Barry Ritholtz has a great post up about one indicator about whether 2006 might be an up year or not. This was based on some discussion with Michael Panzner (another friend of this blog).
The quick and dirty is that over the last 50 years the occurrence of winning streaks longer than three years is very rare. This is yet another anecdotal this is how the market usually works type of indicator the ties into 2006 being, in my opinion, down a little.
Barry's BusinessWeek forecast was for SPX 880 which would clearly be down a lot. While I hope he is wrong it would be worthwhile to, if you have not already done so, map out a clear strategy of how you reduce domestic exposure and where that cash would rotate to, a moneymarket is fine the big thing is just to have a game plan.
Specifically, when do you take action and what is that action? If you have someone that helps you, they should have some sort of game plan. But if they don't have one and you have to tell them the game plan, what is the point?
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7 comments:
Hey Roger....
I have a tough time predicting the markets based on "Counting cards". I'd rather look at the fundamentals. I'm leaning towards an improved S&P 500 for next year. But, if you really want to know where I stand, you'll have to ask in December of 2006. I'll know for sure then.
David,
Market timing is an integral part of every succesful investors strategy.
Even value investors sell and time the market. Read Ben Graham carefully or listen to Buffet and see his trading history.
Frankly - I hope Ritholtz is right. What a great buying oppurtunity that would be.
The market, like a coin, doesn't know how the last toss came up. Or the last three. Or the last four.
Barry has posted more than one weak argument in recent weeks. He has been very hung up on (high) inflation issues and, in my opinion, he is looking at trees in great detail and not seeing the whole forest. (I have posted a number of comments on his blog in recent weeks and he has graciously responded directly.)
In regard to the current question, what is basically being ignored is that the market was flat for about 22 months leading up to October. From the historical perspective one can find at least three other long periods of sideways consolidation and the years afterward were very strong.
I believe my number, 1421 on the S&P, will prove to be low but closer than yours by a long shot and closer than Barry's by a long-long-long shot.
Just look at every succesful investor - Buffet, Soros, Templeton, Lynch. They all pay attention to stock market cycles.
More than likely we'll be range bound until 2018.
What's different this time than the last 18-20yr bear cycle we had?
What are we doing now that we didn't do then?
If you're not analyzing sectors, investing abroad, investing in commodities & timing you're gonna regret it 10yrs from now.
Of course, in order for me to be right. Most of you will have to disagree with me. That's what you gotta love about the market.
...an up year this year is not in the bag yet...
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Anonymous - I have to disagree. Unlike the coin, the market absolutely DOES know how the last toss came up, and the three or four before... "the market" is you, me and all the rest out there; it's human interaction, not a toss of a coin, and humans will anchor expectations in observation of the past.
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