How many here are contrarian?

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toddthebod
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Re: How many here are contrarian?

Post by toddthebod »

km91 wrote: Tue Nov 29, 2022 1:27 pm
nisiprius wrote: Tue Nov 29, 2022 1:09 pm Like KlangFool, I believe that staying the course is the true contrarianism. Even now, the vast majority of investors try to pick stocks and adjust to the market. As you yourself note, that includes both contrarians and trend followers, and I feel that they are alike because they both are trying to beat the market by committing extra to "opportunities."
Why the scare quotes? Markets present us with opportunities all the time. Today is a much better opportunity to buy VOO than Jan 1 was
No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Calico
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Re: How many here are contrarian?

Post by Calico »

I am great at saving money. I've been accused of "saving my money away" :mrgreen: . But I am not very good at investing, that's why I like John Bogle's philosophy. It's simple for me to follow and it's typically a good way to grow money. So for literally 99.99% of my portfolio, I am kind of a dyed in the wool Boglehead. I rebalance once a year, on my birthday and change my AA every five years.

That said, I do have one contrarian account. And you all are going to laugh at me for this... I have a Robinhood account where I trade stocks based on gut feeling and market trends that I think I see. I am down 7%, haha. Yeah, I am not good at it. I treat it like a game, but with real money. I only have $100 in it... well, $93 as of today. I currently own a little bit of Apple, Vaalco, Barkbox, Jupiter Wellness, and Alberton's.
I am a mere Boglehead apprentice... even after all these years.
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burritoLover
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Re: How many here are contrarian?

Post by burritoLover »

Count de Monet wrote: Tue Nov 29, 2022 4:46 pm
burritoLover wrote: Tue Nov 29, 2022 4:15 pm
Count de Monet wrote: Tue Nov 29, 2022 4:00 pm It seems to me that buying when prices are in decline is contrarian, almost by definition, because having more sellers than buyers is why prices are declining. So, being in the camp with fewer in it is contrarian.

Also, if buying more aggressively when stock prices are 20-30% (or more) off of their highs is considered market timing, then I'm glad to be in that group, and feel a bit sorry for folks who are unable, or perhaps unwilling, to take advantage of those virtually always great buying opportunities. Even worse is if someone would fail to take advantage of such opportunities because they've been told that "market timing" is a bad thing.
This is a fallacy because "buying more aggressively" means that you have to have the funds available to buy and they have to be mostly unaffected by the market drop at hand (which you can't predict ahead of time). Which means you have to have them in cash or short-term treasuries or the like, which means, when there's not buying opportunities, your return sucks compared to someone who just puts this money to work in the market all the time. The problem is, the dip buyer only looks at their returns from the dip buys, not from the opportunity cost of having dry powder available at all other times.
You seem to be comparing what I suggested to a 100% stocks approach. I believe most people here are well below that exposure, and that the non stock portion of their AA should not be characterized as "dry powder". What I am advocating is to shift your AA towards 100% stocks as the market declines significantly from its highs. In addition, there are other ways of buying more aggressively than keeping dry powder. Examples: during bear markets: 1) work more, 2) continue to work even if you could retire, 3) spend less, and 4) invest your emergency fund. I'm currently doing all four, and did the same in 2008, which paid off immensely. Admittedly, this might be perceived as too risky for some folks, hence why I could consider it "contrarian". :happy
If you can tolerate a move towards 100% stocks after a market drawdown - for which you don't know what the actual bottom is going to be, then you could have a more aggressive AA all the time.
Marseille07
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Re: How many here are contrarian?

Post by Marseille07 »

burritoLover wrote: Tue Nov 29, 2022 6:09 pm If you can tolerate a move towards 100% stocks after a market drawdown - for which you don't know what the actual bottom is going to be, then you could have a more aggressive AA all the time.
So? Just because they're capable doesn't mean they must.
Triple digit golfer
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Re: How many here are contrarian?

Post by Triple digit golfer »

Marseille07 wrote: Tue Nov 29, 2022 6:18 pm
burritoLover wrote: Tue Nov 29, 2022 6:09 pm If you can tolerate a move towards 100% stocks after a market drawdown - for which you don't know what the actual bottom is going to be, then you could have a more aggressive AA all the time.
So? Just because they're capable doesn't mean they must.
That's why he said "could."
km91
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Re: How many here are contrarian?

Post by km91 »

toddthebod wrote: Tue Nov 29, 2022 5:56 pm No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Investor A bought $10k of VOO on January 1. Investor B bought $10K of VOO today. Both hold for the same 20 year period. Who will have more money after this period?

These investors clearly don't have the same expected return. How can they? Investor A paid 20% more for VOO than Investor B did
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windaar
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Re: How many here are contrarian?

Post by windaar »

I have to echo what others have said. The Boglehead is the contrarian. Of the colleagues and relatives who have talked about investing with me, NONE do risk tolerance, AA plan in stone, stay the course, rebalance per IPS. They pick stocks based on tips and hunches, get in when the market is hot, and sell when it drops.
Nobody knows nothing.
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secondopinion
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Re: How many here are contrarian?

Post by secondopinion »

toddthebod wrote: Tue Nov 29, 2022 5:56 pm
km91 wrote: Tue Nov 29, 2022 1:27 pm
nisiprius wrote: Tue Nov 29, 2022 1:09 pm Like KlangFool, I believe that staying the course is the true contrarianism. Even now, the vast majority of investors try to pick stocks and adjust to the market. As you yourself note, that includes both contrarians and trend followers, and I feel that they are alike because they both are trying to beat the market by committing extra to "opportunities."
Why the scare quotes? Markets present us with opportunities all the time. Today is a much better opportunity to buy VOO than Jan 1 was
No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Long, long, long term return yes. But even in 20 years time it does matter a little bit; ten years and it matter much more.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Random Musings
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Re: How many here are contrarian?

Post by Random Musings »

JasonHutt wrote: Tue Nov 29, 2022 2:13 pm
KlangFool wrote: Tue Nov 29, 2022 1:04 pm OP,

"Buy, Hold, and Rebalance" folks are the contrarians. Normal folks follow the herd and assume that they are smart enough to market time.

KlangFool
This.
I also concur. Staying the course is contrarian to most things in life where you have to do something to get ahead of most people. It's the other way around with investing.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
toddthebod
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Re: How many here are contrarian?

Post by toddthebod »

km91 wrote: Tue Nov 29, 2022 6:27 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Investor A bought $10k of VOO on January 1. Investor B bought $10K of VOO today. Both hold for the same 20 year period. Who will have more money after this period?

These investors clearly don't have the same expected return. How can they? Investor A paid 20% more for VOO than Investor B did
Neither investor A nor investor B had any idea on December 31st. Both invested with the same long term expectations going into the investment.

And while investor B was aware of a recent drop, he had no way to take advantage of this "opportunity," because he was not a market timer that held a bunch of cash waiting for the bottom.
toddthebod
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Re: How many here are contrarian?

Post by toddthebod »

secondopinion wrote: Tue Nov 29, 2022 6:45 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm
km91 wrote: Tue Nov 29, 2022 1:27 pm
nisiprius wrote: Tue Nov 29, 2022 1:09 pm Like KlangFool, I believe that staying the course is the true contrarianism. Even now, the vast majority of investors try to pick stocks and adjust to the market. As you yourself note, that includes both contrarians and trend followers, and I feel that they are alike because they both are trying to beat the market by committing extra to "opportunities."
Why the scare quotes? Markets present us with opportunities all the time. Today is a much better opportunity to buy VOO than Jan 1 was
No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Long, long, long term return yes. But even in 20 years time it does matter a little bit; ten years and it matter much more.
Nope. The fact that one person had cash to invest on January 1 while the other didn't have cash to invest until today is a matter of general life consequences. Investor B didn't look at the market on December 31 and decide to hold cash for 11 months.

In order for today to be a great "opportunity" to buy VOO relative to January 1, you need to explain how you come up with a substantial pile of cash to invest that you didn't have back then.
km91
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Re: How many here are contrarian?

Post by km91 »

toddthebod wrote: Tue Nov 29, 2022 7:15 pm In order for today to be a great "opportunity" to buy VOO relative to January 1, you need to explain how you come up with a substantial pile of cash to invest that you didn't have back then.
Today is a great opportunity relative to January 1 because at at January 1 prices I could buy 22 shares of VOO for $10,000. Today I could buy 22 shares of VOO for $8,000 and still $2,000 left over that I would not have had on Jan 1. I can choose to invest this extra cash in VOO as well, or I can take a nice vacation. In either case, I have a $2,000 "opportunity" that I did not have on Jan 1
Jack FFR1846
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Re: How many here are contrarian?

Post by Jack FFR1846 »

Perhaps I should be a contrarian and buy a hundred grand of bitcoin. I can store it at BlockFi, right?

Wait.....
Bogle: Smart Beta is stupid
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secondopinion
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Re: How many here are contrarian?

Post by secondopinion »

toddthebod wrote: Tue Nov 29, 2022 7:15 pm
secondopinion wrote: Tue Nov 29, 2022 6:45 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm
km91 wrote: Tue Nov 29, 2022 1:27 pm
nisiprius wrote: Tue Nov 29, 2022 1:09 pm Like KlangFool, I believe that staying the course is the true contrarianism. Even now, the vast majority of investors try to pick stocks and adjust to the market. As you yourself note, that includes both contrarians and trend followers, and I feel that they are alike because they both are trying to beat the market by committing extra to "opportunities."
Why the scare quotes? Markets present us with opportunities all the time. Today is a much better opportunity to buy VOO than Jan 1 was
No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Long, long, long term return yes. But even in 20 years time it does matter a little bit; ten years and it matter much more.
Nope. The fact that one person had cash to invest on January 1 while the other didn't have cash to invest until today is a matter of general life consequences. Investor B didn't look at the market on December 31 and decide to hold cash for 11 months.

In order for today to be a great "opportunity" to buy VOO relative to January 1, you need to explain how you come up with a substantial pile of cash to invest that you didn't have back then.
Correct; there has to be a stash of cash (or margin) available to invest. But consider the following:

If one already has a considerable amount already saved for retirement; they could rightfully be conservative. However, a sudden shock (beyond anticipated) downwards chops down their portfolio. They no longer can be that conservative; although they dodged problems somewhat, they have to get caught back up regardless. Hence, the allocation changes.

The two alternatives are to hold the conservative allocation or prior determine a more aggressive allocation. The latter would have backfired worse and it was not exactly needed according to best understanding prior. The former ignores the present portfolio value drop, and might not be best posterior.

The contrarian considers both the prior and resulting posterior with their allocation. That is partly why I follow that practice. Can someone explain why I should ignore the posterior result? I can understand not guessing the result, but ignoring the result is a bit much. That is, one does not hold safe assets because they think things will drop; they hold safe assets because they do not need the risk, yet they know that the need for risk can change.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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secondopinion
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Re: How many here are contrarian?

Post by secondopinion »

Jack FFR1846 wrote: Tue Nov 29, 2022 7:51 pm Perhaps I should be a contrarian and buy a hundred grand of bitcoin. I can store it at BlockFi, right?

Wait.....
:annoyed

Be reasonable. I am talking about sound practices—not just buying lows on highly speculative investments.
Last edited by secondopinion on Tue Nov 29, 2022 8:12 pm, edited 1 time in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
goblue100
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Re: How many here are contrarian?

Post by goblue100 »

nisiprius wrote: Tue Nov 29, 2022 1:09 pm Like KlangFool, I believe that staying the course is the true contrarianism. Even now, the vast majority of investors try to pick stocks and adjust to the market. As you yourself note, that includes both contrarians and trend followers, and I feel that they are alike because they both are trying to beat the market by committing extra to "opportunities."

If you stay the course, then when others are fearful, you are less fearful, and when others are greedy, your are being less greedy
Interesting, can one who invests in whole market index funds actually be a contrarian? It would seem to be the epitome of conformity, and yet I think those who stay the course may well be the outliers. Or perhaps we are the silent majority?
"Confusion has its cost" - Crosby, Stills and Nash
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secondopinion
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Re: How many here are contrarian?

Post by secondopinion »

goblue100 wrote: Tue Nov 29, 2022 8:01 pm
nisiprius wrote: Tue Nov 29, 2022 1:09 pm Like KlangFool, I believe that staying the course is the true contrarianism. Even now, the vast majority of investors try to pick stocks and adjust to the market. As you yourself note, that includes both contrarians and trend followers, and I feel that they are alike because they both are trying to beat the market by committing extra to "opportunities."

If you stay the course, then when others are fearful, you are less fearful, and when others are greedy, your are being less greedy
Interesting, can one who invests in whole market index funds actually be a contrarian? It would seem to be the epitome of conformity, and yet I think those who stay the course may well be the outliers. Or perhaps we are the silent majority?
Only in principle of how they run their portfolio, not necessarily on their portfolio position.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
toddthebod
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Re: How many here are contrarian?

Post by toddthebod »

km91 wrote: Tue Nov 29, 2022 7:43 pm
toddthebod wrote: Tue Nov 29, 2022 7:15 pm In order for today to be a great "opportunity" to buy VOO relative to January 1, you need to explain how you come up with a substantial pile of cash to invest that you didn't have back then.
Today is a great opportunity relative to January 1 because at at January 1 prices I could buy 22 shares of VOO for $10,000. Today I could buy 22 shares of VOO for $8,000 and still $2,000 left over that I would not have had on Jan 1. I can choose to invest this extra cash in VOO as well, or I can take a nice vacation. In either case, I have a $2,000 "opportunity" that I did not have on Jan 1
Where did you get the $10,000 to invest today?
toddthebod
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Re: How many here are contrarian?

Post by toddthebod »

secondopinion wrote: Tue Nov 29, 2022 7:57 pm
toddthebod wrote: Tue Nov 29, 2022 7:15 pm
secondopinion wrote: Tue Nov 29, 2022 6:45 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm
km91 wrote: Tue Nov 29, 2022 1:27 pm

Why the scare quotes? Markets present us with opportunities all the time. Today is a much better opportunity to buy VOO than Jan 1 was
No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Long, long, long term return yes. But even in 20 years time it does matter a little bit; ten years and it matter much more.
Nope. The fact that one person had cash to invest on January 1 while the other didn't have cash to invest until today is a matter of general life consequences. Investor B didn't look at the market on December 31 and decide to hold cash for 11 months.

In order for today to be a great "opportunity" to buy VOO relative to January 1, you need to explain how you come up with a substantial pile of cash to invest that you didn't have back then.
Correct; there has to be a stash of cash (or margin) available to invest. But consider the following:

If one already has a considerable amount already saved for retirement; they could rightfully be conservative. However, a sudden shock (beyond anticipated) downwards chops down their portfolio. They no longer can be that conservative; although they dodged problems somewhat, they have to get caught back up regardless. Hence, the allocation changes.

The two alternatives are to hold the conservative allocation or prior determine a more aggressive allocation. The latter would have backfired worse and it was not exactly needed according to best understanding prior. The former ignores the present portfolio value drop, and might not be best posterior.

The contrarian considers both the prior and resulting posterior with their allocation. That is partly why I follow that practice. Can someone explain why I should ignore the posterior result? I can understand not guessing the result, but ignoring the result is a bit much. That is, one does not hold safe assets because they think things will drop; they hold safe assets because they do not need the risk, yet they know that the need for risk can change.
In December 2021, you looked at the market and thought, I can get 8-10% annually on my equities and about 0.5% on my bonds, and you were 65 years old and you chose a 60/40 allocation.

Now it's November 2022, and you look at the market and think, I can get 8-10% annually on my equities and about 3.5-4% on my bonds, and you are 66 years old and you are going to choose an 80/20 allocation?

My point is, looking at your portfolio as a whole, and considering you were not sitting on a pile of cash in December waiting for the market to drop, there is really no realistic situation where you can take advantage of the so-called "opportunity" to buy VOO today relative to January 1st. The only people who believe that are market timers.
Silverado
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Re: How many here are contrarian?

Post by Silverado »

km91 wrote: Tue Nov 29, 2022 6:27 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Investor A bought $10k of VOO on January 1. Investor B bought $10K of VOO today. Both hold for the same 20 year period. Who will have more money after this period?

These investors clearly don't have the same expected return. How can they? Investor A paid 20% more for VOO than Investor B did
Uh, that’s not possible, so your thought experiment is flawed from that point on.
UpperNwGuy
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Re: How many here are contrarian?

Post by UpperNwGuy »

After reading this entire thread, I am totally confused. The word contrarian is completely meaningless in this discussion. Most people here are buy and hold investors, but others like to do tactical investing. Count me in the first group.
JohnFromPNW
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Re: How many here are contrarian?

Post by JohnFromPNW »

Silverado wrote: Tue Nov 29, 2022 8:29 pm
km91 wrote: Tue Nov 29, 2022 6:27 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Investor A bought $10k of VOO on January 1. Investor B bought $10K of VOO today. Both hold for the same 20 year period. Who will have more money after this period?

These investors clearly don't have the same expected return. How can they? Investor A paid 20% more for VOO than Investor B did
Uh, that’s not possible, so your thought experiment is flawed from that point on.
They have the same expected percentage return from today. One will be starting at a lower balance and have lower terminal balance.
will23
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Re: How many here are contrarian?

Post by will23 »

secondopinion wrote: Tue Nov 29, 2022 12:03 pm I am sure I will hear from the "I am doing nothing and do not market time" crowd, but I wonder if there are any contrarians here. I have seen a lot of posts about treasury bills. But is anyone buying more long-term bonds or stocks instead of buying treasury bills beyond their typical allocation (not just rebalancing)?

My IPS states that "a more aggressive allocation is to be taken in bear markets, crisis, and times of unusual value". Anyone have such a clause or contrarian approach? Is there anyone who is anti-contrarian (that is, follows the trend)?
Yes, I am contrarian but not a permabear or anything. I have a long term benchmark allocation, but I allow myself to deviate significantly from it provided that it is "contrarian" and evidence (not emotion based). I also use intermediate term momentum strategies to enter or exit according to my rebalance objectives, and sometimes I will over-rebalance. I do not decrease risk during a bear market (like today).

As some proof of the above, I wrote in this thread (viewtopic.php?t=364822) in December of last year:
I also don't condone 'timing' the bond markets. But with treasures not keeping up with inflation:
https://www.treasury.gov/resource-cente ... =realyield
I think it is reasonable to (1) allocate maximal amounts to Ibonds and Ebonds (which offer a 0% real and approx 3.5% nominal) and (2) reduce duration of the bond portfolio.

If you are already retired, it is more difficult. We are potentially facing the worst starting point of a 'safe withdrawal rate'. Previously 1966 was the worst time to retire because of poor real returns on stocks and bonds.
Later in the thread I attempted to rebut "stay the course" or "ballast" ideas for duration at the time.The advise above was not market timing, but using observable information about risk premium of TIPs to make investment decisions; the urgency of the post was somewhat informed by the Fed clarifying its tightening approach. I should market this in a newsletter....

However, today things are different. We are in a bear market for bonds and stocks, and both markets could get hit more and maybe a lot more, or maybe not. IMO, it is an OK time to retire if you are planning on a 4% WR, and a 60/40 portfolio has a pretty good chance of getting you there. So, yes, now it is OK to stay the course in my opinion.

Probably it is best moment for a first time homebuyer, though, unless you really love it. Give it a year or so, depending on the market.
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Lawrence of Suburbia
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Re: How many here are contrarian?

Post by Lawrence of Suburbia »

Over my investing life I think I've been a contrarian -- I'll decide on a sensible course of action, and then do the complete opposite.
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km91
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Re: How many here are contrarian?

Post by km91 »

toddthebod wrote: Tue Nov 29, 2022 8:26 pm My point is, looking at your portfolio as a whole, and considering you were not sitting on a pile of cash in December waiting for the market to drop, there is really no realistic situation where you can take advantage of the so-called "opportunity" to buy VOO today relative to January 1st. The only people who believe that are market timers.
The advantage is that you can buy relatively more VOO today compared to Jan 1 for the same price. If you are contributing a fixed dollar amount periodically, you are implicitly taking advantage of this opportunity.
km91
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Re: How many here are contrarian?

Post by km91 »

Silverado wrote: Tue Nov 29, 2022 8:29 pm
km91 wrote: Tue Nov 29, 2022 6:27 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Investor A bought $10k of VOO on January 1. Investor B bought $10K of VOO today. Both hold for the same 20 year period. Who will have more money after this period?

These investors clearly don't have the same expected return. How can they? Investor A paid 20% more for VOO than Investor B did
Uh, that’s not possible, so your thought experiment is flawed from that point on.
Jan 1 isn't a trading day so it was actually flawed from that point on
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secondopinion
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Re: How many here are contrarian?

Post by secondopinion »

toddthebod wrote: Tue Nov 29, 2022 8:26 pm
secondopinion wrote: Tue Nov 29, 2022 7:57 pm
toddthebod wrote: Tue Nov 29, 2022 7:15 pm
secondopinion wrote: Tue Nov 29, 2022 6:45 pm
toddthebod wrote: Tue Nov 29, 2022 5:56 pm

No it is not. The expected long term return of VOO today is exactly the same as it was on January 1.
Long, long, long term return yes. But even in 20 years time it does matter a little bit; ten years and it matter much more.
Nope. The fact that one person had cash to invest on January 1 while the other didn't have cash to invest until today is a matter of general life consequences. Investor B didn't look at the market on December 31 and decide to hold cash for 11 months.

In order for today to be a great "opportunity" to buy VOO relative to January 1, you need to explain how you come up with a substantial pile of cash to invest that you didn't have back then.
Correct; there has to be a stash of cash (or margin) available to invest. But consider the following:

If one already has a considerable amount already saved for retirement; they could rightfully be conservative. However, a sudden shock (beyond anticipated) downwards chops down their portfolio. They no longer can be that conservative; although they dodged problems somewhat, they have to get caught back up regardless. Hence, the allocation changes.

The two alternatives are to hold the conservative allocation or prior determine a more aggressive allocation. The latter would have backfired worse and it was not exactly needed according to best understanding prior. The former ignores the present portfolio value drop, and might not be best posterior.

The contrarian considers both the prior and resulting posterior with their allocation. That is partly why I follow that practice. Can someone explain why I should ignore the posterior result? I can understand not guessing the result, but ignoring the result is a bit much. That is, one does not hold safe assets because they think things will drop; they hold safe assets because they do not need the risk, yet they know that the need for risk can change.
In December 2021, you looked at the market and thought, I can get 8-10% annually on my equities and about 0.5% on my bonds, and you were 65 years old and you chose a 60/40 allocation.

Now it's November 2022, and you look at the market and think, I can get 8-10% annually on my equities and about 3.5-4% on my bonds, and you are 66 years old and you are going to choose an 80/20 allocation?

My point is, looking at your portfolio as a whole, and considering you were not sitting on a pile of cash in December waiting for the market to drop, there is really no realistic situation where you can take advantage of the so-called "opportunity" to buy VOO today relative to January 1st. The only people who believe that are market timers.
It is not reasonable to assume equal expected returns for equities given unequal bond yields; a constant equity premium above the going long-term yields is more reasonable. Why should stocks be a worse deal unless they are believed to be safer than before?

Suppose that a portfolio is supposed to return 4% in retirement every year. If the portfolio drops in value by 20% because of a really bad year, then now we need 5% out of the new portfolio. Tell me, what is the correct adjustment to a portfolio to meet the misfortune? And do not assume that expenses can be cut or that side job income can be had.

If the numbers are not correct, then I apologize for the confusion. But the point should be made: it is not waiting for a drop; it is holding off on risk unless it is necessary.
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toddthebod
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Re: How many here are contrarian?

Post by toddthebod »

secondopinion wrote: Wed Nov 30, 2022 12:25 am
Suppose that a portfolio is supposed to return 4% in retirement every year. If the portfolio drops in value by 20% because of a really bad year, then now we need 5% out of the new portfolio. Tell me, what is the correct adjustment to a portfolio to meet the misfortune? And do not assume that expenses can be cut or that side job income can be had.
It is the opposite of what you are claiming, because bonds can now provide significant returns. If you need 4% and bonds are yielding 0.5%, you need a lot of equities. If bonds are yielding 4% and you need 5%, you don't need a lot of equities.
a constant equity premium above the going long-term yields is more reasonable
If this is true than you also need less equities to bump up your average return.
balbrec2
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Re: How many here are contrarian?

Post by balbrec2 »

KlangFool wrote: Tue Nov 29, 2022 1:04 pm OP,

"Buy, Hold, and Rebalance" folks are the contrarians. Normal folks follow the herd and assume that they are smart enough to market time.

KlangFool
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Re: How many here are contrarian?

Post by KlangFool »

secondopinion wrote: Wed Nov 30, 2022 12:25 am
It is not reasonable to assume equal expected returns for equities given unequal bond yields;
secondopinion,

It is not reasonable to expect expected returns to be exactly the same as the real world return.

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secondopinion
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Re: How many here are contrarian?

Post by secondopinion »

KlangFool wrote: Wed Nov 30, 2022 9:14 am
secondopinion wrote: Wed Nov 30, 2022 12:25 am
It is not reasonable to assume equal expected returns for equities given unequal bond yields;
secondopinion,

It is not reasonable to expect expected returns to be exactly the same as the real world return.

"Man plan, God Laugh!"
-Yiddish proverb

KlangFool
When did I say so?
Last edited by secondopinion on Wed Nov 30, 2022 10:55 am, edited 3 times in total.
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secondopinion
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Re: How many here are contrarian?

Post by secondopinion »

toddthebod wrote: Wed Nov 30, 2022 7:54 am
secondopinion wrote: Wed Nov 30, 2022 12:25 am
Suppose that a portfolio is supposed to return 4% in retirement every year. If the portfolio drops in value by 20% because of a really bad year, then now we need 5% out of the new portfolio. Tell me, what is the correct adjustment to a portfolio to meet the misfortune? And do not assume that expenses can be cut or that side job income can be had.
It is the opposite of what you are claiming, because bonds can now provide significant returns. If you need 4% and bonds are yielding 0.5%, you need a lot of equities. If bonds are yielding 4% and you need 5%, you don't need a lot of equities.
a constant equity premium above the going long-term yields is more reasonable
If this is true than you also need less equities to bump up your average return.
It sounds nice to buy these bonds at a good rate; but unless you had assets that appreciated or stayed stable, it is kind of pointless because both stock and bond holders lost value significantly. Because bonds are a risk asset, it does not debunk my argument. During certain environments, bonds can be riskier. All you are doing is digging a hole in your own argument; one can be contrarian with bonds as well.
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Re: How many here are contrarian?

Post by toddthebod »

secondopinion wrote: Wed Nov 30, 2022 10:54 am
toddthebod wrote: Wed Nov 30, 2022 7:54 am
secondopinion wrote: Wed Nov 30, 2022 12:25 am
Suppose that a portfolio is supposed to return 4% in retirement every year. If the portfolio drops in value by 20% because of a really bad year, then now we need 5% out of the new portfolio. Tell me, what is the correct adjustment to a portfolio to meet the misfortune? And do not assume that expenses can be cut or that side job income can be had.
It is the opposite of what you are claiming, because bonds can now provide significant returns. If you need 4% and bonds are yielding 0.5%, you need a lot of equities. If bonds are yielding 4% and you need 5%, you don't need a lot of equities.
a constant equity premium above the going long-term yields is more reasonable
If this is true than you also need less equities to bump up your average return.
It sounds nice to buy these bonds at a good rate; but unless you had assets that appreciated or stayed stable, it is kind of pointless because both stock and bond holders lost value significantly. Because bonds are a risk asset, it does not debunk my argument. During certain environments, bonds can be riskier. All you are doing is digging a hole in your own argument; one can be contrarian with bonds as well.
You are losing the context of the discussion. This chain of comments started when someone referred to so-called "opportunities" that some investors think they see in the market that causes them to chase returns or market time or otherwise drift from their long-term plan. Someone else argued that buying VOO is an opportunity because it's down from January. I pointed out that unless you knew it was going down and thus were sitting on cash, no such opportunity exists. You mentioned you could shift from bonds to equities, and that in fact you should do such a thing because your total portfolio is down and you need to be more aggressive as a result. I am countering that based on the rise in interest rates, and, furthermore based on your belief that equity returns are expected to be even better due to the rise in interest rates, investors can afford to be even more conservative.

So, to sum up, comparing December 2021 to today, should a retired investor be more aggressive, more conservative, or about the same, assuming we are just talking about the ratio of stocks to bonds?
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Re: How many here are contrarian?

Post by Jags4186 »

Contrarian investing is market timing. There is no difference. Some people will win, most will lose.
km91
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Re: How many here are contrarian?

Post by km91 »

toddthebod wrote: Wed Nov 30, 2022 11:21 am
You are losing the context of the discussion. This chain of comments started when someone referred to so-called "opportunities" that some investors think they see in the market that causes them to chase returns or market time or otherwise drift from their long-term plan. Someone else argued that buying VOO is an opportunity because it's down from January. I pointed out that unless you knew it was going down and thus were sitting on cash, no such opportunity exists. You mentioned you could shift from bonds to equities, and that in fact you should do such a thing because your total portfolio is down and you need to be more aggressive as a result. I am countering that based on the rise in interest rates, and, furthermore based on your belief that equity returns are expected to be even better due to the rise in interest rates, investors can afford to be even more conservative.

So, to sum up, comparing December 2021 to today, should a retired investor be more aggressive, more conservative, or about the same, assuming we are just talking about the ratio of stocks to bonds?
Again, not sure why this is being referred to as a so called "opportunity." Stocks are perceived as more risky today than they were on Jan 1. Price went down and therefore expected return on stocks has increased to compensate buyers for the increase in perceived riskiness. This is undeniably an opportunity. Whether or not an investor can or should take advantage of this opportunity is entirely circumstantial and up to the individual investor. An investor wanting to take advantage of this opportunity could do any number of things; deploy cash, use leverage, increase savings rate, rebalance out of different asset classes. What is or isn't appropriate will depend on the investors' individual circumstances and preferences.

The subtle distinction here is that market timing relies on making predictions about the future which is inherently unknowable. The scenario I have laid out incorporates knowable past price information into the decision making process. If knowing that VOO traded at $465 on Jan 1 and trades $360 today is not informative to your decision making process, that is fine, but others might find this valuable in informing their own decisions
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Re: How many here are contrarian?

Post by secondopinion »

toddthebod wrote: Wed Nov 30, 2022 11:21 am
secondopinion wrote: Wed Nov 30, 2022 10:54 am
toddthebod wrote: Wed Nov 30, 2022 7:54 am
secondopinion wrote: Wed Nov 30, 2022 12:25 am
Suppose that a portfolio is supposed to return 4% in retirement every year. If the portfolio drops in value by 20% because of a really bad year, then now we need 5% out of the new portfolio. Tell me, what is the correct adjustment to a portfolio to meet the misfortune? And do not assume that expenses can be cut or that side job income can be had.
It is the opposite of what you are claiming, because bonds can now provide significant returns. If you need 4% and bonds are yielding 0.5%, you need a lot of equities. If bonds are yielding 4% and you need 5%, you don't need a lot of equities.
a constant equity premium above the going long-term yields is more reasonable
If this is true than you also need less equities to bump up your average return.
It sounds nice to buy these bonds at a good rate; but unless you had assets that appreciated or stayed stable, it is kind of pointless because both stock and bond holders lost value significantly. Because bonds are a risk asset, it does not debunk my argument. During certain environments, bonds can be riskier. All you are doing is digging a hole in your own argument; one can be contrarian with bonds as well.
You are losing the context of the discussion. This chain of comments started when someone referred to so-called "opportunities" that some investors think they see in the market that causes them to chase returns or market time or otherwise drift from their long-term plan. Someone else argued that buying VOO is an opportunity because it's down from January. I pointed out that unless you knew it was going down and thus were sitting on cash, no such opportunity exists. You mentioned you could shift from bonds to equities, and that in fact you should do such a thing because your total portfolio is down and you need to be more aggressive as a result. I am countering that based on the rise in interest rates, and, furthermore based on your belief that equity returns are expected to be even better due to the rise in interest rates, investors can afford to be even more conservative.

So, to sum up, comparing December 2021 to today, should a retired investor be more aggressive, more conservative, or about the same, assuming we are just talking about the ratio of stocks to bonds?
It strongly depends on what one means by "bonds" as to how this hypothetical question can be answered. If "bonds" to them are very short-term bonds, then the current rates are kind of pointless (helpful right now for returns but it could disappear from the long-term picture). If "bonds" mean long-term bonds, then the rates matter greatly. I did not say shifting bonds into equities; I said be more aggressive. The connection of bonds with safety is flawed; especially for long-term bonds. Cash-like investments have a superior safety in that they adjust quicker to current conditions (albeit often at a small real cost).

The current interest rates mean little unless you lock them in (that is, buy long-term bonds). So, "bonds are yielding 4% and you need 5%, you don't need a lot of equities" is only true if long-term bonds are bought; but if they were already had prior to when it was a good deal, they would have far less of a portfolio. Bonds cannot be sublimely stable in value and persistent with their rates at the same time.

Would the 2021 investor have short-term bonds, long-term bonds, or both? I will address the first two.
  • If they were in short-term bonds only, then they have more of a portfolio than if they had long-term bonds. But unless they shift into long-term bonds, that 4% rate is not a guarantee; they cannot shift stock into short-term bonds and expect the rate to be there for them.
  • If they were in long-term bonds only, then they have less of a portfolio than if they had short-term bonds. They would have suffered greater than even if they had 100% stock. They have a greatly diminished ability to invest in these "great rates"; they would be actually rebalancing stocks into bonds.
The only one who could truly benefit from the rates being favorable was the first investor; the second investor already took an aggressive stance. The second investor cannot really do much more than rebalance because they have far less of a portfolio and need more than 5% to recover; the first can do that shift into long-term bonds like you are suggesting and get away with it as a contrarian, taking more risk in the process at the benefit that expected real returns are much better. But the first would be changing their allocation, a no-no here for Bogleheads right?

So the answer to the 2021 retiree allocation question is that it depends on what bonds you are talking about.
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Re: How many here are contrarian?

Post by alluringreality »

km91 wrote: Wed Nov 30, 2022 11:37 am The subtle distinction here is that market timing relies on making predictions about the future which is inherently unknowable. The scenario I have laid out incorporates knowable past price information into the decision making process. If knowing that VOO traded at $465 on Jan 1 and trades $360 today is not informative to your decision making process, that is fine, but others might find this valuable in informing their own decisions
I tend to interpret a market price decline as potentially an indication of either risk or opportunity, along the lines of individual considerations mentioned in the prior paragraph. One way I might be able to reconcile toddthebod's position may be if I simply consider error bars, or estimated error, around stock investing simply too large to make a considerable difference for personal strategy. Future price increases or decreases may tend to remain unknown, regardless of the current date. To extend a similar line of thought to the realm of bonds is that in the 1970s as bond yield crept higher unemployment also tended to likewise increase. Looking back there seems to be some trend for investors to pine for the higher nominal rates in the early 1980s, but that also came with high unemployment by today's standards and possibly even more uncertainty around price levels, or different expectations about future inflation. I still have about zero idea what exactly might be the strategy secondopinion considers effective for taking advantage of mistakes by other investors, yet I tend to think of labels like risk and opportunity as potentially fairly well intertwined for many investors.
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Re: How many here are contrarian?

Post by secondopinion »

alluringreality wrote: Wed Nov 30, 2022 12:41 pm I still have about zero idea what exactly might be the strategy secondopinion considers effective for taking advantage of mistakes by other investors, yet I tend to think of labels like risk and opportunity as potentially fairly well intertwined for many investors.
Some of the strategies rely on the fact that few are taking the opportunity (and no, I do not read newsletters or junk like that). With anything in the market, only so many people can take advantage of such opportunities without removing the benefit of doing so (as to generate the efficient market hypothesis state). So, there is not really much incentive to share the details.

But yes, it is fair to say that risk and opportunity are "well intertwined".
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Re: How many here are contrarian?

Post by km91 »

secondopinion wrote: Wed Nov 30, 2022 2:31 pm
alluringreality wrote: Wed Nov 30, 2022 12:41 pm I still have about zero idea what exactly might be the strategy secondopinion considers effective for taking advantage of mistakes by other investors, yet I tend to think of labels like risk and opportunity as potentially fairly well intertwined for many investors.
Some of the strategies rely on the fact that few are taking the opportunity (and no, I do not read newsletters or junk like that). With anything in the market, only so many people can take advantage of such opportunities without removing the benefit of doing so (as to generate the efficient market hypothesis state). So, there is not really much incentive to share the details.

But yes, it is fair to say that risk and opportunity are "well intertwined".
I have a hard time believing that the market is rife with opportunities in the way that you present them. The market is not in the habit of offering up "sales" or "good deals". When opportunities for higher expected returns present themselves the flipside is that the market is pricing the assets as more risky than they once were. There is no free lunch, the investor has to be willing and able to take on more risk. Maybe that is why few are taking these opportunities, they're seen as highly risky. For the low risk, high return opportunities that may exist in the market, you are competing with the smartest and most sophisticated hedge funds and traders to exploit miniscule price anomalies
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Re: How many here are contrarian?

Post by secondopinion »

km91 wrote: Wed Nov 30, 2022 3:05 pm
secondopinion wrote: Wed Nov 30, 2022 2:31 pm
alluringreality wrote: Wed Nov 30, 2022 12:41 pm I still have about zero idea what exactly might be the strategy secondopinion considers effective for taking advantage of mistakes by other investors, yet I tend to think of labels like risk and opportunity as potentially fairly well intertwined for many investors.
Some of the strategies rely on the fact that few are taking the opportunity (and no, I do not read newsletters or junk like that). With anything in the market, only so many people can take advantage of such opportunities without removing the benefit of doing so (as to generate the efficient market hypothesis state). So, there is not really much incentive to share the details.

But yes, it is fair to say that risk and opportunity are "well intertwined".
I have a hard time believing that the market is rife with opportunities in the way that you present them. The market is not in the habit of offering up "sales" or "good deals". When opportunities for higher expected returns present themselves the flipside is that the market is pricing the assets as more risky than they once were. There is no free lunch, the investor has to be willing and able to take on more risk. Maybe that is why few are taking these opportunities, they're seen as highly risky. For the low risk, high return opportunities that may exist in the market, you are competing with the smartest and most sophisticated hedge funds and traders to exploit miniscule price anomalies
It is not "rife with opportunities", and I know there is not a free lunch. As a said, dozens, not hundreds, of opportunities over the past few years. And not all of them were profitable; some bit badly. Put all the money in, I would have been close to broke; put a percent or two percent in, then it adds up to a considerable profit from the speculations.
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Re: How many here are contrarian?

Post by burritoLover »

There we have it. The OP believes they have some secret sauce.
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Re: How many here are contrarian?

Post by secondopinion »

burritoLover wrote: Wed Nov 30, 2022 3:32 pm There we have it. The OP believes they have some secret sauce.
Everyone has their own sauce; that is okay, because it is merely risk-return and skew. If one does not understand that the market does leave opportunities (those risk-return propositions that meet a speculator's criteria), then they are just throwing tomatoes at anyone who does not conform to their line of thinking.

And you make it sound like I am claiming mega bucks risk-free; that is false. For I have stated that risk has to be taken, and I never said it made me mega bucks. Please refrain from snide remarks; what works for one does not work for all.
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Re: How many here are contrarian?

Post by burritoLover »

secondopinion wrote: Wed Nov 30, 2022 4:09 pm
burritoLover wrote: Wed Nov 30, 2022 3:32 pm There we have it. The OP believes they have some secret sauce.
Everyone has their own sauce; that is okay, because it is merely risk-return and skew. If one does not understand that the market does leave opportunities (those risk-return propositions that meet a speculator's criteria), then they are just throwing tomatoes at anyone who does not conform to their line of thinking.

And you make it sound like I am claiming mega bucks risk-free; that is false. For I have stated that risk has to be taken, and I never said it made me mega bucks. Please refrain from snide remarks; what works for one does not work for all.
I'm not being snide - you keep proposing things about your position that are vague and inconsistent. You aren't seeking alpha "exactly" but it something you can't share (implying it might be arbitraged away). But then you imply it is more a risk proposition - "contrarians generally have low need to take risk; they can reasonably sit in a conservative portfolio, but they also have a high ability to take risk." You can't arbitrage away risk.
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Re: How many here are contrarian?

Post by secondopinion »

burritoLover wrote: Wed Nov 30, 2022 5:42 pm
secondopinion wrote: Wed Nov 30, 2022 4:09 pm
burritoLover wrote: Wed Nov 30, 2022 3:32 pm There we have it. The OP believes they have some secret sauce.
Everyone has their own sauce; that is okay, because it is merely risk-return and skew. If one does not understand that the market does leave opportunities (those risk-return propositions that meet a speculator's criteria), then they are just throwing tomatoes at anyone who does not conform to their line of thinking.

And you make it sound like I am claiming mega bucks risk-free; that is false. For I have stated that risk has to be taken, and I never said it made me mega bucks. Please refrain from snide remarks; what works for one does not work for all.
I'm not being snide - you keep proposing things about your position that are vague and inconsistent. You aren't seeking alpha "exactly" but it something you can't share (implying it might be arbitraged away). But then you imply it is more a risk proposition - "contrarians generally have low need to take risk; they can reasonably sit in a conservative portfolio, but they also have a high ability to take risk." You can't arbitrage away risk.
Simple: I have two discussions. One is the contrarian discussion. The other is side speculations unrelated.
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Re: How many here are contrarian?

Post by Ed 2 »

secondopinion wrote: Tue Nov 29, 2022 12:03 pm I am sure I will hear from the "I am doing nothing and do not market time" crowd, but I wonder if there are any contrarians here. I have seen a lot of posts about treasury bills. But is anyone buying more long-term bonds or stocks instead of buying treasury bills beyond their typical allocation (not just rebalancing)?

My IPS states that "a more aggressive allocation is to be taken in bear markets, crisis, and times of unusual value". Anyone have such a clause or contrarian approach? Is there anyone who is anti-contrarian (that is, follows the trend)?
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Re: How many here are contrarian?

Post by burritoLover »

secondopinion wrote: Wed Nov 30, 2022 5:51 pm
burritoLover wrote: Wed Nov 30, 2022 5:42 pm
secondopinion wrote: Wed Nov 30, 2022 4:09 pm
burritoLover wrote: Wed Nov 30, 2022 3:32 pm There we have it. The OP believes they have some secret sauce.
Everyone has their own sauce; that is okay, because it is merely risk-return and skew. If one does not understand that the market does leave opportunities (those risk-return propositions that meet a speculator's criteria), then they are just throwing tomatoes at anyone who does not conform to their line of thinking.

And you make it sound like I am claiming mega bucks risk-free; that is false. For I have stated that risk has to be taken, and I never said it made me mega bucks. Please refrain from snide remarks; what works for one does not work for all.
I'm not being snide - you keep proposing things about your position that are vague and inconsistent. You aren't seeking alpha "exactly" but it something you can't share (implying it might be arbitraged away). But then you imply it is more a risk proposition - "contrarians generally have low need to take risk; they can reasonably sit in a conservative portfolio, but they also have a high ability to take risk." You can't arbitrage away risk.
Simple: I have two discussions. One is the contrarian discussion. The other is side speculations unrelated.
So what percentage of your market timing exploits would you consider "side speculations" vs. contrarian plays?
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Re: How many here are contrarian?

Post by Charles Joseph »

secondopinion wrote: Tue Nov 29, 2022 12:38 pm [*] Unusual value is abstract on purpose. I do not state what I actually do to determine that.
What does this mean, if I may ask? And would you be willing to state what you "actually do to determine" "unusual value?"
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Re: How many here are contrarian?

Post by Charles Joseph »

Ed 2 wrote: Wed Nov 30, 2022 5:53 pm Bogleheads are contrarians vs other investors/ market timers by nature , brought to you by Jack Bogle.
The prompts me to ask a question: When I rebalance into an underperforming asset, aren't I being a contrarian of sorts?

(In other words, I think I'm agreeing with you, as near as I can understand).
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Re: How many here are contrarian?

Post by secondopinion »

burritoLover wrote: Wed Nov 30, 2022 5:55 pm
secondopinion wrote: Wed Nov 30, 2022 5:51 pm
burritoLover wrote: Wed Nov 30, 2022 5:42 pm
secondopinion wrote: Wed Nov 30, 2022 4:09 pm
burritoLover wrote: Wed Nov 30, 2022 3:32 pm There we have it. The OP believes they have some secret sauce.
Everyone has their own sauce; that is okay, because it is merely risk-return and skew. If one does not understand that the market does leave opportunities (those risk-return propositions that meet a speculator's criteria), then they are just throwing tomatoes at anyone who does not conform to their line of thinking.

And you make it sound like I am claiming mega bucks risk-free; that is false. For I have stated that risk has to be taken, and I never said it made me mega bucks. Please refrain from snide remarks; what works for one does not work for all.
I'm not being snide - you keep proposing things about your position that are vague and inconsistent. You aren't seeking alpha "exactly" but it something you can't share (implying it might be arbitraged away). But then you imply it is more a risk proposition - "contrarians generally have low need to take risk; they can reasonably sit in a conservative portfolio, but they also have a high ability to take risk." You can't arbitrage away risk.
Simple: I have two discussions. One is the contrarian discussion. The other is side speculations unrelated.
So what percentage of your market timing exploits would you consider "side speculations" vs. contrarian plays?
Speculations: 1-2% of portfolio.

Contrarian Shifts (being aggressive when portfolio has taken a major loss): 10-20% of portfolio

Difference: Speculations have no fundamental rationale other than an attempt for alpha. Contrarian shifts are an aggressive adjustment to the portfolio as a means to reflect the realization of the loss, or a conservative adjustment to the portfolio as a means to reflect the realization of the gain. Speculations serve no purpose; contrarian shifts can serve a purpose if "winning the stock market game" means you do not need to take as much risk. There are a lot here who do follow that mindset and it goes under a different name, and is endorsed by people here. Mine is just more pronounced. Holding an emergency fund or a safe asset bucket is the opposite of contrarian. Using up bonds during down markets is contrarian. I think a lot here are missing the point.
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Re: How many here are contrarian?

Post by Cheez-It Guy »

I'm very contrary.
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