Comments on Fund My Mutual Fund: 2 of 10 Biggest Index Days Have Been this Month

Colin, you're technically correct. But what does ...

2008-10-29T11:36:00.000-04:00

Colin, you're technically correct. But what does 80% annualized vol mean? does it mean the market is pricing in a 80% move? and the vol on the VIX is a 30 day im vol, not an annual.

A way to interpret it is, that the market is moving (both up and down) at speeds which if it was in a straight line, would send the market either up or down 80%. This is more intuitive to a bi-nomial type pricing model where an up/down move in each time step is defined by the 80%.

I don't mean to gripe, but the vix at 80 doesn't i...

2008-10-29T03:12:00.000-04:00

I don't mean to gripe, but the vix at 80 doesn't imply a move of 80% in a month at all. It means that based on a normality assumption of returns (and a clearly false assumption at that), that 68% probability that returns will fall within +/- 80% annualized, or ~20% (80% vol over a 20 day period) and 95% of returns within 40% for this month.

Insane vol, but by no means 80% expected change.

Mark, I think the takeaway here is when timing and long/cash/short is everything, then you need to lower your tracking error and look more like a normal 100% fund and track the benchmark a bit closer. Have faith in the stock picking, it will matter soon enough. Love your stuff.

Mark, ive learned to be a fundies guy, but its use...

2008-10-28T22:50:00.000-04:00

Mark, ive learned to be a fundies guy, but its useless here. The 5 min chart on the index trades like a daily chart in terms how how fast they move! And thats exactly what the VIX is saying. Theoretically speaking, its the implied vol (im sure you know this, but for your other readers) of the 30 day S&P option. when its at 80, it literally means, that the market is moving at speeds that could send the market up or down 80% in 1 month (22 trading days)!!!

This market isnt for buy and hold, and sentiment is all over... buy when 60 is oversold, and sell when its overbought.. Amazingly, that could mean 30% moves in some stocks!

For figuring out what works when the market rallies... ETFs seem to be the way to go.. cant beat em - join em.

While I fully share your analysis and reading of t...

2008-10-28T20:14:00.000-04:00

While I fully share your analysis and reading of the situation I am mananging to survive 2008 with a relatively simple strategey. Let's use the Positive Black Swan metaphor, 80% cash and 20% very high risk strategy (damn it, even if you lose the 20% you will be well ahead of the market this year!).

What is left is to choose the risky indexes, I settled on double shorts and longs as needed. When everybody is in flight you double long and when everybody is in love you double short.

What to short and long? I like emerging markets/japan/china/HK (but use others incuding oil/miners and many others as needed).

Timing? Of course the key is timing, make sure the herd is heading one way before you choose the direction (no need to move ahead of the herd, the herd is large/noisey and noticable...).

May I add, I rode every cycle with no worse than 0% return this year (at the absolute worst days)but most days I am in 20-40% return range but still shor tof my 50% objective.

I know this is not classic investing, but it is not classic time either:-)

*I've sat here the last three weeks reading earnin...

2008-10-28T20:05:00.000-04:00

*I've sat here the last three weeks reading earning reports every night and asking "why?" "none of it matters anymore". *

It will matter eventually, have patience. The market is a voting machine in the short term but a weighting machine in the long term.

I did add a couple of indices of the beaten down variety on the long side last week - RSX and EWY, but most of the portfolio is still in individual stocks.

Mark,This chart is a real eye opener. I wonder if...

2008-10-28T19:04:00.000-04:00

Mark,
This chart is a real eye opener. I wonder if investors in the 30s had a lot of the same reaction to the market then as we are having now.