Making Money with the ETF “SPY”

December 1st, 2017

December 1, 2017

Unless you are convinced you know what you are doing, and are willing to put in the time, the most successful market gurus will tell you to invest in an index fund such as SPY and just hold it through thick and thin.

My approach differs only in that I am interested in capturing the upside movement and eliminating as much as I can of the downside. That makes me a market timer.  I have searched for and found a backtested model of the ETF ” SPY” ( January 2000 ) which has served me well, so far, in terms of winning versus losing trades.  I subscribe to a timing service which has backtested the model I like ( 6 trades since 2000 and 5 of the 6 were winners).

The model dictates that whenever the price of SPY is below its 200 day moving average, at any month end, exit the market by selling your entire position in SPY.  Conversely, return to the market or gradually enter the market, when the price of SPY is above its 200 day moving average at month end…as it is now. For me, the best entry point is the month end when SPY turns positive. Not advice.

You originally entered the market with $1 million two years ago.  As of December 31, 2016 you held 4905 shares of SPY valued at $ 1,096, 413.  At today’s price of SPY  $264.87 x 4905 shares, your SPY position is worth $1,299,187,  a profit of $202,743  for 2017….18.49 percent excluding dividends.

Pretty good return for watching grass grow.  The sum total of your work is to make certain the price of SPY is above its 200 day moving average on the last day of the month….as I do and report here. And that is as close to the definition of Capitalism as I can get.

But, for me, retired as I am, that is not quite good enough.  I know SPY is the benchmark by which the performance of all market and portfolio analysts are measured.  And, I know that very few analysts can beat SPY and that Warren Buffett acknowledges this to be true.

So, to prove to myself, that I know a thing or two, I go beyond SPY and invest in situations which conform to my beliefs about how to make money in the market. Thus far in 2017, I am beating the performance of SPY  ( 18.49% ) by 5.57% on the money I have invested in the market.  This money includes stocks, ETFs and Selling Put options.

For my purposes, SPY is the canary in the mine.  I own zero SPY, but I’ll sell everything when the SPY model turns bearish.  My perception is that SPY won’t turn bearish until the yield return on the 10 year US Treasury begins to challenge the earnings yield of SPY with inflation lurking in the background.

Richard Maurice Gore

 

Timing this Market

November 1st, 2017

November 1, 2017

First things first.  The market ( SPY etf ) closed October 31, 2017  at $257.15.

This is 6.29% above SPY’s 200 day moving average which is $241.93.

This means, sail on .  The skies are clear and our 200-day model barometer is not signaling a change in the weather…yet.

I have read that the stock market spends much more time in an uptrend than in a downtrend. Bull markets have an average duration of 97 months while Bear markets average 18 months.  That doesn’t mean Bear markets aren’t violent.  It took SPY a long time to come back from the 56% knockdown of the last Bear market.

The current Buy Signal for SPY is 401 days old.  This was preceded by a sell signal which lasted three months and before that a buy signal which lasted 931 days.  So,  those who have followed the model have enjoyed almost all its profitability and would have avoided a serious downdraft had the sell signal been more than a head fake..

Today starts the beginning of my investment year.  I am always mindful of “Play until May then Go Away”.

So, with the SPY model positive and Obama’s low-interest rates,  I feel very good about everything except the possibility of the market failing to meet Wall Street’s expectations for a tax cut and higher earnings due to developments in Washington DC.

Richard Maurice Gore.

 

 

 

 

Meet My Investment Advisory Committee

October 10th, 2017

October 7, 2017

First a disclosure: I haven’t had a paycheck to deposit in over 10 years,  and my only sources of income are Social Security and capital gains income derived from equity investing.

I don’t have a license to give advice, but I can share with you the sources of my advice.

Some of the members of my Investment Advisory Committee are alive and some are not.  We meet about three times each week,… under the bed covers,…in my mind, between 4 am and 6 am.  Meetings tend to last longer when it is snowing.

Getting serious,

If I want to outperform the recognized market benchmark for performance…the return on the S&P 500 Index, I need to have an edge.  And, truly, investing in the market is a zero-sum game where investors without an edge are likely to lose money.

Permit me to introduce my investment advisors…

#1 Bill Parcells, Hall of Fame Coach of the NY Football Giants:  Shop for your own ingredients and be prepared to eat what you cook.

#2 Confucius:  One chart is worth a thousand words..instant separation of potentially focus worthy investments.

#3 Warren Buffett:  Its about comparing the price you pay for free cash flow per share with the returns from other investments..

#4 Martin Zweig ( ex-Assistant Finance Professor at Iona College and, ultimately, owner of the most expensive apartment in New York City…top two floors of the Pierre Hotel…Predicted the 500 plus point market drop on Louis Rukysers “Wall Street Week ” the Friday before it happened in October 1986.) When interest rates are low, equities tend to appreciate.    By interest rates he means fixed income yields which compete with equity yields for investor dollars.

# 5  Joseph Granville: Technician and Chartist….Volume = Conviction,… in either price direction. The” On Balance Volume ” trendline sets the stage for breakouts.

#6 Jesse Livermore: Nobody ever went to the poorhouse by taking a small profit.

#7 Morningstar: The backstory…is it there? , or is it not there?  a sustainable competitive advantage, a moat to protect operating margins.

#8  Bill Parcells ..again, You are what your record says you are.  Learn from it!

#9 My grandfather, Philip Joseph Tenety:  Quite a few old sayings which I believe contain market logic. For instance, ” A bird ( profit )in hand is worth two in the bush,”…”

Richard Maurice Gore

 

 

 

 

SPY Model Signal : Buy / Sell

September 30th, 2017

September 30, 2017

The September Equity Market is now in the books

Since the model closed September comfortably above its 200-day simple moving average, if you follow the model, by rule, you would continue to hold your position in SPY ( S&P 500 ETF ) until the close of October.

Your theoretical investment in SPY which started at 1 million (4,905 shares ) had a value of  $1,096,413 on December 31, 2017.  Its present value  is $ 1,232,283.  Your unrealized paper profit since December 31, 2017, is $135,868 excluding dividends ( yield 1.90% ).

Appreciation has been 12.39% since January 1. and,  comparing this return to what you can get in a savings account or CDs or the 10 year Treasury is no contest….except for the Market RISK you must bear versus whatever Specific risk you may have in your alternative investments.

I’ve been doing this since August 2010 as a service for friends and people who have retired with a 401K and have very little experience in surviving on Wall Street.  I don’t give guidance, but I allow you to look over my shoulder to see what I see based on a formal education which consists of an undergraduate degree in Economics, a graduate degree in International Finance , five years  in the Overseas Division of  Citibank which included a 2 year stint on the Middle East and African Desks at 55 Wall Street, and a 2 year stint as an officer at Citibank’s Johannesburg subsidiary.

I don’t have a license to give advice and I don’t want one because I am beyond using this web site to make fees or commissions by giving advice or handling investment money

BUT, it would be interesting to know how many of you, if any,  find this blog helpful.  My nephew, who is a website designer, tells me that almost anyone who has commented on this blog has done so to create a link which would serve their own web interest.  So, I’m in the dark on whether or not anyone even reads this blog or finds it helpful.

You can get a better idea of SPY model rules and historical performance by consulting the blog which precedes this indicating the action dictated by the model for September 2017.

Richard Maurice Gore

 

“SPY ” ( S&P 500 Exchange Traded Fund ) Model Says… HOLD

September 1st, 2017

September 1, 2017,

The 4,905 shares of SPY you held on December 31 ….$ 1, 096, 415, are now worth $1, 216, 244.

This is a paper profit of $ 119,829.  ( $14, 979 per month since January 1, 2017 ) excluding dividends.

It may be interesting to compare that return to the estimated appreciation and net rental income on a piece of real estate you own as of December 31.

Investing in SPY requires no work from you except to read the newspaper once each month or listen to the financial news as often as you like. No complaints or annoying calls from tenants, no interaction with handymen or worry about repairs and maintenance. No big commissions when you buy or sell SPY probably in the neighborhood of $5 for the trade.  However, if you were to buy or sell each of the 500 equities in the SPY basket, each trade would cost you $5 in commission ( 500 x $5 = $2500) So that is a $2,495 saving just to buy or sell SPY. Real Estate commissions are a whole different matter.

On the other hand, if at any month end, the price of SPY is less than its 200 day simple moving average, you would be required by the rules of the ” model ” to sell out and move these funds into a money market account at the same brokerage.  This could result in a small loss if you got on board late or a larger loss if the market goes off a cliff during the month. The commission to sell SPY would aapproximate $5  !!, so that is not an obstacle.

There have been only 6 trades in the model since 2000 and 5 have been winners.

When at a subsequent month end,  the price of SPY again is higher than its 200 day moving average, the model would dictate you switch out of the money market and go ” all in ” to SPY.

The object of following this model is to spare you a slow, grinding descent with a paper loss which could approach 50%.  Real estate price declines could make you feel even more locked in and upside down.

The whole point of the SPY Month End Model is to preserve capital by following a trend until it ends and moving to the sidelines.

Rental investments have their risks too.  With what happened in Houston this week, I can remember in the 80s a Houston real estate broker telling me that he wished he could borrow enough money to purchase every vacant apartment in Houston.  Nothing lasts forever.

For me, knowing that SPY is on a buy is the underpinning for my decision to make equity investments far more aggressive than SPY .  My canary in the mine is SPY.  And I never take my eyes off my canary.

For those curious, present investments include exposure to MCO, MCD,MA, ITA, QQQ, DIA, PPA, GLD,NVDA, AAPL, FB, MSFT, AABA( yahoo ), SNE, UNH,SPGI, RTN, HON, KBE, AMZN, BX, XLF, AVAV, SBIO,OA and V.

My SPY investment is up 10.93% since December 31 as indicated above

My investments in the above symbols are up 17.1% since December 31.

BUY or SELL “SPY “

July 31st, 2017

July 31, 2017

On December 31, 2016, you were holding 4,905 shares of SPY @ $223.53 = $1,096,415

On July 31, 2017, your 4905 shares of SPY  @ $246.77, are worth $1,210,415.

Your paper profit for the first seven months of 2017 = $113,991 ( $16,285 per month since January 1 )

The 200 day simple moving average of SPY  is below SPY’s current price of $246.77, so SPY continues on its BUY signal until August 31.

See also June 30 commentary  ( Archives on Right ) for a complete understanding of how I follow the SPY model.

Richard Maurice Gore

Rx for widening wealth gap and disappearing middle class

July 29th, 2017

 

I’ve thought of a few solutions which can be rolled into a REFORM package which the swamp creatures have no intention to pass.

Let us start off by identifying the swamp creatures.   Not all live in Washington DC.  Many live in New York.

The swamp creatures are….

#1 Corporate CEO’s who have surrounded themselves with compliant Boards which enable them to hijack corporations from shareholders.  The multiple of CEO pay to hourly worker pay has increased from a multiple of 24 x  in 1964 to a multiple of 262 x today.

#2 Board Members who do the bidding of CEOs focused on short term profit rather than long term growth and reward CEO’s with huge bonus and separation plans irrespective of results they achieve

#3 Wall Street and money center Banks whose managements bear no risk because they are too big to fail, yet who invest the bank’s assets in proprietary risk instruments knowing that outsize risk begets outsize reward. They get the reward via a huge bonus, while shareholders get the risk.

#4 Lobbyists who have corrupted the staffs of congressmen to the point where the lobbyist actually writes the legislation it wants to be passed. Money provided by ultra rich and special interests.

#5  Congressional staffs with their hands out for lobbyist freebies and promises of future employment etc..

#6 Congressmen who consider their seat a career and use it to feather their own nests.  There are 268 members of Congress ( more than half of the 534 ) who have a net worth exceeding $1 million.  Their interests conflict with those of the middle class.

#7 The ultra rich.  There are 540 billionaires in the USA with a combined net worth of  $2.4 trillion. They can’t find new ways to spend money so they invest it in ways that ensure Congress will help enrich them further and protect them from the middle and working classes.

#8 The professional class of attorneys and accountants that make certain the irrespective of the tax rates, their clients will pay the absolute minimum, and hopefully no taxes.

WHAT IS THE Rx TO DECREASE THE SIZE OF THE EVER WIDENING  WEALTH GAP

1- Focus on developing robots to compete with the low wage scales in developing countries.

2- US Companies are holding  $2.5 trillion in offshore profits which are not being put to productive use. The hope is that the Congress will pass legislation that creates a tax holiday on such earnings. Now you tell me if this happens, will the repatriated profits be used productively,  or will they be used to create huge bonus packages for corporate managements?

3- Creation of apprenticeship re-training programs such as have been created in Germany to recycle displaced workers into higher paying technical jobs in corporations, giving USA  manufacturing sustainable technical advantages against competition from third world – low wage countries.

4- Abandon the notion of trickle down and use fair increases in taxes on ultra rich to fund reductions in the need for student loans and crippling loan interest which forecloses on any possibility for young Americans to accumulate sufficient capital to finance the American dream… home ownership.

5- Remove penalty on IRA funds being used for investment in a home or home improvements.  Wall Street lobbyists not only want you to have all your money invested in Wall Street, but they want to make it easier for you to lose it there.

6- Establish a reasonable ratio between CEO pay and hourly worker pay, after which an escalating surtax is applied.

7- Allow common shareholders a  greater proxy voice in approving CEO team bonus compensation.

8- Strengthen protection for whistle blowers and increase incentive pay for SEC and GAO auditing agents.

9- Eliminate the possibility for congressmen to ” front run “, investing in business developments learned before in closed hearings before being made public

10- Eliminate the use of “earmarks ” attached to legislative bills by congressmen.

11- Term Limits for Representatives ( 3 x 2-year terms )…Senators ( 2 x 6-year terms )

 

Richard Maurice Gore

Searching for a Contender

July 24th, 2017

July 24,, 2017

 

It should be clear to everyone,  except President Trump’s base, that he will not be an eight year President.

I’m assuming that he will not be impeached and/ or  resign.

I’m assuming by 2020 sufficient independents and base will have cut ties with President Trump to open pathways for new candidates, left,  right and center. Which brings me to our topic and my thought we could have done a much better job selecting the candidates in 2016 if we each had had a check list of attributes against which we could have matched  a potential candidate.

Here is my checklist of  attributes and qualifications to help select a man for the most important job in the world, President of the United States of America.

#1   The ability to lead and to effortlessly project an aura of inner strength and quiet confidence.

#2  An unblemished record of integrity, and the ability to project and articulate an uplifting and inspiring p0litical philosophy.

#3  Likeability and the ability to smile and poke fun at himself/ herself.

#4  The ability to focus on important issues and have sufficient energy to work hard on the peoples business.

I believe that our next President needs to focus on general issues of REFORM and not be tied to any issue where the driver is race or religion.  He needs to restore the secular greatness of the American Dream which guarantees every man a shot at the brass ring, if he deserves it,  by virtue of a long string of accomplishments and self-improvements. For the time being, social justice issues would be put on the back burner.  Everyone’s lives matter.   Economic justice, in terms of expanding the middle class,  would be the number one priority, recognizing it to be a springboard for social gains.

#5 Our next President will need to persuade Congress to act against itself in terms of perks, privileges and by putting the middle American agenda ahead of lobbyist issues which fortify and expand the wealth and power of the ultra rich….and Congress.

#6  He should be focused on issues rather than Party. and be willing to work with both sides of the aisle simultaneously.

#7  His personality should be such that no party or group can be so petty as to claim him as theirs.  He should project his intent to be loyal  and answer exclusively to his articulated dream for America.

#8  He should  be able to name his American heroes and embrace them publicly as his personal role models.

#9 He should be a student of history and be able to invoke historical precedents in any discussion of choices of national direction

Now, whom do I have in mind?  No one, except to say a young  Bernie Sanders,  sanitized of  labels like socialist and exhortations for revolution.  Bernie is a REFORMER who tells it  it like it is ….like a  John the Baptist.  Our selection needs to be his worthy successor, imbued with  Bernie’s ideals and the ability to articulate the need for economic justice.

Why don’t you run this list against any of our last election, pre nomination contenders and see who would be the best fit.

 

Richard Maurice Gore

 

 

 

 

June 30: Half Year Update

June 30th, 2017

June 30, 2017  Close

If you are invested in SPY ( Spider S&P 500 Index ETF )…

Here is where you stand after 6 months of 2017.

On December 31, 2016 you held 4905 shares of SPY worth $1,096,415.

Today you still hold the same 4905 shares but they are valued at $1,186,029.

Your paper profit …$ 89,614 or an average of  $14,935 per month for the 6 months.

The longer picture, You would have started with $1 million on March 31, 2016, have been invested for 315 consecutive days and have an investment that has appreciated 20.45%.

You are invested in an ETF called SPY which is a basket of 500 stocks which trades as one stock.

You are a trend follower…following a model which tracks the simple 200 day moving average of SPY’s price.

You invest when the model says to invest and you get out when the model says to get out and go into money market funds at the same brokerage through which you hold SPY.

The model says to invest when the closing price of SPY at any month end is above the  200 day simple moving average of SPY’s price.  I follow this model, so if you see what I am doing you can decide whether to follow me or not.  When SPY ends a month below its 200 day moving average, I move to the sidelines by selling my entire SPY position and investing /depositing the proceeds in the Money Market at the same broker.

What would I do if I haven’t yet invested in SPY and today’s signal is BUY.  I wouldn’t commit all my funds at once.  I would invest a third now and another third if the market is still a buy at the end of July and another third if the market is still a buy at the end of August.  If a sell signal is generated at the end of July or August, I would move to the sidelines and wait to go ” all in ” when the next buy signal is generated.

An alternate strategy, ( non-model ), would be buy in the increments described above and hold and hold and hold and continue to add as you go along.  This is the advice of Warren Buffett and John Bogel of Vanguard. My stomach can’t stand watching my position melt away, so I follow the model which has been backtested to the year 2000. The maximum drawdown for the model has been negative 17.3% whereas the maximum drawdown for buy and hold has been 55.2%. I can’t hold my breath that long.  As a matter of fact, I can’t hold my breath for 17.3% and that is why I am out at the end of any month the model says to fold’em, with me gladly accepting the possibility of a small loss knowing that I have preserved my capital to play again.

Since the year 2000 the model has been involved in 4 winning trades and 1 losing trade.

Going forward, I don’t care what Trump does except to recognize that the market doesn’t like uncertainty and to recognize that if the earnings yield on stocks is greater than the yield on the 10year Treasury Bond the chances are very likely that stocks will go up.  By following the model, all I really need to do, if I am interested,  is listen to half hour news updates on the stock market, examine my  monthly brokerage statement to see how rich I am getting , and see how  the month end closing price of SPY relates to its 200 day moving average ( available by Googling ).

Richard Maurice Gore

SPY wealth tracker as of May 31, 2017

June 1st, 2017

May 31, 2017

SPY $241.44

SPY closed May still on a buy signal initiated March 31, 2016.

This makes 294 consecutive days in this trade…The model says take no action.

The 4,905 shares of SPY you held on December 31 @ $ 223.53 per share ( $ 1,096,415 ) are now worth $1,184,263….an increase of $ 87,848 ……. or 8.00% %. Add on dividends of 1.45% per annum.

Going forward, the case for this market moving higher rests on two assumptions.

#1 Assumption. That earnings yields will continue to be more attractive than fixed income ( bond ) yields.

#2 Assumption. That Donald Trump and the Republicans will continue to sustain a viable relationship.
This means, at a minimum, no nasty surprises ( criminal charges against Trump ) on the legal front.

The Republicans hold the key to Trump’s survival. Impeachment will not take place so long as criminal charges don’t overpower the lesser charge of inappropriate behavior. However, if the Republicans can’t turn their agenda into law, and blame it on the direction of the Trump investigation or his disruptive antics, they may consider it prudent to go after Trump rather than surrender their seats in 2018. But, don’t feel bad for Trump. He really is a Democrat ( without ideological portfolio ) who made a deal with the Republicans to hijack political power from them.

As of right now, only one piece of legislation has made it through the House, the Health Bill. Tax Reform, the Budget, Infrastructure, and Senate reworking of Health will have a major impact on whether the stock market will continue to be patient and await all the good things for business on which the Trump bump rests.

As bad as Trump is, in my opinion, the Republican ” promises” to themselves are worse. Their budget has been described as ” hateful ” and their assumption of 3% growth is grounded in fantasy according to some pretty knowledgeable lawmakers with deep budget experience.

So, the clock is ticking on jobs, jobs, jobs and all the other Trump promises because this market’s pricing assumes all will end well. If it doesn’t end well or begins to show cracks you can expect the market to let you know in no uncertain terms.

Working under SPY’s ” buy ” umbrella, I have sold Twenty QQQ put contracts @ $ 132 June expiry, Two Amazon put contracts, @ $840, expiry August and five Facebook @ $139, expiry June.

And, I have some long positions in the equities indicated below, none of which amounts to more than $10,000. Here, I am not following the SPY model… I following a BUY and HOLD and BUY MORE model when and if the market sells off heavily. CGNX, AMZN, GOOG, RTN, GS, WMT, COST, MSFT, NVDA, YHOO, MCD, WB, AAPL, HON, CRM, INTU, plus 2x larger long positions in ETFs ….RYH, ROBO,  TQQQ. I continuously monitor how QQQ relates to its 50 days moving average as separate from SPY and its 200 day support.

Richard Maurice Gore