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Going crazy with my 401k!

Discussion in 'Off-Topic Discussions' started by akm3, Jun 27, 2008.

  1. goofnut

    goofnut Well-Known Member

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    Thanks Justitia! That's quite interesting. I'm suprised at those results. However I need to know for sure from my own experience, otherwise I'll always be wondering if I could have made it work. Also I don't see any other way to recover my money within a reasonable amount of time. By the end of next year i want to be back to where I was 5 months ago. ...anyway, I can let you know in a few months how it's going. One thing I learned in the last day or so is I need to change from a discount broker to a direct access broker. I'd like my orders to go thru faster. I suspect there's someone in the chain of events who's slowing down my executions so they can profit from my trades at my expense.
     
  2. Justitia

    Justitia Elite Member
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    Good Luck :tu:
     
  3. Justitia

    Justitia Elite Member
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    Yeah... it is yrue a lot of mutal funds have a lot of costs, etc. All thise issues are de minmus with TIAA CREFF because it is fund run for teachers and does not have the same profit motive. I don'y lnow too much anouy ETFs as they came onto existance after I stopped looking at these things,

    Well, I think you are observing more mismanagement than Keynesian economics having run its course.

    Greenspan has an interesting history. Back in the early'70's when our economy started to have serious inflationary pronlems, Greenspan guided out monetary policy. He was so concerned about the destructiveness of infaltion that he clamped down on the money supply quite severely and as a result sent us into one of the worst unemployment spells since the Great Depression at that itme. That is one of the issues of inflation vs employment. Policies to effect one are usually at the expense of theother.

    Whereas in the '90's Greenspan was functioning to give as much stimulus as possible -- uite the opposite -- but we did not expereince any overall inflation so he may not be concerned -- but he is blamed quite a bit for the subprimne mortgage crises -- and the fiancnes behinf that controbuted to the rapis rise in housing prices. (sub-prime mortgages bu allowing a lot of people to take out mortgages they could n;t really afford increade demand for housing and drove up housing prices -- once the sub-primes statred to default house started whoing up in th market place and down come housing prices.



    My bond fund has started a mild decline -- yeah I agree -- the gig is up.

    I can't comment on Austrian economics. It was poo-pooed when I was in grad school so I never looked at it to form a personal opinion... Yeah I know, Hayek won the Nobel prize in economics... :p
     
  4. Banditfist

    Banditfist Well-Known Member

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    The interesting thing about Hayek's prize is that it was awarded only after the death of Von Mises. I think that too many people in power did not want to give Hayek's mentor any credit. Most of Hayek's and Von Mises' work centered around the proof that fiat currencies and socialism fail because the market cannot accurately price itself.
    Kind of reminds me of mark-to-myth verses mark-to-market. Too much fraud is allowed.

    My girlfriend's 401k does not have an option of a PCRA account. My work allows me to move all but $1k to a brokerage account. The only thing that I cannot do are options and shorting. I would love to be able to do covered calls (risk is 100% defined and I own the stock). My girlfriend has a choice of like 10 mutual funds....and no money market account. Kind of sucks. I moved 60% of my balance to my brokerage money market over a year ago and the other 40% back in January. I have done some day trading with it. I am down around 0.5% overall.
    My after-tax brokerage account run by my broker is down over 40%. But, he is my contrarian. I am a bear.
     
  5. zenpharaohs

    zenpharaohs Elite Member
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    It is pretty likely that they would lose money day-trading. But in the general case, it is possible to make money trading on that time scale, and even faster. It's just a lot harder than it looks - definitely only for professionals, and doesn't have much to do with what people in economics think about, let alone law.
     
  6. Justitia

    Justitia Elite Member
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    Sorry ... the data does not bear out your assertion. There have been a ton of studies on this. If one engages in day trading on a continuous basis, in the long run they will lose money. It is not possible "to beat the market" no matter how "professional" the professionals claim they are. Of course one might have luck on a particular trade but over time the individual loses more money than he or she gains.

    The solid professionals don't do that. See even the remark on this thread by Robert2006

    To translate -- the solid professionals know they can't beat the market -- so they do not engage in day-trading -- they have their portfolios diversified to match the market.

    And with regard to your remark about the irrelevance of economists on these issues-- they are much sought after by investment houses -- my former economics professor from grad school left an Ivy league position to open up Smith Barney's Option's division when the options markets were first big in the late 70's. He did it by using a statistical program developed by two fellow grad students of mine (one of whom became my husband, who BTW had his doctorate in Applied Math -- which he applied to economics) to predict the market clearing prices of options. They developed that model by applying a decade old theory of another economist you might have heard of -- as you are of the right generation-- Paul Samuelson, the second person to win the Noble Prize in Economics.

    Smith Barney was so nervous about entering into this new-fangled market on options that my former prof offered to just work on commission. He made so much money for Smith Barney that within a year they made him VP, expanded their options division, and within a couple of years it was the largest profit division of Smith Barney.

    E F Hutton (you know, the one "everyone listens to" when it speaks) decided to follow suit and open their own options division and hired my husband's co-developer straight out of academia. Smith Barney tried to hire my husband. They flew us to New York for a week to convince us what a lavish lifestyle we would get to lead. Unfortunately, investment houses are selling their services -- so this means extravagant wining and dining of clients and potential clients several days a week. I was so bored by company we had to keep that by the 3rd day I told my husband if he took this position, he went without me. I was staying in academia. I guess he thought being with me was more fun than Duck l'Orange 3 x a week. (Truthfully -- he was bored silly also.)

    But all was not lost. My husband went on to develop the first test statistic to detect chaotic data (chaos theory) which bears his name along with his co-researchers, one of whom was considered a contender for the Nobel Prize. Fortunately that test statistic had great value for banks trading in international currency, so my husband was hired as a consultant for leading banks around the world to write programs for them to use in their trading decisions.

    His co-program developer from grad school ultimately left E. F. Hutton and went on to be a private trader for the Rothschild family.

    Another economics colleague of mine -- who was originally my de facto thesis adviser though he was at another university, because he was one of a handful working in my field -- ultimately left his academic position to go be a very successful commodities trader for a major firm in Chicago -- using the very economic theories that he (and I and others) wrote on.

    So those are a few very successful economists in the securities markets in just in my small circle.

    Obama's two top picks for his economic advisers to deal with what is happening in the securities markets and the fall-out are Geitner,with an MA from Johns Hopkins in International economics (he did not get a Ph.D) as Treasury Secretary and Larry Summers -- one of the leading economists of my generation, former Harvard economist and winner of the John Bates Clark Medal for the most outstanding economist under 40 (considered akin to the Nobel prize.) He probably would have been picked for Treasury if it weren't for his sexist remark that the reason there weren't more women in science was that as a group they had lesser abilities in science then men.

    Honestly -- that made me laugh -- Larry is a typical economist with a political tin ear and sexist attitudes. I had to deal with my economic colleagues' sexist attitudes and conduct (who were all men as I was one of 14 women econ profs in the US when I started my career). It was one of the reasons I was quite happy to switch over to law -- I was so sick of 15 years of the daily onslaught of sexism ... and since law at that time was dying for trained economists -- I took the jump.

    But regardless -- it is quite clear that others do not share the assessment of economists and their theories about financial markets nor does the evidence bear out the assertion at the top of this long post that markets have nothing to with what economists think about. A similar analysis could address the assertion abut law.

    Despite what some mathematicians think. ;)

    (BTW -- my undergrad degree is in mathematics -- one of the youngest individuals elected to Pi Mu Epsilon, the national math honor society -- not that that means much.)
     
  7. Justitia

    Justitia Elite Member
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    I love reading about your market analysis.. they always seem to bear true (no pun on bear :lol:) Shows in how you just about broke even in day-trading compared to what most people would do. And you seem to sniff trends really early on. I am a little flabbergasted that you moved into money markets so early. I have been too busy the last couple of years to pay proper attention but I know that even if I had -- I would have still let 2/3 of my fund ride in equities that far back. And I faced a much shorter time horizon than you do.

    Great going!!!
     
  8. KT Monahan

    KT Monahan Active Member

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    It's very easy my friends: Buy low. Sell high.:tu:

    In all seriousness, per a prior post, I have been persuing historical 26 and 52 week moving averages. The crossover points certainly do indicate whether a stock and or the market will be going up or down. Granted I need to do further research, but from what I have seen, generally, in a lot of cases, if you buy at the point where the 26 week moves above the 52 week average, it seems to later move below the 52 week average at around the same price. If you used these indicaters as the buying and selling point, from what I've seen, you would be buying and selling at roughly the same price.

    Again, this is from my very superficial research of about 30 stocks and the S&P 500. I know there must be more to it.
     
  9. zenpharaohs

    zenpharaohs Elite Member
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    I'm the one who has had 19 profitable years of 19 years I have been on Wall Street. Including this year, where my stock trading is making a double digit return. So it's OK with me if you're sorry. Did you know what I do for a living?
     
  10. Justitia

    Justitia Elite Member
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    Yes...

    Doesn't change what I wrote.
     
  11. zenpharaohs

    zenpharaohs Elite Member
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    Well as long as you understand that "the data" that you see amount to a tiny fraction of the data that I can see. It's confusing to me that people teach extremely wrong things about finance, but it doesn't seem to bother that many of the other people I know who understand the situation. One of the graduate schools that I advise is a typical example - their finance and economics departments are interested in reality, but their business school doesn't care. I would have expected the exact opposite.
     
  12. DFS

    DFS Well-Known Member

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    I can't quite decipher this...are you a day trader zen?
     
  13. zenpharaohs

    zenpharaohs Elite Member
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    No, but something like that. I run a fund which has a range of computer trading activities.
     
  14. Justitia

    Justitia Elite Member
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    How widespread the view would be to characterize computerized decision-making for trading activity as "something like" day-trading is not clear.

    As a side-note, the computer programs used for such decision-making are based on economic theories of financial markets.

    One of the first users of a computer program approach for trading decisions was my former econ prof, mentioned in an earlier post, who opened up the first investment house Options division at Smith Barney in the late 70's. In doing so, he used an expanded version of the computer program my husband and his fellow econ grad student partner developed to predict the true market-clearing price of options when the market was out of equilibrium. As stated in an earlier post, that division became one of the most profitable at Smith Barney. Similarly, when my husband's partner went to open an options division at E. F. Hutton, it became equally profitable.

    I seriously doubt either one of them would ever consider computer trading activities as day trading. In fact, day trading was one of the things my former econ prof stopped at Smith Barney -- at least in his division -- which is why his division became so profitable. Same with my fellow econ grad student at E. F. Hutton.

    My former econ prof's development at Smith Barney is now a case study taught at business schools around the country. One can google it if one is familiar enough with the situation. :read:
     
  15. Justitia

    Justitia Elite Member
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    Well, I thought I would bump up this thread -- since it is about the subprime mortgage crises, the drop in the securities markets and a lot of historical analysis of previous economic crises.

    The state of the economy continued to sink after this thread, investment houses -- despite using computerized trading -- were at risk of bankruptcy and one leading firm did fail. A number of the traders at these houses were forced into retirement and unemployment, in general, went up past the even the dire predictions after the Crash2008 (but not much more than that).

    However, unlike the Great Depression that started in 1929, the Great Recession that started in 2008 had a much shorter duration.

    At the start:

    Using the Dow Jones Industrial Average as a bell- weather, the Dow Jones hit bottom of its decline in early March 2009 - a little under 2 years from the beginning of the crash in late 2007.

    Similarly, during the years of the crash, unemployment rates skyrocketed from 4.9% to 10%, a slightly more than doubling of the unemployment rate mirroring the Dow Jones Industrial Average plummet of slightly more than 50% of its value.

    The 2 + year slide of the economy hit bottom around the end of 2009 during the first 10 months of the Obama administration.

    Thus far the Great Recession of 2007 paralleled the Great Depression of 1929 in terms of time table - and though pretty bad -- it was not, however, as bad as the Great Depression of 1929 when unemployment rates peaked at an estimated at 25% (instead of the Great Recession's 10%) and the Dow Jones lost 90 % of its value (instead of the Great Recession's 50 % of value.)

    The rate of recovery:

    But not only was the Great Recession not as bad as the Great Depression, the recovery during the Great Recession was remarkably fast in comparison.

    The Dow Jones, after the Great Recession's crash, recovered its losses and returned to its previous levels within 3 years. - by September 2012. The Dow Jones' Great Depression crash took 25 years to recover, from 1929 to 1954.

    The unemployment rate during the Great Depression - though it is a little hard to measure because of WWII which sent our men overseas, actually creating a labor shortage - lasted at least 10 years and probably would have lasted several years longer but for WWII before returning to its more normal levels in the late 40's.

    The unemployment rate during the Great Recession returned to its normal rate within 8 years.

    This, to me, is a testament to the modern-day applications of Keynesian analysis, discussed earlier in this thread in combination with business cycles discussed earlier in this thread as well.


    On a more personal note -- I reported back then that my retirement portfolio had lost about 40% of its value during the first couple of years of the market crash.

    Well, fortunately, similarly to the Dow Jones, my portfolio pretty much recovered to its former size the same time the Dow Jones did in 2012. And just as the Dow Jones has now increased to 3 times its low point, so has my portfolio. :-)

    A better description would be that both the Dow Jones and my portfolio are now 50 % higher than their respective peaks before the 2008 Crash. Dow Jones had just cracked a historic high of 14,000 just before the Crash and now is hovering around 22,000. My portfolio had just hit a historic value just before the Crash as well.

    I took a gamble back then (though I thought it was the wisest approach) of not moving my portfolio out of equity (i.e., stocks) - which tend to fluctuate with the economy - hence the decline in my portfolio value during the crash - into secure bonds, which tend to maintain their value more or less during volatile periods. The movement into bonds would minimize further losses if the market continued to tank but they also don't grow much in value when the economy recovers or grows.

    But it was not really that much of a gamble -- as at the time, I had 10 years to go before I would be turning to it. Regardless of any drops in the market -- in the long run, the market will always recover and then grow. That is always true - unless the country completely collapses in every dimension including political and economic - which was extremely unlikely.

    And now it is 10 years later -- but I have no interest in retiring. :-) So the portfolio shall continue to grow as the economy does and I will be continuing to contribute to it as my employer does. But I have chosen a little more risk-averse strategy to maintain current value as my time horizon now is extremely short. I could decide to turn to it at any time from now until whenever....

    Hope everyone is doing well......
     

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