Wall St Fails!
I really love looking back at predictions, as I usually get a good laugh at most of them. This year is no exception: Wall Street firms got it hopelessly wrong. Here are their predictions for the S&P 500 index at the end of 2024, made at the end of 2023.
Yep, not one was even close. I particularly love JPMorgan’s estimate that missed by 31%. You would think that with over 300,000 employees and $3 trillion assets under management they would have managed a little better than that! Not that any of the others were much better – Oppenheimer was the closest, it only missed by 14%.
Schadenfreude
Yes, it’s an ugly trait, I know, but I’m going to indulge myself a bit longer as there is a reason. Although it amuses me to see how badly they get things wrong, I can’t help but feel sorry for the poor people (their customers) who will be affected by this. They have put their trust in – and given their money to – ‘experts’ who really hadn’t a clue.
These poor people!
Yet people keep giving them their life savings to invest.
The top 12 firms have $28.6 TRILLION funds under management. That is more than 4 times the total annual spend of the US federal government!
It is a massive sum – but behind it are millions of people who have lost money trusting in the experts who (they thought) knew what they were doing.
To me, it is quite tragic, and the reason I wrote the books. My small way of trying to help. It’s certainly not for the money or fame!
Who could have done better?
Practically anyone! Have a look at the chart below. Anyone could have drawn a simple trend line at the end of last year and got to within 6% of the final result.
Not rocket science, and way better than the Wall St ‘experts’.
What about ITM 2024 Results?
That’s good news. At the start of 2024 SPY was trading at $472. Today at time of writing it is $604, up 28%. So, the ITM results are:
50% strike: 56% increase
60% strike: 70% increase
And the ITMS results are:
50% strike: 83% increase
60% strike: 103% increase
I hope that everyone is happy with these results – if not I am not sure how to please you! Personally, I am feeling quite smug.
Give Back - Help Others
If you know anyone who is investing with Wall St in managed funds, please do take pity on them and let them know what their results are likely to be, and that there is a better way!
I am keeping this blog free, so there is no cost to them to follow along.
The fewer people being taken in by these Wall Street sharks masquerading as ‘financial advisers’ and ‘market experts’ the better.
Date of Results & Data Sources
These results are as at market close on the 13th December 2024, and the information on the Wall Street firms comes from Morningstar.
To the markets
Last week was a bit of a consolidation week with no major moves, but both SPYG and the Nasdaq making new highs. The move higher is quite measured, not a euphoric bubble as far as I can see which is a good sign.
SPY Charts
SPY didn’t make a new high this week but is still trading over $600. It may retrace and test the $600 level, but it seems content to consolidate above this level.
On the long term chart it is still in its trading channel.
SPYG Charts
SPYG made a new high this week and appears to be testing support at $90 (although that’s only 3 days of candles so not yet confirmed). Looking good – there may still be a retracement to check support at $88, but lets hope that it doesn’t feel obliged to do that.
On the longer term chart we can see that it is nearing the top of its trading channel.
QQQ Charts
QQQ has made another new high! Albeit with a doji, which shows trepidation about bursting out higher, but on the other hand no real inclination to go lower. Next week will tell.
On the longer term chart, it has finally bounced off the lower bound of the trading channel.
VIX Chart (Volatility)
The VIX is still extremely low (that’s good!)
ITMeter
The week ahead . . .
This week, the Fed meeting is taking center stage, with the Fed expected to cut interest rates by 25 basis points. This should be announced at 2:30 ET on Wednesday. Apart from that, things should be slowing down for the Christmas & New Year period.
The futures
The futures are pretty neutral, but bouncing around a bit. Here’s where they are now, 13 hours to market open.
Next Blog 6th January
I am taking a break until the 6th January, but will, of course, be monitoring the market. I am not expecting any surprises, but if there is anything that needs to be done, I will post here and send out an email.
Until then I wish all my wonderful readers a very merry Christmas and a wonderfully happy and prosperous New Year and:
A Little Xmas Present
I have set up a new idea – an ITM Trader Library with free book downloads (although there’s only one book there right now).
I am not sure how many of you have read ‘Reminiscences of a Stock Operator’ by Jesse Livermore.
It is my favorite stock market book, and many great traders have cited it as being the most valuable advice they had ever had.
So here is some Christmas reading: Reminiscences of a Stock Operator
I really hope that you enjoy it.
X
h
Fingers crossed for a good 3 weeks!
Heather
Q & A
If you would like questions answered by me personally please post them below. If you want to chat to other traders please go to ITM Chat
25 Responses
Dear ITM traders and investors,
Please keep it simple and stick with SPY and SPYG because they have been back tested extensively by Heather Cullen. We can start with SPYG with a few thousand US dollars and begin the ITM journey from there. Happy holidays and happy new year to everyone. Please trade and invest responsibly and respectfully.
Sincerely,
George Henry
Someone in the U.S with more money than I have might be interested in this ITM variant. SPX trades an option that you can’t be assigned and that you get U.S. partial long term tax treatment (so about half your roll money will be taxed as U.S. long term profits which is good for now…and Trump has promised he will keep that tax rate (if he fails you’ll not do worse than SPY tax rate). But you need probably 1/2 million dollars or so to trade it as per your ITM strategies. Bob
Hi Heather, just bought your two books on ITM and ITMB and really enjoying them both. Just wanted to ask that you used SPY etf in your examples which is a little complicated to access here in UK. Would it work just as well using 6 month MES (or even MNQ) options contracts? My understanding is the multiplier would be 5 rather than 100 as in SPY? This would also help smaller account sizes I think. Many thanks Tim
Hi Tim,
I trade from Australia, not the US, and I travel for 3 months of the year – there is no problem trading the US market from anywhere.
I would suggest that you look at Schwab.com or Firstrade.com who both offer international accounts (there are more, but I use both of these, so I know they work). Apart from the time difference (which is not as extreme as it is here in Aus – 12 hours, which is a nuisance, but ITM doesn’t trade that often) these is no difference trading locally or internationally.
ITM has been specifically designed to work on indexes, not individual stocks – of course, you can use the techniques, but we have no idea what the results will be.
So – I wouldn’t try it on UK stocks – that sounds risky. I would recommend getting an international account and trading in the US.
Hope this helps.
h
Dear Heather,
Thank you for your weekly blog as always. Speaking of the performance of the ITM, we need to be careful of losses as well. The ITM performance from 1993 until 2023 grew from $1,000 to $181,000 in 30 years. However, in 2022 the ITM performance dropped from $150,000 to $100,000 about 50% loss. Please be aware of this and stay with ITM patiently and persevere through losses like the year 2022.
Sincerely,
George Halongton
Hi George – ITM does not protect you from losses – but a 50% loss seems a bit extreme! Let me check the figures.
h
Dear Heather,
Thank you for doing that. You are one of the best. Happy Holidays.
Sincerely,
George Henry
HI George – just had a look at 2022.
– Assuming you got in at the start of the year (and the top of the market) at $477 we got the signal on 18 Frb and got out at $429, SPY dropped 10% so ITM would have dropped 20%.
– we got a back in signal on 29th March and got back in at $459. False alarm. We got out again on the 13 April at $443. SPY dropped 3.5% so ITM dropped 7%.
– there were no other trades that year, we were out of the market. Didn’t get back in until 2023.
SO our cumulative losses for 2022 were 27% – not good, but not quite as bad as 50%!
h
Dear Heather,
Thank you for taking your precious time to answer my question. I appreciate it very much. I emailed you with a screenshot to clarify my question further. Thank you so much and happy holidays to you and this wonderful community of ITM Investing.
Sincerely,
George Henry
Hi George – I have replied to the email explaining and with an attachment that you will find interesting.
Merry Xmas and a happy New Year!
h
Something I think about periodically is how influential it is what your first experience is with something. By that I mean, if you started investing during an up market, your first experience will be positive and you will continue to learn and invest. But people that start in a negative market will get discouraged and most likely not continue. I have seen a study about problem gamblers, they had early success and got a dopamine hit from that success and get conditioned to look for that success to recur.
I worry about the young men who got those stimulus checks and Covid and put it to work in the market and just keep trading wildly. The ones who were successful with GameStop, for example are conditioned to that success. But I doubt the staying power of that method.
Heather,
Thanks for an entertaining and informative column all year long. It has been a great way to learn about the options market, and love your global take. Enjoy the holidays and Happy New Year!
Michael
HI Michael – thank you!
I often think it is funny that 98% of my readers are in the U.S. and reading about what someone from Australia thinks about their market!
Australians don’t seem to be interested in the stock market other than trading tips on the latest lithium or ‘sure fire’ mining stocks – but such is life. I think our way is better.
Merry Christmans to you too, and a wonderful new year.
h
Thank you Heather.
A very merry Christmas and a wonderfully happy and prosperous New Year to you too!
I appreciate all the hard work you put into this blog. It is my favorite read of the week.
Hi Ben – thank you!
You have quite made my day, so kind of you to take the time.
Merry Christmas!
h
Hi Heather! Just finished the first book and loved it. From looking at the recent charts, I’m not seeing a cross of any kind recently or coming up. Better to hold off on the DITM calls till the market adjusts? Thanks again!
Hi Luke,
I don’t recommend waiting until the next golden cross – you may be waiting for years! I know it may seem too late to get into a bull trade, but I have addressed that in a couple of posts; Here are some links: https://heathercullen.com/joining-the-bull-run/ , https://heathercullen.com/bull-runs/, https://heathercullen.com/the-bulls-are-back/ and https://heathercullen.com/is-it-too-late/.
There are some others that reference this situation, just use the search on the website or google ‘heather cullen (whatever you are interested in)’ – there are hundreds of blog posts and they cover most of the questions people ask.
Hope this helps.
h
Reminiscences of a Stock Operator is my favorite book on the subject also and has been for decades since I first read it. I would however recommend One look at the 2010 publication of the book that is an Annotated Edition by Jon D. Markman. It is hard to improve upon such a great book but this annotated edition does so in my humble opinion by providing pictures and/or photos and historical notes that really do flesh out the details of the book. This edition just puts more meat on the bones of the words of Edwin Lefevre giving the Reader a fresh historical background to this wonderful book…..”With New Commentary and Insights on the life and Times of Jesse Livermore.”
Hey Tommy – I must have a look at it.
The PDF version that I put up has quite a lot of contemporary photos which are fascinating – and I didn’t know that his second wife shot his son!
Thanks!
h
Merry Christmas, by the way, to you and yours and a Happy and Prosperous New Year.
Thank you Tommy – and to you too!
h
H
My contract expires in January and since my bad habit/s of “ why do it now when I can do it tomorrow “… I rolled it over in Nov and didn’t wait. And since my 3 moves in the market are call, put and roll. I don’t even read financials anymore – it seems that most of it is fluff… a friend told me about PLTR – and my thinking was/is why go thru all that when it’s part of the market pushing the SPY spider up or the QQQ higher anyway. My only question ( that I can think of at 2am ) does buying a 4 month put and selling weeklies on it work… maybe you have address this question before… my reason is that before I started my SPY I was holding Walmart thru the split and thought it was a good position ( and still is ) – but I don’t have to deal with earnings now. But I would like your opinion on weeklies ( just curious )
R
And thank you for the work you’ve done for us.
Hi Randy
couldn’t resist, so looked up the chart of PLTR ( which is in 2 parts because of its recent shift to the Nasdaq).
It has certainly had a big run lately, and is in the hot sector, but the option market doesn’t go out very far (46 days) and the spreads are huge – 30% on ATM options.
But maybe you were talking generally?
I have written about selling weekly calls / puts before – either Google ‘Heather Cullen covered calls’ or go to HeatherCullen.com and put ‘covered calls’ in the search box.
I know you are talking about puts, but the comments and calculations are relevant to both calls and puts.
Hope this helps, but if you have a specific question please get back to me.
h
Hi Heather Hope all is well Just finished both of your books, ITM and the ITMB. Great work. I am not new to the world of stocks and options and have been an investor for quite some time. Primarily value investing. I am now looking over the appendix at the end of ITMB, but am confused about “Premium In and Premium Out. Please clarify as the first trade in ‘93 was Premium In. Should it not be Premium Out?
Roger
HI Roger
I went scurrying to the book to find out – and its not there! As in, the Appendix was in one of the old versions of the book. It was updated in 2023 to include the Biden Bear of 2022-3, and the trades were put in chapter by chapter rather than in an appendix at the end (as it just made the book longer and the printing and eBook delivery prices up (yes, authors have to pay for eBooks to be ‘delivered!).
I don’t have a copu of the old versions but from what you as saying the ‘premium in’ would be buying the put so you paid a premium to get into the trade – does this make sense?
If not please get back to me.
h