JaiH's Blog : Beat Warren Buffet Service - Free weekly stock Picks

I'm confused. If NCT is a lower risk stock pick, how is it also a high risk stock pick?

Are these Zack's rank 1 stocks?

they will be high beta stocks, but the way they behave over the long term in backtest determines the risk profile of the strategy. DVAX AND XOMA or their sibblings in the subsequent weeks can shoot up or down a lot.
The lower risk stocks picks are all zacks rank 1, but the other strategies can have 2 and 3.

The risk profile is with the strategy, not with stocks. I don't pick stocks and combine them to lower or increase the risk profile. There are basically two strategies at play here one is high risk the other one is low risk and the way they are combined determines the risk profile.of the combined strategy. The combination is done by reseach wizard there is no human input other than a mouse click.

JaiH

It would seem that you are falling into the trap of thinking that a strategy reduces the risks inherent to stocks. This is false. No strategy reduces the risk the tickers inherently have. What strategies do that "seem to reduce risk" is limit the time exposed to adverse price movement, assuming of course, the strategy takes seriously the risk of continued adverse movement when prices are moving adversely.

I am not falling into any traps, the strategies are backtested through two bear markets and the down side risks are explained in my earlier post. But this is stock market anything can happen. The lower risk strategy may lose more money than high risk. I dont time the market, you stay long through thick and thin. There is no correlation between returns and market indicies. Although if market has a bad week you will take a hit because it sinks all boats, but the strategies will recover quickly. I already recovered my correction losses which were subustantial last week in canadian dollar terms.

OK, then. :-) Since you are not using traditional definitions ... what do you mean by "risk" .. please state precisely your definition so that I may understand what you mean by it.

Also please explain how you quantify risk ... "lower", "high", and "medium". I'm totally at a loss as to what they mean when you say it because you use them in context which I am not familiar. Also, please describe how you studied historical data to arrive at your system of assigning risk.

As an example I tested the lower risk strategy for 2008 which was a bad year and the returns were 190% which is consistent with its long term performance even though the market indicies had a bad year. You got bad weeks when the market went down 18% in a week, but you take your losses with your gains. I think you should get off this market timming thinking it does not work. The markets are random you cannot time them. I had some high beta stock during correction lost 22% and 18%, never sold a thing. Only followed my strategy sold only when a week was up and bought new picks irrespective of what the market does. I am doing fine even with those losses.

I define risk as the volatity in your returns. The performance of your strategy should be as close to a straight line as possible on a log scale. The lower risk starategy performace is very close to a straight line. The medium risk has more volatility and is reflected in higher maximum drawdown. The high risk strategy has the most volatility. I tested my strategies with research wizard it has a ten year database.

JaiH,

Market timing doesn't work? Well, it largely depends on how one times the market. Take for example, from Sept 2008 to March 10, 2009. My average gain was over 7% and the ratio of winners exceeded losers 4 to 1. It was made both long and short. In any event, I was there buying on reversal day of the new bull market and commented about it here. I clearly see the huge difference timing made for my capital.

But I do agree that other factors are also important and that timing on persistent trends under-performs buy and hold for the trending ticker. It takes a reversal of trend to reap the benefits of timing.

When I read your strategy it seems precisely the opposite of what the conventional wisdom states. For example, you state:

" ... you stay long through thick and thin" which is like saying "... let losses pile up as long as they will ... they always come back".

Conventional wisdom is to cut losers short.

"Only followed my strategy sold only when a week was up .."


Conventional wisdom says to let winner's run. I will note also that selling when a week is up is a type of market timing.

The lower risk strategy performance is very close to a straight line.

I take from this that the line is always pointed up for all strategies?

Also, thank you for describing your analysis of risk. I appreciate your willingness to respond to the questions. Even while we are in correction, we are months away from a bear market, if that close. Of course that does not mean we can not correct fairly deep here but prices for the indices will recover from this correction. I will be quite interested in how your strategy performs in the next bear market. Hopefully you will be here during the full extent of it.

I take from this that the line is always pointed up for all strategies?

The returns can be postive or negative what do you means by line is always pointed up.

I cant model cut your losses short on the research wizard, so don't use it.

I guess what I meant is that the line (performance) on the log chart is rising at a fairly constant rate of return. Maybe something like 160% or so annually. Is that right?

Selling when the week is up is not market timming, it is more like time diversification.

for the lower rsk strategy it is rising mostly in log scale. For higher risk it has some periods of underperformance.

"Selling when the week is up is not market timing, it is more like time diversification."

:-) You say Toe-MAY-Toe and I say Toe-MAH-Toe. In the end, we still have a round fruit, colored red, with high acid content, and a bunch of tiny seeds.

you stay long through thick and thin" which is like saying "... let losses pile up as long as they will ... they always come back".

The maximum drawdoen in the lower risk strategy is -25% in the tested period. If you cannot handle that loss, you should not be in the equity markets.

The maximum drawdoen in the lower risk strategy is -25% in the tested period. If you cannot handle that loss, you should not be in the equity markets.

LOL.

JaiH. Why would I want to have a drawdown of 25%? To show how I belong in the equity markets? If I am able to avoid a 25% drawdown whilst you endure it, I out-perform you by 33% over the period. Literally you would have to return 33% to catch up on my equity-risk-free abstinence. If I make money from declining prices, then the outperformance, (though not risk free), is much greater and could approach 67% without leverage.

you got your mind all set up, you wont get off this market timming bandwagon. If you could market time you would be a billionair by now, so what are you doing here.

From your response, it would appear that I am tormenting you ... but then I am not doing that. Really I am not.

As for having my mind all set up. My mind is set though you haven't a foggy notion what it is set on.

you cannot torment me, I am not that week. But you are giving bad advice to people reading these posts saying you can avoid losses by market timming. That is what pisses me off.

TB is actually correct whenst he says you can avoid losses by Tai Ming the markets. It's just that he has proven without any doubt many times over that he can't personally do it. All you gotsta do is go read what he said whenst he closed out his very last long play he made...thisn right cheeeya >>> GS :-) Is it any wonder that TB no longer "plays the game" but simply stops by on weekends to see who he can torment? I didn sssthink so *-) 3J

"But you are giving bad advice to people reading these posts saying you can avoid losses by market timming"

Simply not true. If one evaluates my comments I said nothing of the sort. I said every ticker has its intrinsic risk no matter when one enters. I would further say that having statistical support of a high-probability of gain does not remove the intrinsic risk. Also I said, "in so many words", that timing gives the illusion of reducing risk by reducing the time exposed to adverse movement. In reality, every day one is exposed he is exposed to the risk inherent to the ticker.

As for 3J's comment. I am ample evidence that one need not be exposed to the markets all the time. There are times however when market exposure is required for out-performance and other times when market exposure must be abstained (assuming only going long) in order to outperform the market. And yes that is a theory in much the same way JaiH has a theory that his tickers will always come back when they are losing.

As for tormenting JaiH, that is hardly the case. I disagree with him that his lower-risk tickers are low-risk. That disagreement in no way presumes that the tickers will lose, rather, that they have high volatility and indeed have high risk.

NCT is clearly in a downtrend since the beginning of April. I would not buy that stock until at least the MACD has bottomed or $2 low gets taken out. IMHO.

Let me add 2c. IF a strategy is proven reliable over an extended period of time (e.g. 10 years), and IF therefore there is a reasonable presumption that market conditions over the next 10 years will be about the same, then preconceived notions of any kind (timing, volatility, etc.) become irrelevant because the proof is in the numbers. That does not negate the possible value of market timing in other strategies, but it does not involve this specific one (whatever it is).

The IF's however become important--I've commented on caveats for 1wk backtesting with RW; and a 50 year backtest would be even more reassuring than a 10 year.

I believe I understand what JaiH is saying about different portfolio (v. individual security) risks, the portfolio determined by the specific screen; JaiH, are you using maximum drawdowns or some other measure to determine portfolio risk?

I use maximum drawdown as a measure of risk, but also take a look at the log performance chart to see how much risky the strategy is.

OK thanks. (Looked at your picks on Zacks elite and put on supercharts--a RW screen I use gives ICGE this week. I'll go out on a limb and say NCT and GNET look very strong, DVAX speculative and XOMA a dog--don't see a clear common pattern to your system--good luck!)

DVAX and XOMA are from high risk strategy, they not from my primariry strategy.

I use combo screens to generate picks, that is why you don't see a common thread.

IF therefore there is a reasonable presumption that market conditions over the next 10 years will be about the same, then preconceived notions of any kind (timing, volatility, etc.) become irrelevant because the proof is in the numbers.

I guess I would have to say that risk and how JaiH analyzes risk became relevant the moment he portrayed the "risks" of his recommendations. (Not relevant to overall success of strategy nor even relevant to whether the trades would themselves be successful. If this is what you mean by irrelevance then I guess I agree only in that regard). The portrayal of risk by other market participants is always relevant to me and I think to many others.

One last thing, JaiH has a bad habit of misrepresenting others whether it be Mo in another blog or myself in this blog. First, he takes my comments which stand on their own as viable concepts to an academic discussion of the markets, (heck, they aren't even my own individual brand), and then he construes the comments to be giving the advice that "losses can be avoided by market timing".

Fact is, he hasn't a clue about what I am doing or how I do it. Certainly, insufficiently to present my strategy in two words "market timing". And since he doesn't seem to know he is timing the market, and he doesn't understand successful timing methods, I am quite at a loss as to how he is equipped with the knowledge to make the judgment. In any event, the extent to which JaiH is either an expert or something less will eventually be borne out with time. The cream always rises and it stays on top when it gets there.

TB

It would seem that you are falling into the trap of thinking that a strategy reduces the risks inherent to stocks

I don't think you have a clue about what you are talking about. Diversification is a simple strategy which reduces the risk inherent in stocks. So i don't know what you are talking about. you can diversify among various asset classes to reduce the risk further. What do you think large pension fund managers do. Nobody follows your system of limiting exposure to adverse price movements. You are stuck in this market timming bandwagon.

By the way a large percentage of my assests is in fixed income short term bonds so a 25% loss in equity portion does not mean a diddle to me.

I don't think you have a clue about what you are talking about.

OK, but then you also said this ...

. . . so a 25% loss in equity portion does not mean a diddle to me ...

... I use combo screens . . . that is why you don't see a common thread ...

.... I am not that week ....

...Selling when the week is up is not market timming, it is more like time diversification ...

...I define risk as the volatity in your returns ...

JJJ successfully timmed the VIX puts and calls and made 200% return in two days, so maybe TB timmed the market successfully and made 7% return in a bear market. Now you think all the pension fund managers will start timming the VIX puts and calls and make trillions of dollars.

Market timming is like gambling, sometimes it works it makes you feel good and you start thinking you got the markets figured out, but in reality it is just gambling. What you need ia a low risk strategy with limited drawdown and high return. That is what I got and start using the strategy. If you want to make money you have to risk capital losses. There are no risk free ways of making a high return. The best thing to do is to limit your exposure to equity markets like I am doing. Don't listen to charltons who never lose money. I have lost money in the past and will lose money in the future but you have to risk capital losses to make a high return. JJJ playing with these VIX puts and calls is gambling. So stop doing that and invest some money in my strategy. Start investing and stop gambling.

Start investing and stop gambling.

What a hypocrite. LMAO. He holds his picks no longer than a week and he calls that investing. WHUTEVER.

TB

get lost, you will never understand anything.

And so I guess that's because you know it all?

I know that you know nothing from our discussion here today.

How about a truce, guys? I think you both offer constructive observations to this board from different perspectives.

Neurodoc,

I think I gave him the last word. You will also notice except for the comment about his hypocrisy, I didn't make any comments about him on a personal level.

NCT taking some pain here. More to come.

Burtman

All picks cannot be winners, it is moving with the markets.

Wasn't the market up today?

I understand that JaiH. I'm am just adding value. The thing you need to understand is that you wrote a blog... A blog to the players/investors on P&P. There comes responsibility with writing a blog (at least I think so). You wrote that NCT was a low risk. Where did you get that information? Since your post NCT has dropped almost 20% and it's still dropping. You have to understand there are people out there looking for information, Neurodoc happened to agree with you, what if he invested in NCT. Ouch! I don't know, I guess sharing info is good, as long as there is thought put into it.

Burtman
The risks are clearly stated in the introduction to this service read the blog.

Clarification on NCT: I didn't agree NCT was low risk, but it looked strong to me because of a (1) bullish engulfing pattern that day (negated the next) (2) very strong recently increased earnings estimates and a Zacks 1 stock at the time. "Lower" (portfolio) risk (if what JaiH means by that may be valid--a big if), is obviously relative here--these are all small stocks I suspect with high Betas and high volatility. (I didn't buy it but could have and don't advocate blindly following someone else's system). I agree in retrospect with Burtmann's observation about downtrends being important to consider, and the limb I said I was going out on snapped. And I think all of us continuing to be invested in almost any stocks over the past couple of weeks can say Ouch!

On the topic of NCT, JaiH, why didn't you sell when the week was over? Sold everything else (according to plan).

I sold most of it, still got some I buy and sell daily on a weekly basis. Today i will sell the last of NCT.

Meanwhilst, back at the ranch...Warren "the real" Buffoon sees his BRK.B fund get taken down to a new low fer the move yestermaday....68.48 to be eggZackt....and heading lower too! Does "the Buffoon" realize he is no match fo 3J? Stay tuned sports fans...as I werk my majic on the ole coot aaaaall the way down to my previously mentioned target of BRK.B $37 dollahs. *-) 3J

NCT up more than 10% today, so much for Burtmans analysis. TB and Burtman, go find these persistent trends and gamble on them. I will follow my weekly plan.

Warren Buffet is going to eat 3J for lunch today.

Sheeeyot...I'll be cashing outta my VIX putskis somewherst belowst 24.10 and then rollin em ova into calls that'll pay me a mumphs salary by the close on Fri. My TZA putskis come off the bored...back into DRV at oooooh...I dunno...6.50 fer the ride thru 9.41...again, by Fri. At that point BRK.B will be trading at $65 to $67 and "the Buffon" will be calling me on the red phone and beggin me to >>> Make it stop! *-) We'll see..."perhaps" I will make it stop. Alot ovit depends on what joo do. :-) 3J

BTW, fugg the "Buffon" attimatude. Why buy sheeeyit like he buys? GS? Are you FooKing kididng me?!! That POS will face BK cuz o'me. You "may as well" ssstick with sheeeyit thaaas already BK. Watch what I do with this POS today ....just as an example >>> VSTNQ ...now at 1.18. Watch this! *-) 3J

Looka that thur VSTNQ thingy...10% in 10 minutes. Rimmie has gotta be pullin his hair out and wonderin>>. How does he do it?!!! I already toldja....I AM the markets. *-) ....and I will take a BK company and make it "look like" the kang o'thangs..but only ifn I want to. I'll be back with my VSTNQ profuts latta oooon....and whenst you see it...you woan believe it. *-) 3J

JJJ, you are the best. Maybe you should team up with Warren Buffet and get him to 100 billion dollars.

Fugg the Buffoon, NE1 that falls fer that azzhole's lies n deception deserves what they gots comin to em. At least he wuz "kind" enuff to say >>> "Well, I 'guess' if the govmint bailed out GM and the banks they will step up and bail out the individual states if it comes to that" ...thanks fer telemagraphing the "inside" scoop you POS. And I'm sho you'll be thur fer yet anudder 'sweatheart" deal like you got whenst Lehman got taken out too. Meanwhilst, the shareholders in yer funds git thur azzes handed to them. Yeah...we "should" all be like the Buffoon...POS! *-) VSTNQ now at 1.39 now..I'm not finished yet either. But thur's still time to git on bored some AKS calls with me. But only ifn ya wanna make sum muny! *-) 3J

Ooooh well, compooters gone wild agin. "Looks like" EVERYBODY loses this time. Including me! :o Uhhhm, I'd take the 20%er on VSTNQ too...jist fo the halibut. Let's try agin tamarrah...shall we? "Hopefully" Mr Panic will now just plain ole STF...UP!!! LOL 3J

LMAO.

More choice tidbits :-)

I buy and sell daily on a weekly basis.

I sold most of it . .

Followed with ...

NCT up more than 10% today ...

Oh and this ...

I will follow my weekly plan. (which isn't true of NCT)

So here is the story. JaiH is bragging that he was right because NCT was up 10%. Here is what we know. He only lost 11% on NCT on less than half of his original allocation. And only because he didn't follow his back-tested program.

I follow my back tested program. You got a thick skull and you dont understand anything. I get daily picks from research wizard and NCT showed up more than once in the week, so i bought it different days of the week. Why dont you backtest your strategy and see what results you get and then post nonsense in the blogs.

Hahaha ...

I say you are lying. Remember you only have a very small percentage in the markets ( a lie to claim you didn't take in on your smart ass chin during the correction). Now you are buying everyday adding to positions which are held a week.

You don't have any credibility.

I think you are an idiot

How does it feel to be out-performed by over 50% annually by an idiot who hasn't played in 6 months? LOL

I think you should get a subscription to research wizard and then we will be talking in the same language, otherwise you are just wasting my time.

You can apply for VIP status and get it free, that should sound good to you.

If cared enough about it, I would have done it months before you arrived. I am quite satisfied with my own methods though I find others interesting. Anyway, how do you purport to know more about my methods than I know about yours? Sounds to me like we are equally ignorant of the other's method.

I dont know your methods, but I tested with market timming, it does not produce desired results. But then again I dont know what market timming signals you are using.

First of all, everyone times. You time based on signals from research wizard. You apply a "time stop". Which is how you time your exits. You are trading a timing system.

As for my method, I only talk about it on the theoretical level. Here is why. It works real time ... real money. I've paid my dues ... I've earned it by hard work. I share the theory, thinking that 1 in 1000 might discover a method not identical to mine but one sufficiently similar so as to be consistent with the objectives discussed in my last post. In fact, only 1 in a 1000, if that many will discover it.

There are... by the way ... other members of this site whose methods are sufficiently similar for me to identify the theoretical basis of their successful method. They aren't divulging what they have earned either.

Burtman

I looked at the possibility of checking if the stock is trading above its 200 day moving average. It cuts my yearly performance by about 35%, and does not seem to produce any gain. So got rid of the alteration. I don't limit the beta of stocks because these are high performance strategies. The stocks might have high beta, but the lower risk strategy if followed limits the downside in tests to about 25% which is very reasonable considering S&P has a downside of 51% in the same period.