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No. of Recommendations: 29
Nice day in the markets, huh?

I forget the exact data, but it's something like only 10 days per year - on average - account for the majority of the gains. Not being in the market on those 10 days can have the obvious effect of altering one's returns.

Being that it is a historical year and depending on what the market does by the close, it would be fitting to have yet another historical record set today for the single largest percentage gain in one day on the Nasdaq. If so, I guess today would qualify as one of those 10 days per year that one would like to have been 'in the market'.

BB
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>>I forget the exact data, but it's something like only 10 days per year - on average - account for the majority of the gains. Not being in the market on those 10 days can have the obvious effect of altering one's returns.<<

beware of statistics. This statement implies that you are out ONLY those ten days. If you do not ride the sucker down by sitting on the sideline for the 50% drop since spring you are still ahead compared to riding it down and doing the happy dance today.

as Sam Clemens said "there are three kinds of lies; lies, damned lies and statistics." ;-P

blue skies and clear waters to all

trimaran

(hoping that those in the market today enjoy their gains but do not get so giddy that they fail to be careful)

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BB writes,

Being that it is a historical year and depending on what the market does by the close, it would be fitting to have yet another historical record set today for the single largest percentage gain in one day on the Nasdaq. If so, I guess today would qualify as one of those 10 days per year that one would like to have been 'in the market'.

Even with today, my ports still down. Now if I was in cash and entered at 2550, yes it would be a good day indeed!! So on that note, so far for the year I would have been better in CD's. One more rally like today & I won't be able to say that. But I'm not counting on it. I've quit hopeing. Like rat says, it's a four letter word in the market.

Levi


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trimaran wrote:

(hoping that those in the market today enjoy their gains but do not get so giddy that they fail to be careful)

I fail to see how my comments were 'giddy'. Rather from the LTB&H side of investing - I've oft read that 'statistic' which must be supported with some type of data about the 10 best days of each year account for the majority of the gains that year. I should go look it up in "Random Walk", but the wife and I are here enjoying some wine and the Christmas tree. Regardless, if one were not 'in the market' on those days and were a LTB&H investor, their performance would suffer.

This statement implies that you are out ONLY those ten days. If you do not ride the sucker down by sitting on the sideline for the 50% drop since spring you are still ahead compared to riding it down and doing the happy dance today.

Once again, the statistic is for a historical perspective. Tossing in to that mix a one year example of a major drop would obviously result in skewed data. Yet, the historical data remains in tact. I don't know about all of your individual stocks, but I have many stocks that are much higher now than they were at the market top this spring in spite of their shares coming down - including stocks with 50 - 100%+ gains by just riding it out. Some of those stocks are not exactly broadband message board material, but I keep a pretty diverse portfolio. Who would have thought things like Cardinal Health, Safeway, Harley Davidson, etc... would give me an impressive 52 week return that surpassed some of my favorite tech stocks?

Then again, you mentioned you were a trader. Everyone knows I'm on the other side of the fence. A tortoise who rides it out waiting for these 10 'best' days each year to meet my goals. If that comes across as 'giddy', I don't intend for it to be taken that way. I am, however, giddy in relationship to the Qualcomm and Texas Instruments cross-license agreement because that was a market that Qualcomm needed access to in order to reach the dual system phone market. Considering the 3G market has been tagged at around $200 Billion, Europe constitutes $150 Billion of that in the study. Hence, Qualcomm now has access through the deal with Texas Instruments. Those kinds of things make me 'giddy' as an investor.

BB

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Yes, but notice that to have gotten the benefit of today's rally, you would have to have bought in either yesterday or last Thursday. If you were in more than a few days before that, you would probably still be way down today (based on $COMPX). We're only even now with the deep V-bottom of 11/13.

This doesn't do much good for the LTBH philosophy. Even if you're bottom fishing -- how are you going to call sharp bottoms like these? Long flat bases maybe, but not these 5G aerobatic dive-pullouts.

-- Scott

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..the tech portfolio would have been up 20% today. All the stocks in my profile.
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This doesn't do much good for the LTBH philosophy. Even if you're bottom fishing -- how are you going to call sharp bottoms like these? Long flat bases maybe, but not these 5G aerobatic dive-pullouts.

Actually it speaks to the benefits of cautiously averaging into a position for those who adhere (or intend to adhere) to a LTB&H style.
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Scott wrote:

Yes, but notice that to have gotten the benefit of today's rally, you would have to have bought in either yesterday or last Thursday. If you were in more than a few days before that, you would probably still be way down today (based on $COMPX). We're only even now with the deep V-bottom of 11/13.

Well, yes - that was my point, Scott. You had to be in the market to benefit from the single largest percentage gain in the history of the Nasdaq. My point wasn't to be giddy, just to point out that history was made today and I would imagine that it will qualify as one of the best 10 days this year for the Nasdaq. Hence my reference to the 'best 10 days' data.

This doesn't do much good for the LTBH philosophy. Even if you're bottom fishing -- how are you going to call sharp bottoms like these? Long flat bases maybe, but not these 5G aerobatic dive-pullouts.

Well, I have no desire to argue about the benefits of compounding one enjoys by being a long term investor vs. short term or intermediate term. They all have their benefits for each individual - as they should. Likewise, all three strategies of long term, short term and intermediate term would have shared the same benefits today by being 'in the market'. That's all I was trying to say. I guess I fail to see what confusion I'm causing by mentioning that. I wasn't looking for a host of "well, if, then, but, perhaps, however, for instance, in case, on the other hand, what if, etc...".

I expect to see some exciting '10 best days' over the next three decades and know that I will always have something invested in the market on those days, because I'm always invested with a portion of my capital.

BB
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BB..that why YA MUST KEEP CORE POSTIONS.....rat always keeps his cores...sure he trades...sure he trims...sure he makes mistakes,,,but has never been 100% in cash since High School....CoredRat
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BB giddy????...sounds like an oxymoron or something??...now rat could get giddy,...that's more rat's M.O.,,,,but BB?????....NO way!!!...and after the beating our cores have taken...who could blame anyone for doing some ratdancing????......GettingGiddyRat
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BruceBrown observed in #18934:
"....it's something like only 10 days per year - on average - account for the majority of the gains. Not being in the market on those 10 days can have the obvious effect of altering one's returns."

Sure beats your other observration:
http://boards.fool.com/Message.asp?mid=13464996


Thx.
cheers,
Albert
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all three strategies of long term, short term and intermediate term would have shared the same benefits today by being 'in the market'.

But Bruce, that's just not true. You can't count today's benefit for an LT without explaining how the LT would have taken advantage of it. If all it did was make up the previous week's losses, which is roughly the case, it doesn't do the LT any good to have been in the market for the last week, never mind the last month. Only someone who got in this morning, yesterday, and/or last Thursday made money today.

The only LT strategy that does that is averaging in, bit by bit, on every dip, but even that strategy is likely to have suffered a loss since 11/1, unless one started doing it just at that point.

What would be more interesting, as far as evaluating the value of being in the market most of the time, would be the total percentage gain on the best 10 days that made new 30-day or 60-day highs, those durations being possibly long enough to allow LT investors to have bought in.

The point is that one can't evaluate a strategy just by saying "well, it would have been in the market today, so it would have made money". One has to look at all decisions the strategy calls for to see how it would have done on the whole. All today's action does for LT is to erase some losses. That's nice, but it's not the same as making gains.

ST and DT made the real money today, buying at the 10am reversal after the drop after the gap up. That was the right play. Alas, I slept in (I'm in California) and missed it.

IT was probably not in the market at all. IT rules require waiting for a follow-through day to confirm the rally.

-- Scott
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You can't count today's benefit for an LT without explaining how the LT would have taken advantage of it.

Sure I can. I was actively adding additional shares of some of my favorites in the past few days. All were purchased for the LT. No great timing indicators. I simply had some cash ready to invest.

I've been too lazy to go to the other end of the house and retrieve my book, but I believe the figure - according to Mike Buckley - is actually 8% of the trading days each year account for the majority of gains for that year. If you compute that figure, then it is not 10 days, but closer to 20 days. However one chooses to interpret that data is up to them.

Scott, I should be wise and stop the tinkle match with you now (although the amount of adult beverage my wife and I just consumed might facilitate my prowess at producing a nice stream this very moment.) I don't think I have a beef with anything your saying. Obviously it would have been better had I not made the original post in the first place. Considering that my money was in the market and I had not sold equities, I can simply say that being in the market today was more rewarding to me than had I sold all of my equities on Thursday, Friday or Monday and not been in the market today.

I guess that I could ask the question "since I was in the market sitting on the recent declines in my portfolio, does that mean that today didn't exist?". How about the value of my portfolio on December 5, 2000 compared to the value on December 5, 1999? Or 1998? Or 1992? Or 1980?

The WC is calling....

BB
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BB,

Sorry to be out of the discussion this afternoon, but a niece's dress rehersal was more important than anything else today. ;-)

My statement about giddiness was not directed at your post. It was simply a statement in response to several conversations I had today with folks who were, IMO quite giddy about a very large gain after the downward grind we've been in for a while. As I said to them, and here, I hope that their enjoyment does not cloud their caution. Emotions get one in trouble in the market both ways. In light of my personal situation, I have become more of a trader than a LTB&H guy. It works for me and I advocate it for nobody but me.

I value the range of opinion and styles expressed here. If nothing else, they often make me think through what I do more clearly in an effort to see if the alternative would work for me. The questioning and thinking through is what I had hoped to impart by questioning a statistic about "10 days" or whatever. Any statistic has to be looked at in a context rather than as an isolated truth.

blue skies and clear waters to all

trimaran
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Bruce,

Yes, I've heard something similar, from statistics (can't remember where, so skeptics are on notice) that more money is (potentially) lost by NOT participating in these explosive up-moves, than is gained by being out of the market during down-moves (ie. much better to be optimistic, and in the market to take advantage, than to be pessimistic, and err on the side of ALWAYS preserving capital by being out of the market).

Makes sense (but I'm quite easy to convince, and always vote in the majority).

Shaken
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being in the market today was more rewarding to me than had I sold all of my equities on Thursday, Friday or Monday

That's certainly true and it's a good point. If the LT investor hasn't cashed out earlier in the bear market, it's not necessarily a good idea to do so near the end -- assuming one can have any confidence one is near the end.

I have recently been encouraging my LT friends to cash out. Perhaps I have done them a disservice.

-- Scott
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Bruce,

Yep, a good day! Missing the wong days can hurt. Fortunately I was in.

As a side note. I see that TMF is rasing some doubt on ORCL. Humm, they make some good points, but was wondering on your take. I thought your comments you sent me on MSFT/INTC/DELL were prudent.

-Q
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Rat,

I think that is the key. I keep most of my money in CORE stocks. The rest I use the T/A and trading. I also only "play" stocks that I would not mind getting stuck with.

-Q
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>>IT rules require waiting for a follow-through day to confirm the rally.<<

Yup. A good rule is a good rule. For many, yesterday was a good day too.

An extraordinary time may need an extraordinary measure.

A good profit is a good profit. Sometimes flexibility is helpful too.

K

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-Q asked:

As a side note. I see that TMF is rasing some doubt on ORCL. Humm, they make some good points, but was wondering on your take. I thought your comments you sent me on MSFT/INTC/DELL were prudent.

Are you talking about TMFFuzzies' article? John del Vecchio is one of my favorite Fool's and has been a great addition to the Fool staff. He does the research reports for Oracle, Siebel, etc... . He knows the gorilla game and is currently working on a DCF spreadsheet where we will be able to plug in three variations of growth scenarios to forecast out and narrow down a valuation range. You might want to make a post on the Gorilla Game board where he frequents to discuss opinions on Oracle if you are interested.

I'll tackle the issue of Oracle in terms of gaming for you if it helps.

I don't mind discussing this because I have talked about the similar issue on this board before as it pertains to the IP/Broadband solutions companies and the 'games' being carried out in front of our eyes (and money). There is a similar scenario between both the enabling hardware side and the network application (or old client/server) side of the business. That being the case, the choices are basically two. The first choice is for the customer to choose an all-in-one/end to end solutions company. The second choice is for the customer to choose an integrated 'best of breed/best in class' product to end up with the version of an all-in-one/end to end solution that meets their desire and needs. Neither is right and neither is wrong. The customer makes the choice.

We do the same in our consumer purchases if you think about it. When you buy a car, you can choose to have the dealer do all the service, purchase tires through the dealer, have repair work done at the dealer, have inspections done at the dealer, etc... . Or you can choose to have the service done elsewhere, buy your tires elsewhere, have a dent repaired elsewhere, have the inspection done elsewhere. Neither decision is right. Neither decision is wrong. You are the customer. You could buy all of your furniture, carpet and drapes at one store and have the same store do all of the installation and transportation if you so desire. Or you could got to best of breed specialty stores for each of the items and contract out the installation and transportation if you so desire. I could go through a varitey of examples, but you get the idea. The choice is to load everything up from the one-stop shop in your shopping basket needs or visit all the specialty shops and get the best of the best in each category. The choice is the customers.

Some examples of the end-to-end or all-in-one solutions companies on the enabling hardware side for IP/Broadband are Cisco and Nortel. Oracle is that example in the software applications market. They want to offer the full gamut of solutions for their end customer. Or at least for that customer that is satisfied with one-stop-shopping. However, there has been a dynamic generational change in application solutions. The previous generation was the client/server architecture. The new generation is the network application architecture. At the moment, we are firmly in the middle of this transition. That means plenty of product from the client/server architecture is still in use and still being sold. However, most of the new product is usurping the old in terms of revenues these days as the transition continues to take place. The need for network applications drives the IP/Broadband (NGN) space and vice versa. They are really interlinked in terms of a major disruptive change from the way computing and applications were performed in the previous generation BI (before Internet).

Both in enabling hardware and enabling software application 'games', interoperability is important. If I can't connect my toaster to your microwave and print out my weekly shopping list from the database of what's needed in the fridge - then my solutions are not interoperating. An IT department will have high turnover if everyone's toaster isn't working with everyone's vacuum cleaner and picking up the kids after school on time - or whatever. The barriers to entry for an enabling hardware game are higher and more difficult than in a software game because the layer of technology is 'lower on the pole'. Still, software code has got to work with software code and interoperability is key. There are thousands of progammers locked in an office

A recent example is a large Nortel client in Germany (Star 21) announced this week that they would be installing a hefty series of M160's and M10's from Juniper Networks because Nortel didn't have the product they needed and they were comfortable with the JUNOS software and hardware. Nortel is a reseller of Juniper gear until they get their own product up and going. Does that mean that once Nortel has their own gear ready to roll that every Nortel customer will choose the Nortel gear over the Juniper? No. Ditto for Cisco. Every Cisco customer is not choosing only Cisco gear. Both Cisco and Nortel have high end routers coming. Juniper has become the niche space leader in the high end and is now working to broaden their solutions as well as work on the next generation of high end gear. Regardless of that, the customers choice will be end-to-end from one vendor or best of breed from a variety of vendors provided interoperability is satisfied.

The same is true in the software application market. The big worry in 1997 and 1998 was if ERP value added applications like supply chain management or content management or customer relation managment would be able to carve out a niche and become best of breed against the all in one ERP system. Well, they did. Aspect Development, i2 Techologies, Siebel Systems, Manugistics, etc... . Now those niche best of breed companies are broadening their solutions to the point that with the generational change from client/server architecture to network application architecture the entire ERP system as we knew it is in jeopardy of being leap-frogged. What was in the previous generation is no longer in the new generation. So Oracle is up against best of breed powerhouses like i2, Siebel, Bea Systems, Ariba, etc... . Oracle believes the all-in-one/end-to-end solution is what the customer wants. That's true for some customers, but IT departments make the choices and spending and revenue patterns have shown that whether we are talking about an enabling hardware of a software game, plenty of revenue spend goes to the 'best of breed' scenario.

That being said, Oracle is the gorilla in database application solutions. Their historical attempt at broadening that gorilla base to also rule supply chain, human relations, customer relation, content management and other areas like procurement has not come to fruition. i2, Siebel, PeopleSoft, etc.... continue to be the gorillas in their niche and are expanding. I don't know what article you are referring to here at the Fool that was raising doubt in regards to Oracle, but just as the 'game' in enabling hardware is being carried out with the companies we discuss here on the broadband board (NGN/IP/Broadband) - so to are the games being carried out in the network application market.

What all of that means is that as an investor in technology, you have to understand this so you know that Oracle is attempting to be the 'one-stop-shop/end-to-end' solutions company. Or Cisco or Nortel. Likewise, you have to understand the niche gorillas and what they have carved out with their best of breed, or first to market or leadership position to become who they are today. Companies like Juniper, Redback, i2, Ariba, Bea Systems, Ciena, Siebel, Brocade, etc... .

I tend to invest my money in both best of breed niche leaders as well as all-in-one/end-to-end solutions companies. I understand Oracle for what Oracle is just as I understand what their competition is for what they are. We call the mature large companies that are gorillas like Intel, Cisco, Oracle and Microsoft "Silverbacks". New emerging powerhouses like Siebel, Qualcomm, JDS Uniphase, i2, Juniper, Brocade, Bea Systems, etc... all followed 'chasm and tornado' strategies with spot on execution.

BB
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CAVEAT: I do not consider market-timing a wise decision for most folks, including myself. Too much discipline and mental toughness required. Also I am not accusing anyone of 'lazy thinking' such as the excerpted author mentions. I just wanted to add the data table and I included the text for context.
However, I do agree w/the author that the argument about "best xx% of days" is weak because it works both for and against market timing.
Let's get some data logs on this fire, folks.

From fundadvice.com at
http://www.fundadvice.com/FEhtml/InvestingBasics/9908/9908.html
======================================================
"I read an article that said timing is a bad idea because if you missed the 40 best days in the market, you would cut your return to about the level of Treasury bills. That's scary!"

"I see that kind of statement in the media from time to time, and they are not only scary, they are misleading and foolish. This is a silly argument that's been around for a long time. It's an easy "score" for lazy critics to capture lazy minds.

"I bet that article didn't tell you what would happen if you were in the market except for the 40 worst days. That would be just as valid, but it would not support the anti-timing point of view.
"No market timing system is designed to avoid only the worst days or the best days, and we've never seen any claim that anybody ever did this. But just for fun, we decided to study the month-by-month returns of the Standard & Poor's 500 Index over a 50-year period. Here is a table that shows what we found:

1949-1998 1,000 grew to CRR*
All 600 months..........$579,039......12.8%
Exclude best 10 months..$181,832......10.5%
Exclude best 20 months..$.78,998.......8.8%
Exclude best 30 months..$.37,979.......7.3%
Exclude best 40 months..$.19,541.......6.0%
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Exclude worst 10 months.$.1,912,206......15.2%
Exclude worst 20 months.$.4,101,879......16.8%
Exclude worst 30 months.$.7,457,207......18.0%
Exclude worst 40 months.$12,608,300......19.0%
*Compound rate of return"
======================================================


"Timing is everything", if you are (un)lucky enough.

Bye
FrankZ
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u are right...only trade what u know..and what u are willing to ride down.....worst come to worst...u got more of something u want more of anyways.....t-rat
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If so, I guess today would qualify as one of those 10 days per year that one would like to have been 'in the market'.


Bruce,

Ironically this statement may only apply to traders and not to LTBH'ers, which is exactly the opposite of the point you are trying to make.

Should the market return to its recent lows (or gasp, go lower), all of these one day gains will most likely be wiped out in our LT ports. The only ones to have benefitted will have been the traders who bought @ Nas 2500 and sold out this morning, for roughly 2 year's worth of profit...lucky bastages. <ggg>

All of this is a big IF. For if the Nasdaq follows thru this week and ramps up your point holds. However, here are the signs as I see them there is still trouble ahead -

* Resistance - Oh, those chart readers. What do they know? Funny how so many of them called the top around 2950, almost exactly where the Nasdaq turned tail and ran.

* Lows generally get retested - I like this one better than the capitulation theory. Both in individual stock and indexes, I have countless times seen "basing periods" and numerous bounces, or tests, off recent lows, before the price turned north sustainably.

* Tuesday was too perfect - Election finality for all intents and purposes, and more importantly, encouraging words from Mr. Greenspan pertaining to potential rate cuts. How does the news get better in the interim? Gore concedes? I think that is mostly priced in. The Fed goes to a neutral stance? It would no longer be news. Tuesday seemed more a panic buying spree than a sustainable start. "<pant, pant> Don't let the train leave without meeeeee!!!!"

* Bear Prints - I cannot verify this. Long before the Nasdaq began its decline in March, I read a few posters discuss bear market characteristics on these boards. The market has since declined, and now more people discuss its characteristics. A prevailing theme is the violent upswings in the market during the bear, which just as quickly subside. Tuesday was as violent an upswing as there ever was. Wednesday got worse as the day progressed. Futures point to lower Thursday, but we'll see.

I'll make the call right now, and gladly eat crow if I am wrong. We will retest the lows on the Nasdaq. Personally I think we have yet to see the real low, but for now I'll keep to my first statement. Does that mean NTAP goes all the way back to the low 40s? Or JNPR touches 100 or lower? I don't know. But we all need to put our money where our mouths are. I'm in for the long term, but not until I feel the Nasdaq has a floor under it (zero doesn't count, lol).

I took advantage of our brief rally. I'm up to 40%+ cash position right now, licking my chops over additions to NTAP, BRCD, JNPR, AMSC, oh the list goes on and on. Many of us consider their prices to be bargains already, but I think the bargains get better in the near future.

Just an educated guess.

DP <- Taking a random walk, lol





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Bruce,

Thank your for a very good explination. I was being confused by the best-of-breed / all-in-one concept.

Thanks
-Q
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