberger's +1000% leading the way. That's what happens when you arbitrarily construct an index. There are periods when the Dow tracks the total market well and other times not so much. ( Since 1960 the DJIA coverage of total market capitalization has oscillated between 15% and 30%.)

but isn't the real lesson that good investing just requires a strategy, any strategy?

despite the strangeness and arbitrariness of the dow...its r squared to big cap US is 94%.

So as long as you own 30 big US stocks and they are somewhat diversified...you will do about what the market does. If you buy and sell and shift things around...that's not going to work most likely.

But people have tremendous trouble sticking to a strategy.

agip wrote:

la gente está muy loca wrote:

a lot of words that are probably true (too lazy to check) but are of no consequence

but isn't the real lesson that good investing just requires a strategy, any strategy?

despite the strangeness and arbitrariness of the dow...its r squared to big cap US is 94%.

So as long as you own 30 big US stocks and they are somewhat diversified...you will do about what the market does. If you buy and sell and shift things around...that's not going to work most likely.

But people have tremendous trouble sticking to a strategy.

This ^ is true.

03/31/14 Country CAPES are out:

cheap:

Greece: 4

Russia: 7

ireland: 7

argentina: 7

italy:9

hungary 9

jordan 9

austria: 9

lebanon:10

Czech: 10

Portugal: 10

israel: 10

Spain:10

brazil: 10

expensive:

USA: 25

Denmark: 25

japan: 21

indonesia: 20

Kenya!: 20

South Africa: 20

Mexico: 19

Canada: 19

Switz: 19

India: 18

I've put together a basket of the sub 11 CAPE countries. And of course I have a huge amount of the US, which is the most expensive. I have to deal with that.

someone pointed out that there is no context here - maybe Spain at 10 is the highest it has ever been so it is actually expensive. But I doubt it.

and like Gente has pointed out, many feel CAPE is not 'true' in the US because of massive accounting changes.

But there it is. If you can buy countries at half the valuations as the US...

and another all time high set today for the SP 500

agip wrote:

...

someone pointed out that there is no context here - maybe Spain at 10 is the highest it has ever been so it is actually expensive. But I doubt it.

...

I assume you don't invest any client money on this strategy, right? Only your own money?

Randy Oldman wrote:

A 30% fall in the Dow is nothing in terms of the long-term.

Without any context, this statement is pure b.s.

One of my favorite moments in Yellen's confirmation hearing (I think) was when she used the term "long-term". Somebody called her on it, asking her what she meant, and she fumbled badly, never answering the question.

Hilarious, a complete exposure of the industry-speak that is parroted in the echo chamber.

Just like Oldman in his post.

Lolzzzz wrote:

agip wrote:

...

someone pointed out that there is no context here - maybe Spain at 10 is the highest it has ever been so it is actually expensive. But I doubt it.

...

I assume you don't invest any client money on this strategy, right? Only your own money?

some of my aggressive accounts have this strategy. but even in my own portfolio these cheap stocks are only a 2% position.

But you have to understand it in terms of the whole - putting a small part of a portfolio into a basket of cheap countries can make sense in some portfolios. In others it makes no sense. Depends on risk tolerance, goals, time horizon, investor sophistication...

2 questions:

1) does anybody actually use CAPE as a major factor?

2) does anybody own a portfolio with the exact same mix as the DJIA so that tracking is made easy? (lol)

Maserati wrote:

Hilarious, a complete exposure of the industry-speak that is parroted in the echo chamber.

Kinda like "fundamental structural factors in our society?"

agip wrote:

Lolzzzz wrote:

I assume you don't invest any client money on this strategy, right? Only your own money?

some of my aggressive accounts have this strategy. but even in my own portfolio these cheap stocks are only a 2% position.

But you have to understand it in terms of the whole - putting a small part of a portfolio into a basket of cheap countries can make sense in some portfolios. In others it makes no sense. Depends on risk tolerance, goals, time horizon, investor sophistication...

What I understand is that you are executing a strategy (buying "cheap" countries), and you haven't done the most basic research to determine if they are actually cheap, based on their own history.

Then you throw out terms like Investor sophistication. Lolzzzz. Please.

agip wrote:

sorry bro wrote:

One more question - if you are using the 200-day moving average as your buy/sell criteria, why has it been two years since you owned it? (it appears to have been over the 200-day in late 2002 and early 2013)

I wimped out on the earlier breaks above the 200 day - I overrode my system because I don't like gold as an investment. What can I tell you - I just was too scared.

I'll use IAU

As for size - it will be less than 1% of my total portfolio and 5% of my fun money portfolio.

agip,

I might have missed your update, but have you now sold your Gold position? (IAU). It has been below the 200-day for a good week now.

Lolzzzz wrote:

agip wrote:

some of my aggressive accounts have this strategy. but even in my own portfolio these cheap stocks are only a 2% position.

But you have to understand it in terms of the whole - putting a small part of a portfolio into a basket of cheap countries can make sense in some portfolios. In others it makes no sense. Depends on risk tolerance, goals, time horizon, investor sophistication...

What I understand is that you are executing a strategy (buying "cheap" countries), and you haven't done the most basic research to determine if they are actually cheap, based on their own history.

Then you throw out terms like Investor sophistication. Lolzzzz. Please.

Dear Lolzzz:

I'm basing most of the strategy on this paper:

which establishes that if you buy countries with very low CAPES, your expected return is much higher than the market as a whole.

It's hard to cut and paste from it, but here is one key table, summarized:

CAPE

less than 5 - average 5 yr return = 20%

less than 10 - average 5 yr return = 17%

10-15 - average 5 yr return = 12.2%. this is sort the average valuation scenario

25-30 (now in the US) - average 5 yr return = 3.4%

so the point is absolute valuation - if you can buy countries with CAPEs below 10, you usually do much better than if you bought expensive markets.

ok?

sorry bro wrote:

agip wrote:

I wimped out on the earlier breaks above the 200 day - I overrode my system because I don't like gold as an investment. What can I tell you - I just was too scared.

I'll use IAU

As for size - it will be less than 1% of my total portfolio and 5% of my fun money portfolio.

agip,

I might have missed your update, but have you now sold your Gold position? (IAU). It has been below the 200-day for a good week now.

well I still hold it. And now I have a &*^^() loss.

Some of the 200 moving average strategies allow for a bit of wiggle room - namely a 1% 'grace period' - so you don't sell or buy until the moving average is violated by greater than 1% on the last day of the month. That's because so many other people use the 200 day - you want to dodge the noise a little.

So I am doing that. I dunno - I probably should have sold it, but it is a tiny position, so I'm giving it a little room to zig and zag.

Right now IAU is exactly 1% below the 200 day. I'll revisit on 4/30.

¿Que? wrote:

Maserati wrote:

Hilarious, a complete exposure of the industry-speak that is parroted in the echo chamber.

Kinda like "fundamental structural factors in our society?"

Not at all like that. That wasn't even a nice try.

agip, what fraction of those returns, if any, is due to dividends?

Maserati wrote:

¿Que? wrote:

Kinda like "fundamental structural factors in our society?"

Not at all like that. That wasn't even a nice try.

I think he hit the nail on the head.

Hutre wrote:

Maserati wrote:

Not at all like that. That wasn't even a nice try.

I think he hit the nail on the head.

I've never before heard the phrase "fundamental structural factors in our society" before maserati used it here. So, it's hard to understand how you & "Que?" think it is parroted industry-speak.