WE’RE OUTTA HERE! MARKET TIMERS NIX STOCKS: A MAJORITY IN TRADE GROUP SURVEY BAILED IN AUGUST, SAYING WORST IS YET TO COME

With the zig-zagging Dow in recent weeks, market timers are sure earning their keep.

An informal survey of 42 members of the Society of Asset Allocators and Fund Timers, found that prior to Aug. 31 — the day the Dow Jones Industrial Average took a 512-point nosedive — 31 advisers were out of stocks or in a fund that sells short, that is, sells borrowed stock in hopes that its price will fall before it’s due back to the lender.

Still, of the 31 members who bailed out of the market, only four had moved back in as of Wednesday, when the Dow lost 156 points, only to lose another 249 points the next day.

“Our indicators told us to go back in,” says John Sosnowy, chief executive of Simco, an investment advisory firm in Cameron, Tex., who’s one of the four who ventured back last week.

“The selloff triggered something of a contrarian approach on our part.”

Simco, which has more than $150 million under management, incorporates several “sentiment indicators,” such as the level of trading by insiders, in deciding whether to jump in or out of the market, Mr. Sosnowy says.

But most market timers aren’t taking any chances. Kieran Loughman, president of the Loughman Financial Group in Plymouth, Mass., jumped completely out of the market on July 28. And that’s where he is staying — for now.

“It’s going to zero,” Mr. Loughman jokes. “The market is completely oversold.”

Indeed, today’s market timers are a bearish bunch, says Carolyn Mertens, president of the timers society. “There may be some short-term rallies. But overall, the consensus of the membership is that this downward move is not over.”

Simco’s Mr. Sosnowy says his biggest concern is all the uncertainty. “The market hates uncertainty,” he says. “There are still a lot of questions about what is going on in Asia and now there’s a question of Clinton’s future.”

The timers group, which is based in Denver and represents more than 150 registered investment advisers, found that the earliest move out of the market was May 12. Most reported moving out between July 17, when the Dow peaked, and Aug. 5. Seventy-five percent of those moving out of stocks had done so by Aug. 6.

Noting that the big-cap S&P 500-stock index and the small-cap Russell 2000 Index declined 14.5% and 19.4%, respectively, last month, Ms. Mertens says,”This has been a period when investment managers who qualify as timers truly were able to add value to their clients’ portfolios.”

Timers who are out of stock funds have traditionally been positioned in money market or bond funds. But a growing number of society members are using short-selling funds to make money when the market tumbles, Ms. Mertens says.