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Thursday, June 24, 2010

Timing the market

There is an interesting discussion on Bargaineering about market timing. The author of the blog, Jim Wang, had a nice response to a commenter I think is worth talking about. He said, "... if market timing doesn’t work for me, I don’t really care if it works at all."

I like this response because it reminded me of a luncheon I attended a number of years ago at the National Press Club in Washington, D.C. The speaker was a well-known stock manager who had produced exceptional returns by buying out-of-favor stocks. As he described his approach, I noticed that people were nodding and could tell by many people's expressions that they felt they could do it themselves. In fact, it was almost as if they couldn't wait to leave the luncheon and start making some money. And then he mentioned that he had just taken a big position in General Public Utilities after its plunge in price due to its Three Mile Island accident. It was almost as if air had been let out of a gigantic balloon, as people realized that they couldn't manage money like this manager.

Today some people say it is easy to avoid periods where valuations are excessive (for example, when P/Es skyrocketed in the late '90s). Well, one manager did it successfully and took heat for it - Warren Buffett. If you were invested in this period and didn't get caught up, like Buffett, in the bubble, then you may be able to come out way ahead by recognizing these periods. Otherwise paraphrasing Jim Wang may be appropriate.

I'd throw in the fact that professionals have, for some time, been harping about a bond market bubble. If you followed their advice, it has severely impacted your investment performance. Just some food for thought.


  1. That's a very good point about the bond market bubble. Surely there are some risk involved, which is why most recommend to diversify. However, some limit their exposure to an entire asset class based on fear-mongering or expert opinion alone. That's what is truly dangerous. IMHO. Regards,


  2. Hey Shawn thanks for stopping by. Limiting to a single asset class is dangerous-I agree.