How To Avoid Being A Retail Bag Holder

Tyler Durden's picture

Submitted by Daniel Drew via,

Every single boilerplate disclaimer out there says past performance does not predict future returns. They then proceed to tell you about their magical formula, their genie in the lamp, their fibonacci retracement, or their fund manager from Harvard who hasn't blown up his first trading account yet.

What if past performance actually does predict future returns, and it just so happens to be something as simple as mean reversion in weekly price performance?

One chart shows exactly why weekly price performance matters. This is what happened to anyone who only bought after the market was up for the week.

Buying When The Market Is Up

Anyone who buys when the market is up has the odds stacked against him more than he realizes.

An investor who only bought the S&P 500 after it went up and held for a week ended up losing a total of 4% since 1990.

Conversely, anyone who bought the index when it was down between -3.00% and -0.50% for the week nearly matched the market's return without having a major drawdown.

Buying When The Market Is Down

Buying whenever the market was down more than 3.00% for the week was not a good idea. When the market was down that much, something was seriously wrong with the market, and more losses followed.

If the astute investor wanted to leverage his returns, the low volatility of this strategy would certainly allow him to.

Buying When The Market Is Down

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
balz's picture


nyse's picture

Exactly. Rigged game. Rigged everything.. I don't trust any of it.

GRDguy's picture

Agreed. It's illegal to churn customer accounts, but not illegal to churn markets. Beware.

Loftie's picture
Loftie (not verified) GRDguy Oct 11, 2016 9:37 PM

It's also "illegal" to tell the truth about some people.

brada1013567's picture

Hmm I thought you were supposed to sell when it's up

gregga777's picture

They already have nooses and guillotines waiting for their executions.

CheapBastard's picture


James Comey and Loretta Lynch Should Be Impeached for Whitewashing Clinton’s Crimes


Former federal prosecutor says that Hillary obstructed justice and destroyed evidence—with the support of the president himself


Just when one thinks the cavalier cabal of Clinton and her cronies has exhausted all manner of corruption, yet another outrage surfaces, implicating even more people.


Wre're gonna need lots more rope! Hang the criminals first ... we can always give them a fair trial afterwards .........

gregga777's picture

"How To Avoid Being A Retail Bag Holder"

That's easy. Don't put any of your money into the Con Market.

Everyone on Con Street is a swindler. They all fail to acknowledge that growth is dead. Perpetual growth is predicated on cheap, infinite petroleum resources. Unfortunately, this is a finite world and cheap petroleum resources are gone. On average all that remains are petroleum reserves that require ever increasing energy to extract.

When 100% of the extracted petroleum is used to extract, process and transport the petroleum the game will be up. We've already passed the 50% point. The energy gained from petroleum is a fast diminishing return. [See for details.]

No growth means no more wealth gains. In fact, the economy is probably already contracting though that's hidden in the deeply flawed GDP calculations. GDP shows that government spending to dig and fill holes is a gain to GDP. How insane is that?

So, good luck and all that!

Hohum's picture

If the Hills Group is close to right, we're  toast.

Clock Crasher's picture

Unfortunately, this is a finite world and cheap petroleum resources are gone.



Clock Crasher's picture

We're going to need more magnets!

atomp's picture

Where's the chart for the down 3%+ strategy?

Clock Crasher's picture

Check the clock. It's time for volatility regime change you filthy animals.

The Count's picture

Buy low, sell high. Only way to make money.

GPW's picture

Thanks a lot.  I knew I was doing something wrong but could not figure out what it was.

I'm cutting you in for 5 % of future profits.

sevensixtwo's picture

I haven't read the article now but I'm guessing the "how to" is "sell now"

GeoffreyT's picture

Include transaction costs (both spreads and commissions) associated with that strategy, and the excess return would pretty much go away.


One of the best long-term charts I have ever seen (I can't find the fucking thing now) was from the early naughties, and showed what your aggregate portfolio value would be if you allocated the same real dollar value to the S&P every month (including reinvesting dividends). It was pretty sobering.


(Update: I've found a 2003 version without inflation-adjustment - just $500 a month between 1997 and 2003 - the total investment was $39k, and the aggregate return was a loss of $2380). The chart itself is embedded in this story from, which is well worth a read in hindsight, so that you can see that numerate, informed individual saw shit coming.


Since I can't find the cunting thing (or an updated version of the cross-currents one) I'm tempted to just grab some data and do my own... problem is that the dividend reinvestment assumption is a pain in the ass to implement, so it might take me a couple of hours to get it bashed into shape.


Update II... I forgot that back in about 2009 I I prepared a gif to show why (((Mr Magoo))) the "Maestro" was a fucking moron... take a look at just how bad Greenspan was at forecasting equity prices.

One-Eyed-Thong's picture
One-Eyed-Thong (not verified) Oct 11, 2016 6:16 PM

shit.. i dunno...

maybe, don't buy stawks ?


but that's just me

77steel's picture

Tvix or gold . Or both