Subject: Re: OT Cash balances keep soaring
Curious how a trading system off this might work vs. buy and hold...

There isn't any very obvious way, because no matter what you do at the bottom, you have to undo it at some point.

Annualized average rates of return are quite good even out to 2 years after a signal, so you don't have to act too quickly.

The closest is what I have sometimes suggested: wait for Berkshire to be cheap, say <1.35 P/B or something. Sell half your stock and use all the proceeds to buy the deepest in the money, longest dated call options you can. Roll them forward if needed. The first time the stock trades at a good level (say >1.55 P/B), sell all the call options and put the proceeds back into regular stock.

So, you could do something similar I guess: on a major market bottom signal, switch from being an index fund holder to a holder of calls on the index or index fund. Switch back perhaps after the market has risen 30% or some such number.

It's good to recognize that market bottoms tend to be very pointy. The drops are fast, and so are the bounces, so things tend to be very volatile just around about the time that you want to be all-in and more. Even with a very good signal, the odds are that you won't nail the bottom, maybe just near an intermediate bottom before or after "the" bottom. One's account balance goes up and down a lot for a while. It's simple, but not easy.

Jim