I want to time the market, talk me out of it and tell me what can go wrong!

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QuestioningWanderer
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I want to time the market, talk me out of it and tell me what can go wrong!

Post by QuestioningWanderer »

I know market timing is not possible on average in most cases.

This is why I am probably making some mistake here which I don't fully realise myself.

Here is the idea:

I'm in my 30s, holding 100% world stock index.

I think it's time to start allocating a little bit to bonds.

Here is information I gathered:


- The inflation is here. Confirmed by Warren Buffett and many others.

- JPMorgan is building huge cash position in anticipation to rate increases for combatting inflation.

- Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.

Why would bonds crash? I understand that if FED increases rates, then TLTs rates will also increase which means that current bond prices will fall.

With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.

Which means that BND will drop, which means that I will be able to accumulate a nice DIP for my BND position.

For this I plan on selling some of my stocks position (10-15%) and waiting for dip in bonds (and stocks). I had accumulated stocks more than year ago, so I'm very much in the green right now.

Now please, all the reasons why this will go wrong?
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David Jay
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by David Jay »

It will likely cost you more to have cash on the sidelines for 12 months than the anticipated drop in the price of BND from an interest rate rise.

“Nisiprius” has some great information in this thread: viewtopic.php?p=6069268
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
greenyoda
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by greenyoda »

Whether you start adding bonds is an asset allocation question - what's your IPS say?

You own the whole market so will capture benefits that many equities will realize from inflation, if it happens.
At the moment we can observe rising inflation for the past ~3 months. Will that continue? Who knows?
Interest rates as we all know are at all-time lows, so if one just keeps saying they'll rise, eventually they'll be right.

The other two pieces of information you cited are just speculators speculating. Will they be right? Who knows?

You propose moving 10-15% of your holdings to cash, until you observe a dip to buy into. When will that be? When will you call the bottom or "enough" of a dip?

How will it go wrong? If the market continues to rise, no dip in bonds materializes and you're sitting on cash that could have been appreciating.
I think most here would say stay the course on your IPS. Up to you if you want to re-evaluate that, whole market is certainly fine, I think holding some % of bonds is reasonable but trying to time the entry will be a random roll.
sycamore
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by sycamore »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm - The inflation is here. Confirmed by Warren Buffett and many others.

- JPMorgan is building huge cash position in anticipation to rate increases for combatting inflation.

- Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.
All of the above are "appeals to authority". What about all the mistakes Buffett has made over the years? Shouldn't those count against him and his opinion on rates now?
QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm Why would bonds crash? I understand that if FED increases rates, then TLTs rates will also increase which means that current bond prices will fall.
The way you phrase it seems to suggest a direct cause and effect relationship. The FED does not control all rates. They control some very short-term rates directly and indirectly influence other rates. Ultimately it's the market that sets the prices on bonds of various maturities. Oh yeah, the market changes its mind on this just about every day.
QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.

Which means that BND will drop, which means that I will be able to accumulate a nice DIP for my BND position.

For this I plan on selling some of my stocks position (10-15%) and waiting for dip in bonds (and stocks). I had accumulated stocks more than year ago, so I'm very much in the green right now.

Now please, all the reasons why this will go wrong?
It's possible that the Fed will raise rates. Or they may leave them alone. It's not clear to me that they will raise rates. None of the information you presented is a slam-dunk case that the Fed will raise rates. It is not logical to assume so as you have done. As a side note: why not just say "there's a good possibility of the Fed raising rates in the next 12 months?" There are advantages to thinking in terms of possibilities rather than certainties.

What do you think about the idea that the market has already considered what you're suggesting and has discounted that possibility? Meaning that rates have already dropped in reaction to the chance of future rate hikes, and so you selling now to wait means you're too late.

The other common response to your thought process is: Do you really think you know what's going to happen and the rest of the market does not?
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Thesaints »

Not only all of the "information" the OP gathered has to end up being true, but it also has to be true in the particular timeframe of the OP's interest.

Anyhow, if he needs to shift his allocation, there is certainly no harm in selling stocks. Holding cash, it would only mean his portfolio bond component would be made of extremely high quality bonds, with zero duration and zero yield.

That he might be able to change his bond allocation parameters at the right time is instead pure illusion.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Wedemeyer »

Don't try and time anything. My suggestion is to keep the stocks you have and hold forever, and invest 1% of your portfolio or so in bonds annually. You'll be at 30% in bonds in your 60s (keeping this analysis simple) which is reasonable. And you'll avoid trying to sell and buy at the right time which rarely goes well. You have a long horizon ahead of you to ride out the bumps.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by 1789 »

I think you are wasting your time in trying to time the stock/bond markets. If you have a small amount of money, you lose or gain 1% here and there wont matter much as the amount of capital is small. If you have big portfolio, there is no need to risk it by playing fortune telling game.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by goingup »

It doesn’t sound like a good plan. If you want bonds then start to build your position now through contributions in your workplace plan. If you want bonds in the future, decide when that time is, then implement your plan at that time.

It’s a bad idea to sit on the sidelines waiting for either a stock or bond crash. Often it is just a rationalization for being fearful. It’s a sure way to underperform the market and a bad habit to begin. Stay invested, whether it is stocks or bonds. :beer
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by tvubpwcisla »

Stay invested my friends.
TropikThunder
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by TropikThunder »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm
- The inflation is here. Confirmed by Warren Buffett and many others.

- Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.

With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.
Michael Burry has accurately predicted “many crashes”? Please name one other than the subprime mortgage one.

The Fed has stated a much more tolerable stance on inflation these days. Powell has said several times that they would tolerate a higher inflation rate near-term (~3%) as long as the longer term average was on-target (~2%). So rasing rates is far from a slam dunk.
Last edited by TropikThunder on Wed Jun 16, 2021 8:15 pm, edited 1 time in total.
uberdoc
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by uberdoc »

This is not a suicide prevention hotline.
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Meg77
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Meg77 »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm
Why would bonds crash? I understand that if FED increases rates, then TLTs rates will also increase which means that current bond prices will fall.

With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.

Which means that BND will drop, which means that I will be able to accumulate a nice DIP for my BND position.
The Fed does not control bond market rates or prices. They can and likely will raise the Federal Funds rate in the next year or so, which will impact the rate that consumers pay on credit cards and other short term loans tied to the prime rate (HELOCs, car loans).

But bond prices and yields are primarily controlled by supply and demand pressures, which are global in nature. Keep in mind that in MOST of the developed world, bond yields are still below zero. That makes US bonds relatively speaking the best deal in the world as far as high quality bonds go. As soon as prices dip, governments and multi-national companies and billionaires the world over have reliably swooped in and bought them up, keeping yields down and prices up despite our domestic pressures.

I'm no bond expert, but this is the mantra the fixed income folks at my investment firm have been repeating for years as the media and consumers have continued to fret that rates will go up. There is just too much money floating around looking for yield in the world that is likely to keep our prices higher/rates low for the foreseeable future.

Google "fed funds rate versus treasury yields" and look at some of the charts. Over the big picture (many decades) they appear to move roughly together, but if you zoom in on any 10-20 year period, that is far from a reliable bet.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Fallible »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm I know market timing is not possible on average in most cases. ...
You are not market timing, you are reacting to your tolerance for risk by lowering it, by lowering equities. As evidenced by your list of worries, this is about risk, not timing. Your worries about inflation, etc., may be justified or not. What’s Important is how you react to them.

Do you have an IPS to help you through this?
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Ed 2 »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm I know market timing is not possible on average in most cases.

This is why I am probably making some mistake here which I don't fully realise myself.

Here is the idea:

I'm in my 30s, holding 100% world stock index.

I think it's time to start allocating a little bit to bonds.

Here is information I gathered:


- The inflation is here. Confirmed by Warren Buffett and many others.

- JPMorgan is building huge cash position in anticipation to rate increases for combatting inflation.

- Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.

Why would bonds crash? I understand that if FED increases rates, then TLTs rates will also increase which means that current bond prices will fall.

With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.

Which means that BND will drop, which means that I will be able to accumulate a nice DIP for my BND position.

For this I plan on selling some of my stocks position (10-15%) and waiting for dip in bonds (and stocks). I had accumulated stocks more than year ago, so I'm very much in the green right now.

Now please, all the reasons why this will go wrong?
To be honest with you I haven’t even read your post. Your post like a thousand already like your market timing posts with the same “ I know market timing is not possible , BUT..... “
Good luck, Ed
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Ed 2 »

uberdoc wrote: Wed Jun 16, 2021 3:18 pm This is not a suicide prevention hotline.
Lol
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by livesoft »

So BND had a dip today. Did the OP buy some more shares of BND today? But the word stock index ETF (VT) dropped even more, so selling VT to buy BND would have been better yesterday. :twisted:
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by rockstar »

What's the OP actual plan beyond gut feel? Where are the numbers?

As for Burry, I highly suggest reading his actual filings.

https://www.sec.gov/edgar/browse/?CIK=1649339
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Taylor Larimore »

QuestioningWanderer:

Many investors want to "time the (stock and bond) market." However, the evidence is overwhelming that timing the stock and bond markets is impossible.

Read what experts say:

https://www.bogleheads.org/wiki/Taylor_ ... ing_quotes

Best wishes.
Taylor
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by chris319 »

Don't listen to gurus.

Gurus are paid to have an opinion; they're not paid to be right. If a guru is wrong, oh well, it's no skin off his/her nose. If they don't have an opinion they don't stay in the guru business for long.

Trying to time the market is a fool's mission. You pay a penalty for being wrong.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by PDX_Traveler »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm I know market timing is not possible on average in most cases.

This is why I am probably making some mistake here which I don't fully realise myself.

Here is the idea:

I'm in my 30s, holding 100% world stock index.

I think it's time to start allocating a little bit to bonds.

Here is information I gathered:


- The inflation is here. Confirmed by Warren Buffett and many others.

- JPMorgan is building huge cash position in anticipation to rate increases for combatting inflation.

- Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.

Why would bonds crash? I understand that if FED increases rates, then TLTs rates will also increase which means that current bond prices will fall.

With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.

Which means that BND will drop, which means that I will be able to accumulate a nice DIP for my BND position.

For this I plan on selling some of my stocks position (10-15%) and waiting for dip in bonds (and stocks). I had accumulated stocks more than year ago, so I'm very much in the green right now.

Now please, all the reasons why this will go wrong?
One could say Mr. Market knows all these things that you know, and likely more. All kinds of active market participants have already acted on this information and priced bonds and equities accordingly. Now, either you know something that they don't know about what is going to transpire, or you are just making a bet. Likely the latter, and then the question is - do you have a system to calculate the odds that is superior to the system used by much more sophisticated market participants? I would venture a guess to say not.
so, it really comes down to - are you uncomfortable with your asset allocation? Then you should adjust that - but that is almost entirely unrelated to market levels and more related to your need/ability/desire to take on risk - and these are different from JP Morgan's or Michael Burry's, for example.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by minimalistmarc »

Anything that is obvious will have been priced in already.

At 30, if the market drops you just keep on buying as it goes down, that’s where the good money is made.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by galawdawg »

uberdoc wrote: Wed Jun 16, 2021 3:18 pm This is not a suicide prevention hotline.
No disrespect to the OP, but I wonder if this is the new millennial slogan to get the attention of others or otherwise motivate them to engage with them? Lot's of "talk me out of...." threads in the past year or two.

To the OP, you clearly understand that market timing isn't wise. And if you want the reasons that your plan can go wrong, there are many, many threads here on the risks of market timing. They should be easy to find using the search function! And in the end, remember, nobody knows what the future holds. :happy
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Wiggums »

The Fed showed charts yesterday and it’s no surprise that the people on the FOMC committee have different opinions as to the outcome and timing. the future is unknowable and you can only make your best guess.

You have to be in the game for a chance to make more money.
For every seller, there is a buyer. Only in hindsight do you know which one was right.

It sounds like you are getting caught up in the market noise.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by RickBoglehead »

galawdawg wrote: Thu Jun 17, 2021 4:12 am
uberdoc wrote: Wed Jun 16, 2021 3:18 pm This is not a suicide prevention hotline.
No disrespect to the OP, but I wonder if this is the new millennial slogan to get the attention of others or otherwise motivate them to engage with them? Lot's of "talk me out of...." threads in the past year or two.

To the OP, you clearly understand that market timing isn't wise. And if you want the reasons that your plan can go wrong, there are many, many threads here on the risks of market timing. They should be easy to find using the search function! And in the end, remember, nobody knows what the future holds. :happy
Thread after thread, yes. If they're reading the forum they already know the answer. I just skip those.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by lazynovice »

The fed does not just set short term rates. They also buy bonds in times of turbulence. And sell them during recoveries. Any crash in bonds will be cushioned by this activity. How are you taking that into account in your plan?
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Ramjet »

It doesn't even seem worth it. Remember, even if when bond prices fall you will be paid at a higher rate going forward, it will eventually even out
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by LadyGeek »

This thread is now in the Non-US Investing forum (EU investor). As noted in [Estonia, EU] Can't decide on right Vanguard index fund choice., the OP is in Estonia. The OP's stock funds are listed in that thread.

Timing the market can have different aspects than someone domiciled in the US (taxation and regulation).
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by JonnyDVM »

I’ve never heard of anyone trying to time the bond market. Bonds don’t dip very hard. Even in rough bond times. If you want to allocate to bonds, just set a new asset allocation and rebalance. Quite frankly keeping 10% in a cash savings account isn’t that much different from owning total bond right now. Trying to time BND gains you very little.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by markjk »

It's not worth the effort. I vote reallocate now and move on if you want to change your asset allocation. Everyone (experts included) thought the stock market was going to be crushed for years in March of last year. Look how that turned out? How many experts were calling a short term bear market followed by an extreme return to the bull? I don't remember seeing a single comment like that from anyone until it really started happening. Experts are guessing as much as anyone else. There are mounds and mounds of proof over the years. Which gets us back to your original sentiment, don't market time. It's just not worth it.

I also would say you don't need bonds yet at your age assuming this money is retirement money. Even if retirement is 50 for you, holding all stock right now is fine historically speaking. This of course is a personal preference topic. If you really want bonds now, it's not a bad thing. You'll just likely be leaving some growth on the table and gaining a tad bit less volatility. The small bit of volatility savings might be worth it to you.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by RubyTuesday »

Speculators speculate. On net speculators net out to the market, i.e. someone takes the other side of every trade. Which speculators will get it right this time? I don’t know, but I do know my adherence to low cost passive index investing will do no worse than the average speculator, probably better net of expenses.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by dziuniek »

Well, you could always just say you're adding bonds due to your age and not call it market timing. :twisted:

It's not so unreasonable for a 30 year old to hold 0 to 30% in bonds, methinks.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Elysium »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm
- The inflation is here. Confirmed by Warren Buffett and many others.

- JPMorgan is building huge cash position in anticipation to rate increases for combatting inflation.

- Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.

Why would bonds crash? I understand that if FED increases rates, then TLTs rates will also increase which means that current bond prices will fall.

With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.

Which means that BND will drop, which means that I will be able to accumulate a nice DIP for my BND position.

For this I plan on selling some of my stocks position (10-15%) and waiting for dip in bonds (and stocks). I had accumulated stocks more than year ago, so I'm very much in the green right now.

Now please, all the reasons why this will go wrong?
OP,

I guess the market has decided bonds aren't crashing, at least the immediate reaction today from yesterday's Fed remarks have made Treasuries go up, by a lot more than any other trading day in the past several weeks. As of writing this, EDV is up 2.8%, TLT is up 1.9%, and BND is up 0.5%. I guess those who waited for the dip in Bonds may have missed the boat, as they did dip in the beginning of the year and now is going up in prices as yields are dropping instead of rising.

No one knows what tomorrow will bring, or next week, or next year, staying diversified according to a plan is probably the best.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by tibbitts »

JonnyDVM wrote: Thu Jun 17, 2021 6:31 am I’ve never heard of anyone trying to time the bond market. Bonds don’t dip very hard. Even in rough bond times. If you want to allocate to bonds, just set a new asset allocation and rebalance. Quite frankly keeping 10% in a cash savings account isn’t that much different from owning total bond right now. Trying to time BND gains you very little.
Years ago I successfully timed the bond market. It was the only time I tried and I made, in today's dollars, probably a few hundred dollars on a $100k bet. I moved funds from a money market to a short-term bond fund that was earning much higher interest at the time. If I'd been quicker to bail out on the bond fund, before rates rose on short-term bonds (they had fallen in the interim), I'd have make a few hundred dollars more. As it was the NAV was almost the same when I bought and sold, so my margin of victory was the difference in yield during the period.

I've tried timing equities a few times and have been wrong every time, losing probably $100k or more over the years. Hopefully I've learned my lesson.
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Laurizas »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm - Michael Burry who accurate predicted many crashes before
Does anybody know his track record regarding predictions?
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by tibbitts »

Laurizas wrote: Fri Jun 18, 2021 2:05 pm
QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm - Michael Burry who accurate predicted many crashes before
Does anybody know his track record regarding predictions?
Many people would argue that there haven't been "many" crashes in anyone's lifetime. Downturns, bear markets... but crashes?
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Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by JDave »

There are two types of market timers:
1. those who know they can't time the market
2. those who don't know they can't time the market
Seriously - if you really CAN time the market, even 51% of the time, the big firms will be beating down your door with $10,000,000/year+ offers.
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QuestioningWanderer
Posts: 113
Joined: Sat Nov 07, 2020 5:48 am

Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by QuestioningWanderer »

I had a hunch my idea of bond timing was bad, but you guys put it into words perfectly.

This is an awesome forum! I will stay the course and not do anything!
Always question status quo.
phantom0308
Posts: 372
Joined: Thu Aug 25, 2016 6:52 pm
Location: Rochester Hills, MI

Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by phantom0308 »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm - Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.
Michael Burry is a perma-bear. He’s been predicting a crash since he became famous from the big short.
None of the other investors you mentioned are omniscient. Most lost a lot in the Great Recession.

IMO Inflation will only become a problem if people believe it’s going to be a problem and act accordingly. There’s transient inflation like supply constraints that the market can solve and govt has been looking into assisting. Something like a third of the most recent inflation rate jump was derived from used car price increases and the after effects of the chip shortage. The real issue becomes when people start requiring higher wages or buying things earlier because of expected inflation.
sohcahtoa
Posts: 29
Joined: Mon Apr 13, 2020 1:40 am

Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by sohcahtoa »

QuestioningWanderer wrote: Mon Jun 21, 2021 3:27 am I had a hunch my idea of bond timing was bad, but you guys put it into words perfectly.

This is an awesome forum! I will stay the course and not do anything!
Kudos to you for:
A) circling back to the thread
B) taking the well-reasoned advice on offer

May you be kindly rewarded for your ability to stay the course!
brian91480
Posts: 263
Joined: Fri Jan 29, 2021 7:44 pm

Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by brian91480 »

You need to time the market correctly on both ends. Take money out before a dip... put money back in before the rise.

You're not smart enough to do that. Nobody is. If you guess correctly, you guessed correctly. It's akin to gambling. Not skill or intelligence.
JustGotScammed
Posts: 72
Joined: Fri Jun 09, 2017 10:16 pm

Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by JustGotScammed »

QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm I know market timing is not possible on average in most cases.

This is why I am probably making some mistake here which I don't fully realise myself.

Here is the idea:

I'm in my 30s, holding 100% world stock index.

I think it's time to start allocating a little bit to bonds.

Here is information I gathered:


- The inflation is here. Confirmed by Warren Buffett and many others.

- JPMorgan is building huge cash position in anticipation to rate increases for combatting inflation.

- Michael Burry who accurate predicted many crashes before, excepts a huge crash and his fund has placed shorts on TLTs (US bonds) and TSLA. So he expects a crash in "meme stocks" mostly and in bonds.

Why would bonds crash? I understand that if FED increases rates, then TLTs rates will also increase which means that current bond prices will fall.

With all this information, it seems that its very logical that Fed WILL raise rates in the next 12 months.

Which means that BND will drop, which means that I will be able to accumulate a nice DIP for my BND position.

For this I plan on selling some of my stocks position (10-15%) and waiting for dip in bonds (and stocks). I had accumulated stocks more than year ago, so I'm very much in the green right now.

Now please, all the reasons why this will go wrong?
This sentiment was posted in late spring 2020. The risk was missing out on quick 80% returns.
Valuethinker
Posts: 42745
Joined: Fri May 11, 2007 11:07 am

Re: I want to time the market, talk me out of it and tell me what can go wrong!

Post by Valuethinker »

tibbitts wrote: Fri Jun 18, 2021 2:11 pm
Laurizas wrote: Fri Jun 18, 2021 2:05 pm
QuestioningWanderer wrote: Wed Jun 16, 2021 12:35 pm - Michael Burry who accurate predicted many crashes before
Does anybody know his track record regarding predictions?
Many people would argue that there haven't been "many" crashes in anyone's lifetime. Downturns, bear markets... but crashes?
I would call March-April 2020, the Covid-19 crash, a crash. Market dropped, what, 25%?

I would call Post Lehman a crash. 2008. Market dropped 13% in one day, from memory.

There was the "Bonfire of the Quants" in August 2007 & also the first shock wave of the CDO meltdown. That was that infamous Goldman Sachs quote about once in 16 million trading days or something.

Certainly in 2000 dot com and Tech Media Telecoms stocks staged something of a crash, at the beginning of a long and brutal bear market.

Asia in 1997/98 was definitely a crash. Which led to a Russian default and the failure of the hedge fund LTCM

Mexico in 1994 was a crash. Across all emerging markets.

I would call October 1987 a Crash. London dropped something like 32% over 2 days.

Go back to the 70s and you can call UK 1973-74 a bear market. But if the market falls 80% in real terms in a matter of months, isn't that a crash?

Because Bear Markets are often about the discovery of a new, systemically important piece of information, like the breakout of the Covid-19 virus, the response of the market is often very quick, and that fall in turn brings the liquidation of margined/ leveraged positions. Drop turns into a crash very fast.
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