If I were Rondo, I'd be filthy rich

[BballTim]

"what goes up must come down"

That's called taking a short position and thus, you still make money on it, however, this Dec/Jan is very bullish so use 'em sparingly.

  Sure, you can make money when the market goes down, if you know it's going to go down. Do you think you're the first person to claim to have a system to beat the market? Or even the 10,000th?

  Kind of an aside, but does anyone remember, in the 80s or 90s, that a group of financial "wizards" from Philly devised a system to always make money at the racetrack? True story. They went to the track (with reporters in tow), placed their bets in a certain pattern and made a good haul. They might have done this twice. The next time they did the same thing and the results didn't go as planned. They were never heard from again.

  But I'm sure they'll work those kinks out sooner or later...

[Kiorrik]

If I'd be Rondo, I'd be wasting my time at the [dang] freethrow line!

[Tai]

If I'd be Rondo, I'd be wasting my time at the [dang] freethrow line!

Well, that assumes he isn't already, but sure.

[TitleMaster]

Sure, you can make money when the market goes down, if you know it's going to go down.

You see, that's the problem with the common approach... it isn't like a race track. At a track, it's about picking your winners: "Fat Sally", "Blue Demon", or whatever moniker your favorite horse is named. So when you double up, just like everyone else who hits their first winning streak, you lose it all on attempts number 4 or 5.

If you look for a market reversal but you're not really sure, in other words, there's a real split frame in the indicators, you go short and simultaneously buy a call option to go long. The option is paid for upfront and is 'in the money' when it hits your strike price. This is a hedged position.

Thus, you can in fact, get it wrong and still not have a major losing trade. Right now, a lot of astute traders have bought puts (shorting options) for the S&P and Nasdaq, knowing fully well that they need to protect their long calls on the markets esp given both the Januarty effect and excess stimulus in the system. Yet, if the market crashes, they've minimized their losses. On the other hand, a lot of mutual funds, via 401K contributions, are simply buying S&P deposits (long only) and will get toasted if the market collapses in the spring. As you can infer, the people who're mainly toast are the average worker bees who're depending upon their 401Ks for retirement.

[BballTim]

Sure, you can make money when the market goes down, if you know it's going to go down.

You see, that's the problem with the common approach... it isn't like a race track. At a track, it's about picking your winners: "Fat Sally", "Blue Demon", or whatever moniker your favorite horse is named. So when you double up, just like everyone else who hits their first winning streak, you lose it all on attempts number 4 or 5.

If you look for a market reversal but you're not really sure, in other words, there's a real split frame in the indicators, you go short and simultaneously buy a call option to go long. The option is paid for upfront and is 'in the money' when it hits your strike price. This is a hedged position.

  Again, if it were as easy as you claim to get a 30% return everybody would be doing it. Do you consider yourself to be so much more clever than anyone else that you're the only person to come up with this plan? Are you trying a method that's unheard of in the financial industry? If not, your scheme has been tried hundreds/thousands of times and abandoned many times based on the result.

Thus, you can in fact, get it wrong and still not have a major losing trade. Right now, a lot of astute traders have bought puts (shorting options) for the S&P and Nasdaq, knowing fully well that they need to protect their long calls on the markets esp given both the Januarty effect and excess stimulus in the system. Yet, if the market crashes, they've minimized their losses. On the other hand, a lot of mutual funds, via 401K contributions, are simply buying S&P deposits (long only) and will get toasted if the market collapses in the spring. As you can infer, the people who're mainly toast are the average worker bees who're depending upon their 401Ks for retirement.

  I could infer that. I just got my 401k statement and, without having made a single change since the meltdown, I'm in pretty much the same position I was in before the market collapsed. Some of those mutual fund guys must be a little smarter than you think.

[TitleMaster]

Again, if it were as easy as you claim to get a 30% return everybody would be doing it.

Not everyone, there are those rainmakers like Soros/Rodgers, Lipshutz, Rotter, etc, who are.

And even aside from the famous ace pilots above, there are even some amateurs (newbies) who aren't doing too poorly either. See below for an amateur's tracker site...

http://www.kaching.com/investors/find

Before you shoot me down, please read the web site above. If you look at the operators, you'll see newbie portfolio managers who're doing very well, from ~15% to over 500% per year.

I'm in pretty much the same position I was in before the market collapsed. Some of those mutual fund guys must be a little smarter than you think.

The stereotypical mutual fund basically tracks the S&P, Nasdaq, Russell, Hang Seng, and the various cap levels (small, mid, large) under those umbrellas. Since MFs typically have management fees (& sometimes load fees), overall performance isn't that important since 401Ks make routine contributions to the funds' capitalization levels. The MF firms can survive, albeit w/o the big bonuses, by simply scalping on the fees.

[BballTim]

Again, if it were as easy as you claim to get a 30% return everybody would be doing it.

Not everyone, there are those rainmakers like Soros/Rodgers, Lipshutz, Rotter, etc, who are.

And even aside from the famous ace pilots above, there are even some amateurs (newbies) who aren't doing too poorly either. See below for an amateur's tracker site...

http://www.kaching.com/investors/find

Before you shoot me down, please read the web site above. If you look at the operators, you'll see newbie portfolio managers who're doing very well, from ~15% to over 500% per year.

  The S&P 500's up about 35% in the last year. Just over 1/4 of the people beat it.

  BTW, from your description your strategy seems to be long/short. Almost all of the biggest returns use a different strategy (long only).

I'm in pretty much the same position I was in before the market collapsed. Some of those mutual fund guys must be a little smarter than you think.

The stereotypical mutual fund basically tracks the S&P, Nasdaq, Russell, Hang Seng, and the various cap levels (small, mid, large) under those umbrellas. Since MFs typically have management fees (& sometimes load fees), overall performance isn't that important since 401Ks make routine contributions to the funds' capitalization levels. The MF firms can survive, albeit w/o the big bonuses, by simply scalping on the fees.

  I'm not sure what this has to do with the fact that my 401k isn't toast despite the market collapse. BTW, I'd guess the mutual funds that are in my 401k have outperformed over 80% of the people on that list.

[TitleMaster]

BTW, from your description your strategy seems to be long/short. Almost all of the biggest returns use a different strategy (long only).

Long and short allows one to avoid what happened from Sept '08 to Mar '09. Those long-only amateurs are sector friendly and thus, buy on the dips for their areas of specialty. We'll see how many can adapt to a sideways market. For now, since the markets have been bullish for a while, they're running with it.

I'm not sure what this has to do with the fact that my 401k isn't toast despite the market collapse.

I don't know if you'd noticed but the rally since March has been ongoing, thus much of the losses from the aforementioned 2008 crash has been recouped. So if you've been adding, since Mar, to your 401K, via normal employee/employer contributions, it would naturally be going up.

In my current trading regimen, I have only long/short hedged positions of a certain percent of my portfolio, keeping it to a business quarter. Aside from the safety of bonds, the active portion is in swing trading futures on the major indexes. Given my lack of Rondo-like capitalization, I simply don't run with it. I keep it from 1 to 3 contracts at a time, despite having a good hit ratio, 50-62%, I'm in trading for the long haul (or at least until I have my two year audit trail for the hedge funds) and don't want to blow it by staying too long in a position. Naturally, given the state of the rally, more of my calls are 2-3 day longs vs 1-2 day shorts. That could change and I'm keeping an ear on it.

[Kiorrik]

If I'd be Rondo, I'd be wasting my time at the [dang] freethrow line!

Well, that assumes he isn't already, but sure.

No it doesn't :p I just told him what I'd do if I were him. I'm sure Rondo's smart enough to do it too