From the October 2011 issue of Research Magazine • Subscribe!

September 29, 2011

It’s About Timing

When I was in training to be a financial advisor the world was a different, safer place. I was taught the adage, “It’s not about timing the market; it’s about time in the market.”  Much like being in a cult, this sage piece of advice was burned into my brain by my trainer. Over the years, various fund companies would sound the mantra and make up fancy marketing pieces to prove it. “If you were out of the market on these seven days, you would have missed X percent growth in your portfolio.” Has anyone seen one of these lately?

Has “buy and hold” gone the way of the dinosaur and the dial phone? Well, I guess if you’re 15 years old it hasn’t. If you’re on the other end of the age spectrum, it can be fraught with danger.  College funds and retirement funds have taken a beating and it looks like the punches are still coming. Like many of you, I’m pretty much punch drunk at this point.

As I scan the financial news this morning I just read about how the recent durable goods report made investors less fearful and the market went up 1 percent. Whew! Everything is back on track…. Oh wait, I forgot about the 11 percent it dropped right before. Damn, I’m still down 10 percent. Throw that loss on top of the last crash and I’m thinking about strangling my former cult trainer.

I wouldn’t be surprised to start seeing our product sponsor companies coming up with a new glossy marketing piece…. “It’s not about time in the market, it’s about timing the market.” I haven’t crunched the numbers, but my guess is if you were out of the market the days of the largest crashes, your portfolio wouldn’t have black eyes and cauliflower ears.

Naturally, the marketing pieces would have a great new (proprietary) back-tested way to show you and your clients when to get in and out of the market. The wholesalers will be all over this because, at this point, they’ll try anything. You can expect a flurry of free lunches to introduce this revolutionary concept.

As one company after another adopts this strategy you’ll start to see things heat up. Mutual fund and VA companies will start developing their own timing strategies. Third party “timing” companies will be hawking their wares to every BD in the country.

As this approach grows in popularity, small children will start telling their parents when they grow up, they want to be market timers. Anyone holding long-term capital gains will be ridiculed and shamed into timing.

Once the entire investing universe has bought into this strategy, I will adopt it as well. Then and only then can you expect the market to begin the next major bull market.

The interesting part of all this is how it interacts with the universe. The market has always been about cycles. Even timing the market will eventually run out of favor as this cycle runs its course.  As I get out my calculator and start running some numbers, I predict this cycle will end in December of 2012, coinciding with the end of the Mayan calendar.

Am I predicting the end of the world? After all, didn’t I just say the next bull market would start after I adopt this strategy? As I mix current financial news with ancient prophecies I can only assume a small Armageddon will occur at the end of next year and the market will drop to 100.

At that point, your wholesaler will arrive at your office on horseback. Deep inside his man-purse he’ll pull out his company’s latest sales idea: buy and hold.

We’ve got a little over a year to hoard the water and canned goods. Good luck.

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