On Apr 28, 11:11*pm, BreadWithS...[at]fractious.net wrote:
- quote -



Exactly. I'd be very concerned about an advisor who is changing with
the wind.

On Apr 28, 10:04*pm, Igor Chudov <ichu...[at]algebra.com> wrote:

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Buy and hold is the basis for investing. If a company is making money
and retaining it, their stock should increase in value. Intelligent
investors won't hold stock in a company that is persistently losing
equity.

--
Ron

On 2009-04-29, Don <dwzimm[at]telus.net> wrote:
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The best indicator of a market top that I know, I have seen in the
_Intelligent Investor_ book. The indicator is a large number of
obviously bogus IPOs.

- quote -

They become inexpensive below P/E of 15, the lower the better. There
is no hard and fast number, but 15 seems to be a reasonable, but not
precise, boundary.

i

Igor Chudov wrote:
- quote -


Suggested edit to title:

"Reporters Ditch 'Buy and Hold' in Search of New Articles"

-Tad

On Apr 29, 7:37*am, Igor Chudov <ichu...[at]algebra.com> wrote:
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But following the latest investment fashion is not what I'd call a
sensible thing to do.

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So you have not change strategy, which is the sensible thing to do.

- quote -

But clients hire advisors to get professional management. This is not
the fashion industry. Think of this as similar to the medical
profession. Would I trust a doctor who changes medical strategy
because he wants to keep his patients?

Regarding market efficiency.

I actually studied in Fama's class at U of Chicago (did not do very
well in it, but did the whole class and passed). I thought that EMH was
B/S, even then. It was our favorite topic for conversation among the
students. By that time, I already owned some BRK/B shares.

The efficient market theory says that an investor (including or
excluding insiders, depending on the version), cannot outperform a
certain measure of "average market", despite doing diligent research,
simulation, computer modeling, and so on.

Because it involves a negative, and is in some ways fuzzy, it is hard
to disprove and is almost impossible to prove.

Fama was a very bright person and a scholar of EMH, but he never flat
out said that he believed in it. He merely explored it in depth. So I
would not say anything like "Fama is a fool".

Much has been written about EMH and many historical anomalies were
found. With anything historical, it is very difficult to see if those
historical anomalies, like low P/E investing and such, would repeat
their outperformance the future.

Warren Buffett made a famous speech "The Superinvestors of Graham
and Doddsville" where he very succintly debunked the EMH.

http://www.tilsonfunds.com/superinvestors.pdf

He said, roughly, that he knows rather many individual people who
consistently "outperform the market" by a wide margin. That, as such,
is not at all a proof that this is not a random occurrence. But how
come, he asks, so many of them come from Graham's Columbia value
investing class? The possibility that this is a statistical fluke, is
so minuscule as to not be seriously possible.

That means to me that there are people who are able to beat the market
consistently, in a manner that is impossible to occur due to pure
chance.

So the question of existence of "superinvestors" is a settled one, for
me. I do think that EMH has been falsified beyond doubt.

That said, a much more pertinent question is: can a not-so-gifted,
average intelligence Joe Blow, like myself, not bright like Buffett or
Walter Schloss, busy with work and kids, and such, outperform the
market?

This is a question that I considered and decided that I should not
bother answering it, and, furthermore, I should not even try to
outperform the market, such as S&P 500. I only make investments that
make sense to me, and even more importantly, do not make investments
that do not make sense to me.

Most of my investing career since 1996, until recently, was in a very
difficult and overpriced environment, but at least I have not lost
money and made some. (and did better than S&P 500, which is nothing to
brag about in this environment).

i

On 2009-04-29 10:19:25 -0700, Igor Chudov <ichudov[at]algebra.com> said:

- quote -

I would swear that a count of the number of newspaper ads advising
readers to invest in stocks because they do well in the long term would
itself be a good index of the market. In the area where I live at
least, that count would surely rise and fall along with the Dow (with
perhaps a 6 month lag).

I remember seeing the "Dow 36,000 book" on bookstore shelves some time
ago, but I never got around to reading it. My trouble is knowing when
stocks are "inexpensive quantitatively." I have heard people claiming
that to be the case when the market is near the top.

Igor Chudov <ichudov[at]algebra.com> wrote:

- quote -

It's very reasonable. In fact, it is one of the most subtle and least
understood benefits of investing in things like the Vanguard Balanced Index
being discussed in another thread. It is continually rebalanced.

Every time you rebalance a portfolio, you tend to sell things that are
relatively expensive (overweighted in the portfolio) and buy things that are
relatively cheap (underweighted in the portfolio). It is an automatic buy low,
sell high strategy.


- quote -

It's also why the efficient market hypothesis is 100% pure nonsense. People are
not coldly rational. Not me, not you, not anyone. To the extent we can get
more rational, we become better investors because we can start moving against
the emotional crowd. But the crowd is always going to dominate the market. This
provides investment opportunities for contrarians.

You might be interested in looking at behavioral economics that studies how
people actually do behave. Here's a really good one page summary of some of the
mistakes built into people's psyche.

http://www.ctahr.hawaii.edu/oc/freepubs/pdf/FC-45.pdf

-- Doug

On 2009-04-28 20:04:39 -0700, Igor Chudov <ichudov[at]algebra.com> said:

- quote -

Over the years I have often heard the advice: "Invest for the long
term. There will always be ups and downs in the market, ....." But now
I am beginning to think that such advice itself rises and falls along
with the market. If it is a good idea to ride out the ups and downs
without panic in times of an "up," isn't that still a good policy now
that we are in the midst of a "down?"

On 2009-04-29, JoeTaxpayer <JoeTaxpayer[at]comcast.net> wrote:
- quote -

Yes, the author wrote that gold is low risk. I would read it as the
opinion of both the author as well as the cited advisor.

I do not consider gold to be a safe investment at this price.

i

- quote -

- quote -

Is the author suggesting Gold is low-risk, or am I parsing the sentence
incorrectly as I read it?
Joe
www.joetaxpayer.com

On 2009-04-29, BreadWithSpam[at]fractious.net <BreadWithSpam[at]fractious.net> wrote:
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BWS, it is my personal opinion that changing a strategy in response to
changing circumstances, is a very sensible thing to do. The question
is what specific changes to make.

Myself, personally, I buy more things if they get cheaper and sell (or
do not buy) when they are expensive. Hence, allocation of my capital
would change with changes of prices, in some imprecise fashion. I do
not consider that to be an unreasonable approach. I am approximately
85% in stocks, and 3% in junk bonds, with the rest in cash, euros or
higher rated bond funds. This is dramatically different than it was a
year ago, when I was approximately 35% in stocks (most of which was
one stock, actually). This change is a response to changed
circumstances.

As far as advisers go, they are paid by clients, so they need to have
a strategy that appeals to clients. Otherwise they will not have
clients.

If this is why some of them are selecting their strategies, then we
need to look at clients own dispositions to see why advisers would
recommend something that would appeal to those clients.

- quote -

Good point.

- quote -

Several years ago, I heard an opinion that, collectively, the
investing public (not just individual investors, but fund managers and
so on) never really learn the lessons of the past, repeat the same
mistakes, and act more due to their individual temperament than due to
rational thinking. At the time, I thought that it was outlandish, but
the recent events made me believe in this opinion.

i

Igor Chudov <ichudov[at]algebra.com> writes:

- quote -

The article says 15% of the 500 advisors they polled are
significantly changing their strategy.

I'd like to know how much of it is that suddenly some folks
have decided that they know how to time the markets when
previously they didn't - versus how many of them suddenly
realized that they and their clients are more risk-averse
than they all had thought they were during the bull market.

During the bull market, nobody wanted to be at the traditional
60/40 allocation - why miss out on all that stock-market upside?
Now that they've been blown out of the water with 50% losses
in their equity portfolios the 22% loss last year on a dead
simple 60/40 index portfolio looks pretty brilliant. But
folks - both the markets and investors - always seem to
behave by looking backwards. Cash and treasuries did best
during the disastrous 2008, so now all those backwards-looking
folks are thinking that if they position their portfolios
for 2008, they'll look brilliant. If they were really
brilliant, wouldn't they have made all these adjustments
*before* this unpleasantness? Are they really going to
know how/when to get back in?

As I said in another note recently, start with a 60/40
index-based portfolio and unless you can offer some very
convincing evidence that you can improve on it - not
anomalous evidence ("last year stocks stank!") - leave
it alone.

How many times have we all heard "It's different this time"?
And how many times has it really been different?


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

On Apr 28, 8:04*pm, Igor Chudov <ichu...[at]algebra.com> wrote:
- quote -

This would be the Zvi Bodie strategy.

Anoop

http://online.wsj.com/article/SB124096109870565775.html

A small part of the article is included here for space and copyright
reasons. For the rest (on my webspace) see URL below.

``The broad decline across financial markets in the past year has
persuaded a small but growing number of financial advisers to abandon
the traditional buy-and-hold strategy -- which emphasizes long-term
investing in a mix of assets -- for a new approach geared to sidestep
future market plunges and ease volatility.

....

Today, Mr. Seymour keeps about 90% of his clients' money in such
low-risk investments as short-term bonds, cash and gold. With some of
the small amount that's left over, he uses leveraged exchange-traded
funds to place magnified bets both on and against the Standard &
Poor's 500-stock index.''

The rest is here:

http://igor.chudov.com/tmp/advisers.txt

What do you think? For the record, this probably does not represent
all advisors, but I would not be surprised if it covers most of them.

i