Karel's Marketocracy Fund

[Karel]

That was a long time ago, that I wrote an end of year result. The portfolios are dormant for the moment because the screens didn’t generate enough picks to choose from, but I one of these days I am going to check if that has changed.

[Karel]

Marketocracy has changed and I will lose my portfolios. This thread will stop. Well, it ran out of steam a long time ago anyway.

[riverbabe]

Marketocracy has changed and I will lose my portfolios. This thread will stop. Well, it ran out of steam a long time ago anyway.

No no. Say it isn't so. What happened to the funds? The strategy?

[Karel]

Oh, the stragey was a weak copy of $$$Mr. Market$$$'s but still went well. Then I got some health problems and my personal momentum got lost. The funds suffered from that, and now Marketocracy is restyling their free, registration only service into something very limited and unusable for tracking a strategy. I think about looking for another portfolio simulation. Starting completely anew might be just what I need.

[Louetta]

Oh, the stragey was a weak copy of $$$Mr. Market$$$'s but still went well. Then I got some health problems and my personal momentum got lost. The funds suffered from that, and now Marketocracy is restyling their free, registration only service into something very limited and unusable for tracking a strategy. I think about looking for another portfolio simulation. Starting completely anew might be just what I need.

Hang in there, Man.

[Karel]

You will find my reports on my new Investopedia portfolio at:

http://www.mrmarketishuge.com/showthread.php?4039-Karel%92s-Investopedia-Portfolio-for-the-Stock-Only-Game-2017

[antioch6]

Here is Karel's loved Marketocracy thread, where he posted his weekly updates on his top three companies based on MrMarket's formula. To enjoy a walk down the path they left for us, I will continue Karel's Shotgun portfolio with weekly updates and a top 3.

This should give me a nice weekly routine for the stock market on the weekend, so no decisions based on emotion. The last thing that I would need for this strategy is a market timing service, and indeed I spent the last 3 years and over $100,000 dollars, all my money to find a market timing service, but I didn't find one for long term trades. This must mean you can't time the market, so like Karel I will submit to a bear market when one comes, and I will keep my hope that when it ends there will be a new bull market that takes prices back to the highs. This is based on a belief that the government will continue supporting business and keeping people's jobs with time and money. Without the government, companies go bankrupt and culture turns wild at the mercy of the oldest and most enriched financier. But I believe in young people and in opportunity, so this strategy will be for improving life at the bank when I am done with all my house and hotel work.

So how did Karel Update his fund? He created a dump like MrMarket. So first I will create a universe of 200 stocks. I am using MarketSurge Screener. I have 200 stocks filtered from earnings stability, p/e ratio, debt, and relative strength. Now I will rank them on Price Performance and Price Performance divided by P/e Ratio. I won't use 3 consecutive years of earnings and sales growth, I will use a stable earnings number based on the last few years of reporting. This means the company might not be growing, but it's earnings are stable and it's p/e ratio is reasonable, and its stock price is strong relative to what else is out there.

There were a lot of stocks to pick from and I think Karel would be happy with the results. Here is the dump after I filtered for a daily average volume of $1,000,000 dollars:

UGP, PLAB, CM, SBS, HPE, RPRX, TD, RIO, C, GSK, WT, MFG, HSBC, STT, RRX, CFG, ST, BK, FDX, VLY, NTRS, SMFG, DD, WBS, BIIB, NVS, HE, MUFG, NGG, KEY, ZTO, HASI, TXT, GILD, EBC, CSCO, ABEV, CNX, FHN, FITB, JPM, POR, MTB, OHI, AQN, SLB, CCK, GTES, BKH, BCE, BUD, BALL, EPD, ES, WPC, CB, D, KRG, BRX, O, CVBF, EXC, UE, CCEP, ALGN, WTRG, CNI, REG, PCG, ORI, NNN, T, ADC, SKT, PSA, EPRT, DVA, PB, EXR, OKE, STZ

Which ones do you like? And why?

I will buy the top 3 from this lisk next week after I go to the bank and open up my brokerage account.

[antioch6]

I was looking desperately for a way to time the market to avoid downside. I simplified it down to timing the market as limiting your downside, and limiting your upside, because everyone buys when it goes up and sells when it goes down. This is complicated because if something is going to zero you want to sell it more and more when it goes down because you can only make 100%, but if something is going higher you don't necessarily want to buy more as it goes higher because eventually it goes down for a while. This is the bet/trade that always comes around when the market is crashing, half the traders think it is going to zero, and the other half think it will come back and go higher. Well who is right? And what should we do with our buys / sells?

I think it comes down to what makes the market go up, which is: someone paying a higher price for whatever reasons. As long as there is a market prices will go higher. This seams because governments don't want to take on deflation but want to keep things the same, so people with money invest in finance and prices go higher until there is a bankruptcy cycle, then governments give out money again if the assets support enough jobs and political wealth.

So what does this mean the market is going over the next few years? Are we near a bankruptcy cycle, are we marketing higher, or are we in a deflation because of weak demand? Things seem fairly normal out there except for some pressure at the higher end. Maybe this means we are in-between a bankruptcy cycle and marketing higher, as new companies start growing and older companies like those based on A.I. start going through a deflation cycle from possible weak demand and overinvestment. That seems to be the case as of now.

So the decision to invest must be on the smaller side and with companies that are benefiting from new trends, or who will survive when there is deflation and at a good price. What companies pass this criteria from my screener? Karel didn't want to pay such close attention to his companies, and his main downfall was not having technical criteria for stocks that fall in a bear market. This is solved by using an absolute price performance on his 1 year timeframe, buying companies that fall the least in a bear market, and that still have a comparable p/e ratio to justify their strength. Doing this we can invest straight through a bear market on a weekly basis without stopping.

Buying and selling companies seems serious because of the work involved. Buying and selling stock seems not that serious but we still need to know it. With all that said this week's top 3 are RPRX, BCE, and ORI. I am trying to buy these as soon as possible, but when I think about the long years that it takes to see stock returns, I'm not that eager to get started. I am willing to be there regardless of what happens, and we will see.

I am speaking with the brokers and the sales office at Merrill Lynch and I am hoping to have the account setup by next week. In the meantime, I wonder if I really need to buy these companies or if I should not. What do I really want from stocks, and what do I want from sending my money in to the brokerage firm? I'm not having any expectations I seem to be merely going in order from the bank.

[antioch6]

I am still looking for a way to time the market to limit downside, but there doesn't look like a way to without limiting upside. People talk about the 1970s and the 1930s as times where everyone suffered inhumane because of falling prices, but no one talks about how everyone was rewarded, I can't even think of a word because of how little everyone talks about it, but how everyone was rewarded for holding through the -75% and the -35%. I am ready for these swings after day trading futures and experiencing the largest change between high and low, and finding no profit at the smaller time frame. Now I'll live these -75% and -35% swings on the longer time frames, with the idea to break even.

I am not as profit motivated as I used to be. The motivation for trading these companies seems to be from a curiosity about how they will perform. And well, if the companies go down, how low will they go? Who is right out there about what the p/e ratio should be? In the past it was between 5 and 20, and with recent markets it is between 5 and 45. My only worry is that a stock in the middle with a P/e around 15-20 falls down to 10-15 or 5-10, but in that scenario it would be low, and the future might bring it back to 15 or 20.

So the comment I want to add about market swings and volatility, is that I don't believe the low is ever the right price. Recent market cycles have been forwarding the price past any downturns and skipping the lows. The last time we had attractive P/e levels was 1980, and even in 2009 the ultimate low was stopped around 9-10 because people are using an average P/e including the new high from 1998-2000. So there is more money around these days and the federal bank and government are more likely to support a falling market now than in the past. I still think this is because of the debt spiral of 2008 and the stories that we are still recovering from that leverage because if everyone at the top owns each others assets then you need a final buyer to support the price, which is the government. Their assets were falling in price and they were on borrowed money from the banks, using their assets as collateral to buy more assets, so that cycle would of lead to lower prices if the government didn't step in.

That is the kind of thing that leads to me watch P/e ratios and wait for a low price to buy stocks, but if the government is just going to support its friends at the top then that buying opportunity will never come. It has been frustrating since 2008 watching the market go higher and P/e ratios go higher, but I've stayed patient. The only thing I was a long with was buying physical gold and storing it in a vault. My dad didn't want to do this and my brother had to give back all his money, so there was no one to invest with at the end. I could be sitting at home with my gun and my gold, but I am already sitting at home anyways. The only difference I notice is I feel a lot free-er with a gun, but I feel a lot clean-er without one. And with gold I was only going to buy $25,000 for myself, and that isn't much in an era of multi million dollars being common now.

Writing this has me feeling kind of down, but I still like stocks and I like opening a stock screener. It's just hard trying to actually buy and sell higher when the value is a gamble and when you don't know when the government is going to let prices fall or raise them. I guess in the end things stay the same, and people with money keep it and people without money, look for it. I just feel disheartened with I think about my dad's motivation about making it in the stock market, and all the traps he fell for including technical analysis, buying on momentum, buying when something is going down, buying on rumors, and listening to gurus on the radio and internet. My dad was a surgeon and I don't think he had the patience for the stock market, because of it's innate lack of morals in one person benefiting from selling high and one person losing from selling low. But I think that the principal idea of sharing risk and splitting profit is a moral one and that there is more good in the stock market than bad.

Starting things where my Dad left off, he used a market timing service to time the market, but he lost faith after a few tough years from 2010-2012. I think if someone has a market timing service that's worked or at least been profitable from the 1980s until now, it is a decent place to start and it's something I want to use. I think some people neglect to give the downside a proper importance. And, the market was going to go back down after 2012 if the government hadn't started quantitative easing, so it made sense that 2010-2012 were not profitable years because the market was high and there was no money to send it higher. At least, with a timing service I don't have to worry about the trend in P/e ratios, which is the most important factor for me. So with Karel starting and proving that his shotgun strategy works, and my dad feeling safe but not rewarded with his market timing service, I can combine the two and should receive profitable trades while remaining safe from a large downturn which may or may not eventually come.

What is the real point of all this? To me, its the fun in picking up where someone left off. Karel and my Dad are the two most enthusiastic people when it comes to the stock market that I know. Beginning with all the experience they learned in recent market cycles should work going forward, unless the market is just one big trick and everyone loses money to the computer traders. At the minimum, I can enjoy keeping up with the stock market, and at the same leisurely pace that those two seemed to enjoy.

The last thing I'll say is why did these two investment participants fail in their attempts? Karel was supposed to copy MrMarket, and if he just sat through to 15% and bought a new company, he would of been fine. And my dad, why didn't he stay with his market timing when he was done researching and finding new services that he liked? I think greed is the answer, and patience. Karel wanted to find more reward when there was none in the market, and that led to him trying to develop new methods without staying with them. There was no money left to look for. My dad also fell prey to short term trading and trying to find a get-rich-quick system to trading. But the truth is there is no system that works for everyone. Together, they didn't want anything more out of the market, but they wanted more out of life. Sometimes you have to look outside of your work or your hobby to find what you really really want. The stock market isn't going to solve all your problems, and if you want something you might need to pay the price first.

So with all that said, I will start subscribing to the market timing service and combine it with Karel's Shotgun Mix Fund in my Screening strategy.