Home' Trinidad and Tobago Guardian : July 19th 2015 Contents SBG10 STOCKS
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JULY 19 • 2015
Ask Reno Frazzitta what
he thinks of market
that you can profitably
buy and sell by pre-
dicting future stock
wastes little time with
an answer: "With extremely few exceptions,
it s a losing battle."
Frazzitta, the president of Smart Money
Investors in Sterling Heights, Michigan, says
that while day-to-day market movements are
"completely random events," tracking tangible
measures over time much more reliably opens
the door to making money. Economic growth
or corporate profits, for example, "tend to
affect longer-term trends in the markets over
months and years," he says.
Those who would defend market timing
would say it s not an inexact science because
it relies on applying technical indicators to
specific investments. But when it boils down
to buying and selling at just the right time,
many experts sum up their views like this: If
market timing principles hold up, you d have
certainly heard about it by now; and joined
the crush of people making a killing.
"Yes, market timing sounds sexy and some-
times can be achieved sporadically," says Ter-
ence Pitre, an associate accounting professor
in the undergraduate and graduate business
programs at Saint Mary s College of California.
"It is, however, not for the faint-of-heart,
part-time investor, or one with limited financial
resources and time."
He estimates that the charts, technology
and information needed to give it a go can
run "upward of $45,000." And mostly, that
buys you access to past market behavior and
trends, "which are not guaranteed to repeat
themselves," he says.
The irony here is that market timing, so
often pitted against a longer-term buy-and-
hold investment tactic, has little chance of
working in the long run.
"Unexpected events having either a positive
or negative impact on a company, industry or
sector are virtually impossible to anticipate,"
says David Kass, a finance professor at the
University of Maryland s Robert H Smith
School of Business.
"By contrast, the antithesis of market timing,
which is a buy-and-hold strategy, is likely to
succeed" a truism, he notes, replicated time
and again in study after study.
Speaking of the long run, even those who
have staunchly stuck by market timing have
changed their stripes over the years. At its
launch in 1983, Seattle-based Merriman Inc.
was a money management firm and newsletter
publisher that sang the praises of market tim-
ing. But over two decades, the company shifted
to a diametrically opposite viewpoint. Now
"we encourage our clients to adopt a long-
term view of investing," Merriman s website
states, "because it reduces risk and increases
the likelihood of success."
About the only time market timing can reliably
succeed, experts say, is when you employ a
much gentler variant of it based more on invest-
ing and rebalancing in a particular sector.
"While you can t market time stocks, we
do believe in rebalancing your portfolio after
volatility," says Bradford S Bernstein, senior
vice president of wealth management with
UBS in Philadelphia. "This helps you buy low
and sell high, enabling you to work toward
your personal goals without making emotional
decisions based on day-to-day market per-
And for those in the quickie market timing
camp, therein lies the rub: "You have to be
right twice; you have to get out at the right
time, and then you have to get back in at the
right time," says Ken Weber, president of Weber
Asset Management in New Hyde Park, New
York, and author of "Dear Investor, What the
HELL are You Doing?"
How firmly against market timing is Weber?
"I ve often told clients that when it comes
to market timing, the worst thing that can
happen is for you to try it and be right," he
says. "Why? Because then you think you can
Indeed, finding any persuasive evidence in
support of market timing requires a rather
deep dig. A 2002 study by an economist who
worked at the Federal Reserve Bank of Kansas
City concluded that it "may be possible"---
may being the key word---to improve on a
buy-and-hold strategy, thus avoiding "some
of the market downturns." Notice the word
And that analysis was published well before
the Great Recession, let alone the first iPhone.
Fast forward to 2015: Search "market timing"
in the Apple Store and you ll find there s no
app for that. Nor is there any gathering enthu-
siasm for the application of a market theory
that is, if you will, no longer timely; assuming
it ever was.
"Market timing is a scam," says Robert
Novy-Marx, a professor of finance in the
Simon Business School at the University of
"Timing won t lower expected returns rel-
ative to a steady exposure with the same aver-
age leverage. But it adds lots of luck, good and
bad. You might get it right and someone
always does, and they re happy to tell you
what a genius they are. But you are just as
likely to sell too early, or get back in too late,
or too soon." US News
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