Trying to Time the Stock Market

The financial media has a habit of commenting on timing the securities markets. It cannot stop for a good reason. Securities-timing articles fill space. In blogs, books and publications, over the air, and the internet.

Yet, independent research constantly shows that market timing never works consistently. Mutual fund management companies know that in-and-out investors never do as well as their buy-and-hold, long-term statistics show.

Reading a financial article telling how a rally trend in one security class may be finished, and it may be time to get into another type, should be a danger signal, not a buy opportunity. (Also see past Earl J Weinreb NewsHole® comments.)

Preventing Bubbles and Recessions and Dodd-Frank

The purpose of the Obama administration’s attempt to regulate the economy amounts to a foolhardy attempt to smooth out the effects of booms and severe financial jolts and recessions.

The U. S. has repeatedly been through recurring economic cycles over many years. Other economies around the world have experienced the same.

The bottom line is this: Over-regulation or overly-strict regulation never works. The effort always has a short term goal, but, nevertheless, is used because it’s always a political measure to temper public unrest.

Dodd-Frank is excessive regulation that will not help. There is the usual political factor that overrides all supervision that the regulation affords. Easy money and the subprime crisis were what Congress and the Obama administration created, not the lack of supervision.

I have commentated on this repeatedly, mentioning how simple bank guarantees and not having “mark-to market” accounting for banks in an emergency, would have been the alternative solution. (Also see past Earl J Weinreb NewsHole® comments.)

The Magic “Financial Adviser”

The financial media covets financial advisers with its imprimatur, as a veritable storehouse of all valuable knowledge. The media invariably deems to put forth commentaries on advisor suggestions as the best advice available.

Somehow, the media manage to find these pundits from over 100,000 who ply the trade in the U.S. alone.(I don’t want to get into the subject of how these advisers manage to get selected for quotes in the media.)

But there isn’t advice from these sources that cannot be often questioned, especially when it comes to bonds, The quoted financial expert invariably never fully discusses the principles of duration when it comes to these investments. ( See the Earl J. Weinreb NewsHole® comments.)

Why Bother to Buy TIPS?

Lots of recent publicity are in the financial media about how TIPS funds can legitimately inflate their yields, in accordance with Securities and Exchange Commission rules. It’s easy to be hoodwinked into believing you are getting more than you are, while enjoying benefits of inflation protection.

However, I have never been a fan of TIPS. I have always explained its shortcomings on the return you get and tax subtractions. And how you can avoid inflation’s effect on fixed income investments with proper use of duration principles.

The problem is, most investors and those in the financial media are in the dark about the use of duration principles. ( See the Earl J. Weinreb NewsHole® comments.)

Market Direction Signals

I have found many market indicators in my investigation of strategies. However, many described in the media from time to time are not as sensitive as others.

The short sort treasury bill rate has always been an important one, until the federal Reserve decided, in recent years, to keep money at basically zero cost. When they do decide to raise the rate, there will be an indication of actionable policy change.

There is always that question of sensitivity. For instance, look at the Misery Index, That is the addition of inflation and unemployment rates. Great for psychology but not overly sensitive for quick market action decisions.

I have seen the “Crack Spread” or refinery profitability range index. But that's seasonal and hard to gauge for investment strategy. An even less sensitive investment strategy indicator is the Baltic Dry Index or BDI. This calculates the cost of moving bulk raw materials across oceans and involves mainly those companies involved and ship rentals. ( See the Earl J. Weinreb NewsHole® comments.)

Hedge Fund Regulations

More hedge funds are now subject to SEC regulations. However, regulate them too severely, and they will no longer be considered hedge funds in the true sense. Not by the definition of what an investment hedge fund does for an investor.

Hedge fund managers need secrecy in order to trade. If they divulge their intentions in advance, as stricter regulations promote, their efforts and objectives will be neutralized. Other investors will be able to counter strategy, to make any proposed hedging worthless or even dangerous.

Moreover, hedge fund activity had little to do with the financial downturn of 2008.

Over-regulation is another instance of the Obama administration’s jousting at windmills for no real purpose, other than catering to its anti-business, anti-finance industry constituency.

Derivatives Misunderstood

Politicians love to point fingers at derivatives as bad, and a major cause of our past financial distress.

But derivatives perform an important function as a financial instrument.

Timothy Geithner, the Secretary of the Treasury, overlooked meetings, monitoring trading of derivatives, when he headed the New York Federal Reserve. So, the mysterious workings of derivatives should not have been so foreboding, dangerous, and deadly, causing the 2008 financial meltdown. And they didn’t warrant the notoriety they received.

Derivatives trading now have tougher regulations. I can see having more transparency, but derivatives make financing cheaper in the long run.