Market Timing: Should You Attempt It?: Re: Market Timing on the QT

» Kirk - Re: Market Timing on the QT

I am a market timer who adjusts class allocations dynamically, but not on "gut feelings," but according to my models which attempt to identify which classes are performing best and which classes can be expected to perform best in the near future (months to years).

I've sure enjoyed your contributions here Normxxx. I just want to say thanks!

I think one of the simpler models of dynamically adjusting allocation is the one Dr. Ed Yardeni uses based on the Fed Model.

The Fed Model

I actually track this Fed Model myself as the data from others doesn't seem to be so easy to find. I'd sure like to find an updated chart from Yardeni as I just have raw data and processed numbers for my work whereas a chart is best for showing others.

I also haven't allowed my asset allocation to change much more than 15% on a monthly basis from the peak of the bull to the depths of the bear. The key for me is the asset allocation model for me has me adding stocks when the market is down and selling some as it goes up. I have some "hysteresis" in my allocation which allows winners to run and bear to wreck some damage before I get too busy buying. You might say this 15% range is "the art part" whereas my target asset allocation is based on Modern Portfolio Theory (MPT) which suggests the added return for being over 80% in equities doesn't justify the added volatility.

I haven't tried to identify which asset classes will outperform as you've done. I find it too hard to become "expert" in all the market sectors. I prefer to pick a market sector I have training and experience in that is far too difficult for most to really understand the science behind: semiconductors and communications.
The division of HP that I worked at in R&D designing new products and businesses for 20 yrs was called "Optical Communication Division" which was later changed to "Communication Semiconductor Solutions Division" when they started to grow.

So far, this has all helped me pick tech companies that have greatly outperformed the Nasdaq, S&P500 and DJIA. They are also highly volatile which means I get many opportunites to sell some high and buy some when low. Over the years, it has made for impressive returns in both my personal and newsletter portfolios. What I find really interesting is the compound annual return I measure for my personal portfolio since 1991 is fairly close to the 5 yr number for my newsletter. It makes me wonder if it is coincidence or if my style and sector yield that return?

  Date       Kirk    S&P500   Delta
2003 YTD    +58.4%   20.7%    37.7%  as of 10/14/2003 
 

                                Kirk   S&P500+  NASDAQ 
4.75+ Yrs 12/31/98 to 10/10/03 141.0%  ( 9.2%) (11.8%)
Annualized Annual Return        20.2%  ( 2.0%) ( 2.6%) 
 

9/30/98 Inception Value:   $100,000
9/30/03 5 yrs later value: $345,395 up 245.4%
S&P500 between 9/30/98 and 9/30/03: up   4.6%
With dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter .

-- posted by Kirk