It won’t be long before the second half of the original Troubled Asset Relief Program (TARP) funds are authorized to be distributed to banks to help prop up the economy. This $350 billion, or even more, is following the first $350 billion that banks received. While the government’s public intent was for the banks to use this money to help the banks begin lending to each other and to businesses once again, that result never emerged. The funds were instead used to increase assets on balance sheets, acquire smaller institutions, and as Jeff Rose reported, pay bonuses to keep top talent.
None of this seems to have positively affected the economy. It is possible that we might be worse off than we are now had the original TARP funds never been distributed, but since there has been no marked improvement, market sentiment is still pessimistic. This week is projected to present another depressing turn for stocks as more companies declare their earnings and the government will release reports on consumer confidence, housing, and leading economic indicators.
If stocks dip low enough, I may finally have a chance to buy into the stock market at a lower price than I had earlier. If VTSMX, an index of the entire stock market, falls below 18, I will purchase $500 in shares. Buying on the dips has been my experiment with market timing, and it has not worked out well so far. My purchases so far have been at $28.42, $25.56, $21.85, and $18.00, while Friday’s ending price was $20.12. I have faith that this will pay off in the longer term compared to trying to time a specific bottom, but it’s been a losing bet in the short term.
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Flexo:
About your market timing experiment…
How are you defining ’success’? It appears you’re defining success as the stock going up. While this may define the success of a stock, I don’t see this as a success in market timing.
What I see as a success in market timing is comparing the price when you collected the money, vs, when you actually bought the stock. For example if you want to buy a stock that’s currently at $10, if it goes up a bit to $12, then drops to $9, buying it at $9 would be a successful timing, even if the stock then drops to $8. But if that stock goes up to $12, then dips to $11, buying it at 11 was an unsuccessful timing, even if it then skyrockets to $15, because you had the money available to buy it at $10.
I guess what I’m asking in my long drawn out way is for elaboration on what you’re considering successful timing…
-MBirchmeier