Surviving the market crashes of 2008 and early 2009 meant being largely in cash and "near cash" with short term agency notes (VSGDX, VSIJX) and short term municipals (VWSUX). The all-account total return for 2008 was +0.18%! I was earning 2-3% on the near cash which masked actual losses in other assets, but I was grateful to end up with a micro over-all gain.
As the shock moderated in 2009 I gradually started extending durations and getting into higher yield assets. Asset classes with high yield included preferred stocks, longer duration corporate bonds (LSBDX), Pimco Bond (PTTRX), Pimco All Asset All Authority (PAUIX), Hussman Strategic Return (HSTRX), foreign bonds (GIM and later AWF) closed-end hedge funds of all varieties (GGN, IRR, HIO, PKO), and MLPs (EPD, ETE, ETP, NS, NSH, DMLP). Later in the year I increased "hedge stock funds" from minimal to average amounts (HSGFX. OAKBX, FPACX, TFSMX). Nearly all asset classes (except cash) were going up in price while paying very substantial dividends, a delightful experience. Gold also went up 24.5% for 2009, and I made some gains trading CEF and other golds. And I bought back into the Vanguard specialty energy (VGENX), mining (VGPMX), and health care (VGHCX) funds. Keeping in mind that I was heavily at the short end early on in 2009 and was still fairly much so even later, I had a total return for all accounts of 14.31% on the year, even better than 2003!
As long as money kept running out of cash everywhere I looked and into stocks and bonds, I tried to keep my emotions and opinions out of investment decisions as I discussed here recently. Opinions don't pay an investor's dinner tab or the rent or buy her a new car.
Sentiment studies like the very simple 2CS and credit spread charts, or just the historic charts of bonds funds and closed end fund discounts for the whole decade said not to worry yet. I was fairly conservatively invested, but I was able to stay long when a lot of experts were calling for market tops nearly every week after March 8, 2009.
Other than 2CS and credit spreads (and closed end fund discounts) one of my strongest supports for "staying the course" was James Stack and his InvesTech publications. I had subscribed to Stack and visited his HQ in beautiful Whitefish, Montana, close to Glacier National Park, in the early 1990's. As is so often the case I had moved on to other ideas. But in the craziness of last year one day I thought I really should find out what Stack thought. And I did. Stack and his team worked out their market indicators in the 1980's, and they have stood the test of time. Be mindful that I don't sell *anything* here and I don't get free subscriptions either. I pay full price for everything I mention here.
Stack isn't an exciting or camera-seeking guru type guy. He just does market data analysis and presents it simply and honestly. There can be months or years when his opinion doesn't change much, but he shows you
"why" every four weeks and with interim updates.
Stack is still bullish and so am I. But we are close to having a year of bull market behind us. Much of the catch-up of devastated market sectors has occurred. The very easy money to be picked up off the street has been made. It will be more competitive going forward. Sector and stock and bond selection will matter more. After March 8 last year you could pretty much buy anything or everything and do well.
This lengthy introduction is to tell you why I am starting to look for possible market timing windows this year. There may be new and unexpected positives that are unknown but which can lead to huge further gains, but perhaps not.
There are several people or groups I know of who do excellent longer term timing or cycle work, and they use different methods and are independent of one another. To start with there is always the longer term "seasonal" or one year chart of what a given asset has done over the decades. Then there is what Edgar Lawrence Smith in the 1930's and Edson Gould in the 1960's decribed the
decennial or decade cycle for US stock prices. Years ending in "0" tend to be down years. "1" years tend to rally and "2" years mark major lows
In more recent decades I've followed
Terry Laundry (short to long term,
MarketTrak's neural network project (very short term),
Financial Forecast Center's artificial intelligence projections (intermediate term), and
Steve Berg's timer data (short to long term). Three of these (excluding MarketTrak which does only short term work) are looking for a stock market high this summer,and a low in the third quarter. Higher highs look probable in 2011-2012.
In the work of these people, gold looks higher into this fall with perhaps a year's pullback thereafter. Ditto for crude oil. Bond rates look higher into 2011 after a small pullback this summer.
How do I use this stuff? I am not going out tomorrow morning and buying Eurodollar, gold, crude oil and stock options for 2011. I am just going to be warier of staying long when market breadth and sentiment as I measure it get frothy this summer, if they do. And also I'll be watching to see if James Stacks's indicators get bearish. Major geo-political, macro-economic, or geologic/weather events can overwhelm market events, of course. Berg incorporates some of his ideas on weather and geologic events being affected by the sun, as of course is the annual seasonal charrt.
Right now I am sticking completely with the portfolio I recently updated here and am re-investing hefty dividends. If indicators and events start to spook me I will cut back gradually in stock and bond areas and/or buy more gold.
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