In general what I meant by BS John Q Public is the following. Big Wall Street firms get fees by having people’s money invested in funds. This is why the buy and hold strategy they propogate is constantly reinforced. They cite statistics including how much your return would be reduced over time if you happened to miss the X number of largest up days by being on the sidelines trying to time the market.
Here are some stats regarding this bs. For the last 35 yrs the Buy and Hold strategy in the S&P turned $1,000 into $11,000, a 6.7% annual return. If you missed the 5 best performing days, that $1,000 becomes $150, a -5.3% return. So Mr. Wall Street says, “see you cannot time the market.” What they fail to tell you is in the next paragraph.
Here are the numbers on that same $1,000 if you were able to miss the 5 worst performing days during that same period. It becomes $987,000 a 19.3% annual return. (By the way this is from a study conducted by a friend of mine, this is not my research) My numbers however in my study came out very close to these, probably a matter of rounding decimals differently.
What this shows about as clearly as it can be shown is that missing the worst days is far more important than catching the best ones. Timing does matter a great deal. No Wall Street guy is going to tell you that when his income is contingent upon you keeping your funds fully invested.
The insiders all know of the strong bullish cyclical tendency for rallies in mid term presidential congressional election years. This is one of those. We have dropping long term rates the last 45 days, which is helping set up this rally.
Also, remember, a shifting to blue chips by the big institutions is a sign of caution for them. They tend to hold up better during down periods. They have to have their money committed, so that is a shift they make when they anticipate a drop in the market. That happened during March and April, and low and behold look what happened. I had warned in my blog of the bearishness of the Dow ouperforming the S&P. It did this due to what I have just described.
Make no mistake about it, the stock market is an insiders game. So getting in tune with what they are doing is how we as individual investors can make money and beat the market as a whole. The COT report is so helpful in determining what they are doing, and why I reference it so often.
As a trader all I can do is try and stack the odds as heavily in my favor as I can. Once I have done that, I just pull the trigger and stick to the plan. At times I am wrong as you know. I have about an 80% winning percentage as evidenced by my trading service over time. This means that 20% of my trades will be wrong. Maybe this is one of them that will be wrong. I still like the odds and will pull the trigger with a large chunk in the fall if everything sets up properly. I will follow my plan for entry and exit, and then let it play out.
There will probably be one fly in the ointment when it sets up as rarely are things perfect in the markets. If the commercials are heavily long in the fall, and the bonds hold up, the trade will be done. Any questions, send me an email at [email protected].
Last thought – there is a lot of info on the web about mid-term congressional elections and there bullishness for stocks. Do your own research.
