stock market

“When the paper and the TV say it'll never stop going up, you want to raise cash, cause these same people will be saying handbasket hell is close ,time to put the cash back to work. Just stay ahead of the boomers and don't listen to anything they say.”

“LOL, if I knew the answer to when we will hit the bottom, I could retire!

I tend to follow the DOW because that is where my investments are.

One thing is for certain. The market will run up again, tank again, return to "normal" and go dow again.”

“salebored - Another good contrarian indicator is when a thread gets posted on a backpacking forum....

The DOW is a poor indicator of market health. The S&P, or better yet the Wilshire 5000, is the way to go, but 9 times out of ten the news at the top of the hour will quote the DOW.

If ALL your stock investments are in the DOW you are not well-diversified.”

“You can make the market go dow, WOW! Yes, up and down. Some times you'll miss a few points with some of the money and sometimes you'll buy back too early or late, but the risk of corrections and the satisfied feelings of buying back 20% of a holding at a better price than you sold it for , makes all the Red and green number dance worthwhile.”

“I disagree. The DOW is a good indicator of market health. It holds more of the most widely held stocks than any other index which is why many people consider this index to be a good barometer of market health. No, it doesn't tell the whole story, but to dismiss it as insignificant would be remiss.

Not all of my investments are in the DOW. That would be stupid.
last edited: 11/26/07 11:54:53 AM”

“The DOW holds THIRTY stocks. It is a narrow indicator.”

“Markets are less localized each day and the US market becomes less of an influence each day.The trend is to move stock centers to Europe and the middle east, closer to the action and the growth of China, Russia and India as well as the oilwells of black gold deserts.”

“S&P at 1416. I think I can see the whites of their eyes. Dry powder moving into action before the close.”

“Goldman Sachs (GS)is taking it today, that is not a good sign. GS is thought by most to be the smartest peeps around.”

“I'm betting it's a test of the August lows and not a breach.....”

“Yeah, 30 of the largest and most widely held stocks in the world!”

“5000 > 500 > 30

Not very complicated.”

“investor/=/trader. I've been lazy ,missed cover on ETFC shorts. Cooking my favorite thing, other than swift boat ads, turkey soup and just wasn't watching the other turkey( etfc).”

“The effects of diversification are most profound in the first 20 names you hold. Once you hold over 20 there is a dimishing diversification effect.

Just think about it.

2 stocks is twice as diversified as 1.

3 is only 50% more diverified than 2.

4 is only 33% more diversified than 3.

etc etc.


Take a look at the YTD charts for the S & P 500 and the DOW. They move in lock step.

The additional 470 stocks really add no meaningful diversification from a results perspective. Moreover, the S & P is a cap weighted index. The top 30 stocks carry some 40% of the weighting. The top 50 stocks have 50% of the weighting, leaving the bottom 450 with less influence on the index as a whole. This is why the Dow 30 and the s & P 500 tend to be highly correllated.

YOu could, however, argue that the more old school and conservative nature of the DOW 30 is somewhat protective in an environment such as we are currrently experiencing.


The conclusion therefore that 500 >500>30 is somehow good or better, as I think was implied, is somewhat flawed.
last edited: 11/26/07 1:24:49 PM”

“Taken to its extreme: A lot more wealth has been created through LACK of diversification than through diversification (I am not sure you can argue the reverse, that more wealth has been diluted through diversification).


I give you the Rockfellers and any of their ilk. In Oil, or, steel, or trains.
I give you Bill Gates. Now there is a single stock guy.


Of course . ..it is also true that more money has been lost through lack of diversification . . . . . ..



if we all only knew which 1 stock to buy.”

“looking at a client statement from a large, well known brokerage firm.

The client has $1 million in one their "managers of managers" prgrams.


I kid you not it looks like these guys chose stocks by just picking every name in the alphabet.

$1 million . .holds wait . ..let me count . ..holds 207 different stocks. That's an average holding of 4800. Or .48% of the portfolio. These pieces of junk could double or triple and it would be meaningless.”

“lee - Please don't tell me you think the DOW is followed closer than the S&P by folks that actually pay attention.....please.

DIA traded 11 mil shares today
SPY traded 209 mil

The volume clearly follows the S&P”

“given the correlation of most markets these days, it is the case now (and has mostly been the case) that the easiest, most assured way to achieve a degree of diversification is to hold bonds.

they generally have low correlation ratio with stocks.


Not very glamourous. But a lot more effective.


This assumes that you are seeking to diversification to mitigate risk (which is why you diversify (eggs in one basket). If you are diversifying to gain a performance advantage, see my examples of single stock ownership and the brokerage portfolio with 207 stocks.

Everyone likes to talk at cocktail parties about the one that doubled. But when it doubles from .48% to .96% (actually something less than that . ..but never mind) then it is relatively meaningless.”

“No. That is not what i am saying.


The S & P, because it is a broader market index, but mostly because it is not the trademarked product of the Wall Street Journal, is more widely quoted, followed and watched. You are absolutely right.


What I am saying is:

1. They track so closely it rarely makes much difference. Because of the structure of the S & P, you may as well use the DOW 30.

2. When it does makes difference it is that the DOW protects better in a down market (this used to be the case, but some of the names have changed in the last few years).


I am neither a fan of the DOW nor the S & P particularly.


And course, I was trying to let the air out of your (i could have missed the tone) rathe condsening response to Creek regarding her investment in the DOW, by demonstrating that it hardly made difference. From either a performance or a diversification perspective.


Must go get salmon.
last edited: 11/26/07 1:56:30 PM”

“For the US I want to know in order: The S&P, the NASDAQ, and lastly the DOW. They could leave off the DOW data entirely and I would be happy.

I still contend that if one would limit their universe of stocks to the DOW they would not be diversified. One can CERTAINLY have a well-diversified portfolio with 30 stocks.”

“I want to know all of them and I have 37 names of common stock.”

“Diversity is key to survival in the market. Most people just are not good enough stock pickers to put all their eggs in one basket. I keep my money diverse and fully invested most of the time. The last time I completely bailed out of the market was in 1999. We were topping out, but I watched them market go higher and higher while on the sidelines. The market probably gained another 10 percent before it finally crashed. While sitting out one of my fears was that it would not crash. The talking heads on TV would not even talk about a crash. Then finally it tanked. The wait for the bottom was just as hard as the wait for the top. Then I started moving back into the market. I have been fully invested ever since. I hated being out of the market watching and reading everything I could to get a hint when to make a move. It did pay off but it was bought with lots of stress, but the DOT.COM Bubble ended favorable for me. Over the last few weeks I've lost a lot of money if you want to look at it that way, but I haven't been stressed. The Housing Bubble so far has only had minor effects on Wall Street. I'm not a good enough market timer to jump in and out of these little blips. Those that are good enough could make some money but those that aren't could get burned. Time is my greatest weapon, it basically takes away risk in the market for me. By the time I retire, if I even need the money I have invested, it will have nearly 40 years of growth behind it. In my senior years if I live that long it will have grown for 50 to 60 years. I surely won't care about the 87 crash, the DOT.COM Bubble or the Housing Bubble by then.

Start early, invest broadly and the money will take care of itself.
last edited: 11/27/07 5:48:08 AM”

“Chin, its tanking for me personally because I just paid back a big loan taken on my account when we bought our house a few years ago. That was mid-Oct.”

“I have plenty of diversity not only in different sectors of the US markets, but many in other countries. Today, I am 60% foreign invested, because domestic money is mostly trading involved which allows it to be shuffled in and out cheaply and with almost instant transactions.Noway can the US challenge the growth rates of the evolving outside the borders of grandpa america.”

“I recently changed my 401k contributions, but did not rebalance to these numbers.I've got about 45% of my 401k going to foreign funds. 13% bonds, 22% US large cap(mostly an export company fund), 12% US midcap, and 8% US small cap.

I'm young and basically have no money in there to lose, so feel free to tear me up.
last edited: 11/27/07 9:28:56 AM”

“tech - OUCH!!! Did you just dump it all back in or dollar-cost-average it back in?

bored - I love "grandpa america".... Especially with the downward movement in the dollar. Our economy will flourish with the drop in the dollar.”

“Never again like these countries that will move around our stupid mistakes.”

“Dumped it all back in at one time. Roughly 40% of the total value, and its no small value, either.”

“This thread prompted me to check my retirement account. I wish I hadn't of done that. Ouch.”

“IMO S&P in the mid 1400s (1420 now) is a good entry point for new money. Above 1500 it would be DCA.
last edited: 11/27/07 11:08:46 AM”

“DH - uh-huh. Ouch.”

“What are the analysts pricing the S&P 500 at from a fundamental analysis point of view?”

“ductape - The S&P has a cumulative PE ratio just above 16. Historically, during low inflation times a PE ratio of 18-19 is "normal".

Translation: Historically NOT overpriced.
last edited: 11/27/07 12:31:22 PM”

“Tech - You should be feeling better, at least for today....

1,464.63 +36.40 (+2.55%)”

“Beige Book Report says it's time for a recess and home prices are going down everywhere.

Saudis arrested over a hundred Al-Q in the country and oil kept going down. Recess kids.”

“Chin, I'll let you know tomorrow after the daily closeout. I'm spread over small cap, international and S & P so the hit isn't quite as bad as if I were only in Dow stocks.”

“I have some sizable mutual funds that I've held for 30 years. I've become a little more active in shorting ETFs as a hedge against down drafts like these last weeks. With 7 buck trades and constant attention long term holding can be successfully protected. With constant attention !!”

“Shorting (puts) is a good protection strategy outside of a tax-deferred account. But if the investments are in a tax-deferred account it makes no sense.”

“When you invest for the tax man you start out with the wrong priorities. If the luck of the IRS falls in your path, take it, but when the tax code gets in your eyes, like sand on the trail, you can be lost.

I find it emotionally soothing to catch one of my falling stocks in a neutralizing short bucket. The serious nature of supporting ones self with markets can be far less stressful when the downs have as much purpose as the ups.

I even find myself hedging IRAs etc out side , because the tax calcs are way easier.
last edited: 11/29/07 10:18:39 AM”

““S&P at 1416. I think I can see the whites of their eyes. Dry powder moving into action before the close.”
ChinMusic
12:27:07 PM
11/26/07

I want to thank TT for starting this thread. The 26th has turned out to be a GREAT entry point. I wasn't paying attention that day until I stumbled upon this thread.

”

“Good call Chin! I'll be watching for your next call.”

“Thanks pedxing - I make very few moves, sometimes none in a year. With new money I did buy on Nov 26th and previously Thursday August 16th at S&P 1380ish (got SPY at 139.70 - still trying to figure out how I got such a sweet price, but not complaining). Funny thing was I was with Dub at Glacier NP and a buy order got tripped while I was on vacation. I have been targeting S&P near 1400 for entry points.

I tend to follow the advice of Bob Brinker. He has been very, very good to me over the years.”

“My retirement account perked back up after that rise. Giddy-up.”

“Markets should be "entertaining" today. Starting at around 2:15 EST the market graph will look like someone hit it with a sledge hammer.

Get your popcorn.....”

“I see two 10% retest of that $140 level-where's that trading spirit?”

“dayhiker - ditto.”

“Sledge Hammer has spoken......”

“Ouch! Glad I sold some yesterday before the plunge. Gotta pay for next semester's college tuition x 2!”

“Markets should be "entertaining" today. Starting at around 2:15 EST the market graph will look like someone hit it with a sledge hammer.

Get your popcorn.....”
ChinMusic
7:41:33 AM
12/11/07

Wish I had had the time to daytrade this one. Take a look at the time on the graph. Right on command at 2:15.....

”

“So what gave you that feeling?

edit: never mind, I see the feds cut the interest rate, with the announcement this afternoon.
last edited: 12/11/07 1:55:12 PM”