A couple of bullish calls noted in the FT. First you probably heard Bill Miller, the manager of the Legg Mason Value Trust Fund (LMTVX) thinks a bottom is in.You probably also heard him get derided in a couple of places for already calling a bottom in the spring and for being down almost 60%.
One thing is certain the real bottom will be met with much disbelief and then some hindsight bias will no doubt point to some obvious things that most people will not see in real time.
Also in the FT is a call from UBS that the S&P 500 will close 2009 at 1300. That is an interesting number. In mid November I had a quick post about some sort of massive snap back met by another run down in the end and the number I tossed out was 1300. While 1300 was not really a prediction a logical point is that if you look back in market history there have been massive moves up, 30, 40, 50% during very bad times. To say one of those is coming when the selling really ends (even if the fundamentals are forever broken and the country is financially ruined--which is not what I think) is far from a bold prediction. Of course whether it would fit neatly into a calendar year is the wrong focus.
The Harvard Endowment is making news for a swift drop in a very short period of time. I've been writing about the way endowment fund invest for quite a while. There is a fascination with these funds (I too am fascinated) but I think a line needs to be drawn between learning from them and trying to emulate them. The first post I can find on not emulating them is a post I wrote in October 2007. The guys running these funds are smarter than we are but no one is 100% correct all of the time.
Lastly a couple of more new ETFs from ProShares;
Double Long Gold (UGL)
Double Short Gold (GLL)
Double Long Silver (AGQ)
Double Short Silver (ZSL)
21 comments:
Ok, so with all the brilliant people who follow this blog plus the brilliant person who writes it, couldn't we cover all of the scenarios of a market bottom? Too many? My scenario is housing will guide us.
There is a 5br. estate house for sale here on 2 acres. It has a gourmet kitchen, home theater, game room, saltwater pool, 7 car heated garage, blah, blah, blah. All for $900K. That's about a 40% discount. Another new house that was listed for $1.1MM went for $575K at auction! That scares the heck out of us when we think of what our house would fetch. Certainly a lot less than we have into it. That was not accounted for in our retirement plan because we plan to move south and downsize. Ouch!!!
I think we have most likely seen a bottom at least in the intermediate term. Of course I thought that the first time the S&P hit 840 over a month ago.
Nobody's perfect
I think predicting is a waste of time. It may be fun for some, but I find it annoying at best. It also misleads people who think that some "expert" has the possibility of knowing the future. Quite a disservice.
If the car companies file a prepackaged bankruptcy reorganization plan, how much would a government backed warranty program cost to encourage people to continue buying cars?
This seems like a much better approach than throwing billions down a rat hole year after year.
That same USB analyst also predicted 16% rise in S&P for 2008 last year
ok so now we know a bottom is in. How do we protect from more downside. I know about inverse short funds but not interested in using shorts to protect. Show me how to use put/call options for an index. I might consider buying the SPY or DIA and buying puts and selling covered calls on it. That way I participate on some upside and limit my downside. I know I should have done that a year ago but never too late. Compared to short funds which I can loose more on. I'm not sure of benefits of short funds. Maybe a fund for long financials if I can buy put option. All this make any sense? Maybe I'm getting dilerious from the volatility and my 25% losses.
Should I be paranoid if everyone thinks a bottom is in? Hah.
Yes :)
My belief is that the truly smart folks know that it is impossible to call a bottom and likewise for calling tops. They are only evident in hindsight. 1/2 the smart people calling for a bottom will be right in retrospect; 1/2 of the smart people will be wrong.
I'm not sure that I understand this fascination with housing. Seems more prudent to watch credit markets and employment--neither of which looks too robust now. Those are the two items that will ultimately influence housing (prices, debt service, debt qualification).
Many people are untrustworthy when making predictions as they are biased market cheerleaders. Roger is not one of the untrustworthy individuals.
Many people are just poor market predictors. IMO Roger is better than average on direction, but did not originally get the current problems magnitude.
Lastly, even a good honest predictor can be wrong (a lot). This is a risk with Roger or anyone else. Probably why Roger never advocates selling everything. He knows he does not know. Still I think he and we can benefit by prudently increasing or decreasing our equity exposure when appropriate.
There no good or poor predictors only some that guess lucky on direction more than others.
Bill B,
I know you believe predictors are just lucky, but if you discount the biased cheerleaders (which is most of them IMO) I do not think that is true.
Unfortunately, I doubt I will change your mind.
You're right. Here's how to convince me otherwise. It's simple, find me someone that can reliably predict the next tick on the Dow. Then I'll believe in someone predicting and not having a lucky guess streak.
Can you comment on the historic low yield for treasuries
10 year t-bill at 2.57% means S&P needs to be at just 1100 from current 850 in 10 years time to beat treasuries, and that excludes dividends
I thought the advantages the Endowment funds had were a long time horizon, access to the best private managers and access to illiquid markets which they could tie up and exploit over long periods without having their investors flee... how has anything really changed? Does Harvard really need to dump timberland or private equity holdings to buy books for next semester? Its surprising to see the schools themselves succumb to the despair and act as though their approach has failed... I wont attempt to try and call a bottom but if anything thinks that any market is currently functioning as a weighing machine that indicates the success or failure of their valuations and long term asset allocations, then... I guess you are next up on CNBC!
Ajw
Bill B,
No one can predict the next tick on the dow. Even worse the market can get irrationally over bought or over sold.
That does not mean longer term trends from honest noncheer leaders can not be predicted well enough to provide a reliable positive return.
Take a look at the Hussman fund return. Do you really think Hussman is just lucky?
Bill B.,
The comment about showing you someone who can predict the next tick of the Dow, reminds me of a comment made recently on SA, taking Bill Cara (I believe it was him) to task, because his calls were "only" correct 44% of the time. One of the tennents of trading is cutting your losses and letting your profits run. I'd be happy being "wrong" 56% of the time, if my miscues cost me 5-10% a pop, while my good calls made me 20-30-40%, or more. I'm betting that would make for a profitable year.
Leisa,
I'm guessing so much attention is paid to housing is that at least in the US, housing is sorta the 800# gorilla of the economy. Not to say things like the condition of the credit market aren't important....just sayin'..
Jan
Time to do year end tax selling on my end. This year I will have over 200k in losses to lock in thanks to my fund managers. Screw Fraud Street.
It's tough looking at your losses that have come very quickly these last 15 months and took so long to earn, but at the least you should have an opportunity to make back your money through hard work and (hopefully) investing.
Out here I work with very humble people making $300 a month and others who've never worked a day in their lives but drive very nice cars and are almost guaranteed a comfortable life.
We think we can predict the stock market because we're all so clever and brilliant but a lot of our equity has come about by being born at the right time and in the right place. I'm sure Roger would agree that if he had been born the son of a an Indian farmer, his financial circumstances would have a significantly different future today.
For years I've invested with Dodge & Cox.....very conservative, long-term plays. Even they were caught in this tsunami. All we can do at this point is hope the future is similiar to the past!
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