Friday, January 20, 2012
He blew it again in 2011! He got his clients out on August 5 and told everyone to expect "financial Armageddon", which was an incredibly irresponsible prediction. The S&P 500 started the year at 1257.64. It closed on August 5 at 1199.38. Getting out locked in a loss of about 4.6%. Today, the S&P 500 closed at 1315.38. An investor who simply held an S&P 500 index fund has had a return of about 5.3% since the beginning of 2011 and they haven't incurred trading costs, paid high fees, or realized taxable capital gains on a sale. As far as I can tell, Ken still hasn't advised clients to get back in. You see, that's part of the problem with this absurd idea - it requires two decisions and both are statistically unlikely to be correct.
What do some actual experts have to say about a market timing strategy?
"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." - Warren Buffet
"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen to the stock market." - Benjamin Graham, Author and "the father of securities analysis"
"Market-timing is bunk." - Pat Dorsey, Director of Morningstar Fund Analysis
"The market timer’s Hall of Fame is an empty room." - Jane Bryant Quinn, Author, Columnist - Newsweek
"Market timing is a poor substitute for a long-term investment plan." - Jonathan Clements, The Wall Street Journal
"No, I don’t believe in market timing. I’ve been around this business darn near a half-century, and I know I can’t do it successfully. In fact, I don’t even know anyone who knows anyone who has ever successfully timed the market over the long term." - John Bogle, Founder of The Vanguard Group
"Nobody but nobody, has consistently guessed the direction of the bond or stock market over any meaningful length of time." - John Markese, President, AAII Journal
"There is absolutely no evidence that anyone can time the market." - Bill Bernstein, Author
"Only liars manage to always be ‘out’ during bad times and ‘in’ during good times." - Bernard Baruch, Presidential Economic Advisor
"There is an overwhelming body of evidence to support the view that believing in the ability of market timers is the equivalent of believing astrologers can predict the future." - Larry Swedroe, Author
So, it's no surprise that this strategy doesn't work. The only surprise is that people continue to fall for the sales pitch. Maybe the cookies are laced with some sort of mind altering drug.