The Company You Keep

April 25th, 2017

April 25, 2017

Taking dead aim at May 1….Ever mindful of the admonition ” Play till May then go away ! ”

Aware that a possible government close down April 30 is a definite adverse market risk.

Aware that there are potential ” black swans ” in the pond such as Korea etc.

Nevertheless a trend follower and understanding that interest yields on bonds are lower than earnings yields on stocks.

Therefore I am operating in the market, ( no options at present ), under the protection of the ” SPY ” 200 day moving average umbrella.

Warren Buffett ( Berkshire Hathaway ) and John Vogel ( Vanguard ) would tell you that ” SPY ” an ETF passively representing the S&P 500 Index is the performance benchmark against which all portfolio managers are measured ( including Mutual Funds, and Hedge Funds etc ). The implication is why pay any professional to actively manage a portfolio if he can’t outperform a passive index of the 500 largest USA companies.

SPY….November 1, 2016 to April 24, 2017…positive gain
of 11.58% ( and that doesn’t include a 1.91% dividend… ( SPY is the benchmark )

So, what am I holding outperforming SPY ?

ETFs : QQQ ( passive ) 14.68%…ITA ( 17.74 %)…XLF ( 19.96% )…KBE ( 24.83% )…ROBO ( 18.84% )

SBIO ( 18.51% )

As a comparison reference GOLD ( GLD ) since November 1…negative 0.38%…VDE ( energy ) negative 0.36%.

Stocks: GS ( 25.24% )…AMZN ( 14.89% )…FB ( 11.05% ** thats right SPY is outperforming Facebook )
MCO ( 18.84% )…TMUS ( 33.75% )…C ( 20.94% ) AAPL ( 26.51% ) MSFT ( 12.70% ) GOOG ( 8.52 % )** thats right, SPY is outperforming GOOGLE !

This is the company I am presently keeping with full confidence SPY will not sink below its 200 day moving average as of the close Friday.

To make this list my chart analysis must be positive and I need to like the story underpinning the market’s action…as well as an analysis which includes PEG ratios, Debt / Equity, free cash flow/ price etc.

Richard Maurice Gore

Play Till May ?

April 15th, 2017

April 15,2017

As someone who has seen his year to date profit wiped out during the first 10 days of May, I respect this well know admonition and pay extra special attention to the signals the market is giving off as we approach May 1.

As anyone who regularly reads this blog knows, I respect ( even more ) the 200 day timing model for the ETF “SPY” ( the top 500 USA stocks )which trades as a basket . On Tuesday SPY’s price, $232.41, broke below its 50 day moving average ( $234.51 ), ( support ) so I’ve postponed any new market purchases and will wait to see what develops this week. SPY’s 200 day moving average, $220.75 sits 5.1% below where we are now.

My chart readings for stocks are settling into a performance pattern I would describe as anemic.

More and more, people are referring to the market’s performance between November 1 and now as ” the Trump Bump “, an expression of confidence that Trump will deliver on his promises. Now, with investigations on his relationship with Russia heating up combined with failures to deliver a voting victory on health care, demands for his tax returns, bellicose saber rattling by Korea and Putin, and what seems to be a pivot toward liberals, The ” bump ” has become a ” bimp ” and uncertainty is creeping in. Uncertainty and higher stock prices seldom travel in the same direction.

But, but, but, interest rates are still low and that means stock yields can compete with bond yields. The USA is navigating through troubled international waters and even though Trump says he would favor a weaker dollar ( higher interest rates ) the USA is seen as a safe haven and that means international demand for the dollar, and both stocks and bonds.

Me ? I haven’t been as heavily invested as I should have been and that means a lower overall performance for my portfolio during the Trump Bump even though I was holding the right cards. I’m still learning ! But, smallerlosses if SPY nose dives through its 200 day moving average on the 30th.

My biggest equity position is 3 April PUTS on Amazon at 860, 855 and 840.
My biggest ETF position is with QQQ.

I’ll get aggressive again as SPY clears the April 30th hurdle and my individual stock charts begin to
show a pattern of accumulation rather than distribution.

Richard Maurice Gore

No April Foolin – SPY Model Still Positive

April 1st, 2017

April 1, 2017

SPY ended March at $ 235.74of which is 7.49% above its 200 day simple moving average of $219.32.

This means that SPY is still on a BUY signal.

The 4,905 shares you theoretically hold are now worth $1,156,305 versus $1,096,415 on December 31, 2016. This means your unrealized profit for the first 3 months of 2017 is $59,890, excluding dividends of 2.36%

I always like to compare financial market profits to rental profits. Theoretically, you have received $19,963 per month rent ( with no dividends, BUT with no expenses or aggravation ) for 3 months on an investment property in which you have invested $1,096,000.

The current BUY signal was generated March 31, 2016 ( 253 days ago ). Since that date SPY has appreciated 17.08% excluding dividends which are 2.36% per annum. So, looking back 1 year your total return in SPY has been 19.44%.

Truthfully, I would have sold my position last week based on the possible inability of the Trump administration to make changes that would deliver higher profits and lower taxes. The financial markets abhor uncertainty. BUT, I realize I can’t predict the market at any specific time. All I can predict is that I will follow the trend dictates of my timing model and probably not head for the exits on time. On the other hand I can predict I will not be savaged by being long the market and most likely will escape with a decent profit instead of sitting on the fence, doing nothing to protect my profit, and consoling myself that I am a long term investor. The model will not allow me to sit still for anywhere remotely close to a 50% round trip which could take ten years to get back to breakeven as it did during the last grand recession.

I am sufficiently in the market to cheer for a daily rise and sufficiently out, thanks to Trump, to know it pays to have a reserve on the sidelines.

In addition to long positions ( primarily equities AMZN and GS ) (primarily ETFs QQQ, ITA, KBE, XLF ) I have written promises to accept assignment of certain stocks and ETFs ( Puts ) at lower prices.

Richard Maurice Gore

SPY is an Exchange Traded Fund. It is a basket containing all 500 names in the Standard & Poors 500 Index representing the largest of the large cap stocks appearing in the Index 500. In a word, it is the USA Stock market. It is passive in that it is not managed by a portfolio manager. Very few of the components in the index change from year to year. Its annual performance result is the benchmark against which all portfolio managers are measured to determine whether their expertise is worth a fee or commission. It eliminates ( spreads ) the ” specific risk ” of investing in a specific stock over 500 names and is said to contain only ” market risk ” making it attractive to people who want to be in the stock market, but not subject to the risks associated with any one company.

February 28, 2017… And the Buy Goes On.

February 28th, 2017

Market close February 28, 2017…

SPY ended the month at $236.55 per share, while its 200-day simple Moving Average closed the month at $218.01 per share. That means SPY is still on a Buy Signal.

On December 31, 2016 your 4905 shares of SPY were worth $1,096,415. These shares are now worth $ 1,160,425. So for the two months of 1917 your total profit on SPY, including dividends, is $64,010 or
$32,000 per month. Who said investing in Index ETFs is boring?

The question is where to from here? The model says you should stay invested until a sell is generated at a month end. The model has kept you invested for the past 229 days and given you 17.25% on your investment ( including dividends ).

Think you can do better ? or….afraid to lose what you have?

The following is not advice. My thinking for myself ( very dangerous ) is that the market is due for a pause within the context of the existing buy signal. I have sold everything and I am redeploying my money in 100 shares of each of the following ETFs…SPY, VTI, ITA, KBE, XLF ( 200 shares ), QQQ. At the same time I have written 1 put contract ( 100 shares per contract ), except VTI.for assignment to me at a price which approximates the 50 day moving average price of each ETF purchased. This will allow me to stay invested, receive a premium for each put contract and maybe get assigned the shares at a price that will allow me to average down the price of my long positions.

Richard Maurice Gore

Why I Can’t Support Donald Trump

February 11th, 2017

February 11, 2017

I’ve posted quite a few Trump related comments on Facebook, and the response from Trump supporters has been to accuse me of nonobjectivity, hating Trump, of being a leftist, of being unable to face Hillary’s loss etc. Now, they are saying I should support the President no matter what.

After a while, Facebook comments are difficult to resurrect. In the spirit of ” I told you so “, I believe the time has come for me to go on the record and accept the advice of my old mentor….verba volant, scriptet manent ( sic )….words fly away, written words remain where they land.

I’ve never been against any office holder as much as I have been against President Trump. And, I’ve wondered why. Underlying everything, is his history of arrogance, of belittling people, of self- promotion beyond bragging, of his gargantuan need for acclaim and attentionfame. OK..so I don’t like him personally.

But that doesn’t mean I can’t support him to accomplish goals for America. I would just draw a line in the sand when it comes to allowing him to delegitimize other branches of our government as a means to a position beyond Presiden t …as Emperor Trump.

Here is my Facebook Post of February 10, 2017 defending my objectivity.

Donald Trump has been caught in so many lies which offer compelling evidence of a delusional personality, I find it quite difficult to understand how anyone can believe any Trump utterance.

I do not hate Trump. I subscribe to many of his ideas which I find preferable to those of the Democrats.

Neither am I a leftist. I would describe myself as a grass roots capitalist. I haven’t been paid for an hour of work in more than 10 years and I didn’t work more than 20 hours per week in the 30 years prior to that. In other words, mostly my money works for me and I fit the classic description of a capitalist.

That I have had formal training as an overseas lending officer for a large international bank, allows me, I hope, to consider Trump in an objective and dispassionate way. In my judgment,(opinion), President Trump is missing the third ” C ” of Capital, Capacity, and Character, and that means I would not want him as a business partner or consider lending him money without a strong third party guarantee.

As for me being accused of being a socialist-leftist, I would submit as evidence to the contrary, a two-year 24/7 struggle with the Teamsters where I needed to walk a fine line between my ” Commissar ” at the National Labor Relations Board and invitations to meet informally at a bar on Westchester Avenue in the east Bronx, for proposals which I could consider in the context of ” a short life “. Long story short, we won, and the Union filed to decertify its representation of its bargaining unit. We paid the strikers a fair separation benefit and hired the permanent replacements.

However, I will admit my grass roots capitalist self-description should be modified to the extent that it includes ” leave no deserving man behind as in 100% tuition refund plan for all full-time employees at my company

I know Donald Trump. I’ve seen him before, mostly on film and in history books. His character attributes
are irrepressible, inimitable and bigger than life. But trust me, he is not George Washington, Abe Lincoln, Harry Truman, or Ronald Reagan.

All that being said, I would have voted for him if I didn’t consider him delusional to an unhealthy
degree with a propensity for reactive impulsiveness. To me that spells danger.

All too bad for the struggle we may need to go through,

Richard Maurice Gore

SPY STILL ON ” BUY “

February 1st, 2017

February 1, 2017

SPY ended January 2017 at $227.24 while SPYs 200 day moving closing price average is $215.76.

This means SPY remains on a BUY signal.

It also means on the 4905 shares you held on December 31, 2016 you now have an unrealized profit of $18.198 plus dividends.

For me, it means I am free to invest more in SPY or any other ETF or stock.

For you, it means you have the same freedom, providing you do the underlying work that gives you confidence to invest in a specific ETF or Equity situation.

Looking over my shoulder, my largest ETF position is in IWM , the Russell 2000, smaller cap stocks because it is held that small caps should do better in a de-regulated enviornment and because most of these stocks do business primarily in the USA and do not have the currency translation problems of internationaly active USA stocks

Looking over my shoulder, my largest equity position is in AMZN which seems to be in the process of crushing brick and mortar retailers. I have written put contracts which obligate me to purchase 100 shares at $760 if AMZN is below that price on February 24 and 100 shares at $800 if AMZN is below $800 on February 24. AMZN closed yesterday at $822.52.

Interest rates favor Equities and the only possible cloud on the horizon would be the uncertainty relating to the market’s assessment of the Trump Presidency.

Richard Maurice Gore

Methodology: A Memo to Me

January 21st, 2017

January 21, 2017

I don’t need to spend as much of my time, on the stock market, as I used to.

I’m getting much better results than I used to, and I understand why that is so. The only thing holding me back from a much better annual monetary result is my reluctance to invest a greater portion of my investment funds in positions that I really believe in.

However, Market Rule number 1 is not to lose capital. Market Rule number 2 is to invest no more than 5% of my investment funds in any one position. Rule 3 is that no one ever went to the poor house taking a smaller profit. When I break any of these rules it is because I assess my chances are much better than even.

Leaving aside my safest investment … SPY. ( only market risk -last year, better than 11% including dividends…no trades ), the basis of my macro approach is to decide to what degree it is safe to invest in stocks.

The present situation, low USA fixed income yields versus USA stock yields (earnings divided by price ), gives the stock market a clear advantage. Example: 2.5% interest on a risk-free 10 year bond versus the earnings yield on equities ( S&P 500 ), roughly 2.5%, BUT, the potential growth of the underlying 500 largest USA Companies included in the S&P 500 Index , tilts the decision in favor of the stock market….SPY. Martin Zweig who called the 500 point plus downdraft in October 1986 and who owned the most expensive apartment in Manhattan ( top two floors of the Hotel Pierre ) stated simply that the centerpiece of his thinking is that in a low interest rate enviornment, stocks tend to go up. And, with increasing interest rates, stocks tend to decline.

In addition , presently , the S&P 500 ( SPY ) was above its 200 day moving average at last month end month end…trend positive. “Let the trend be you friend till the end ”

Reading the investment climate is a huge determinant on how much market risk I’m willing to take on. For instance the post-election market rally has been referred to as the Trump rally But, in a Trump market the wind could shift with just one Tweet . So, you can be sure market players associate Trump’s name with market volatility and uncertainty.

The result is that no matter how beneficial Trump’s economic program promises to be, lots of people think he is unpredictble and that the market has gotten ahead of itself. Everyone is keeping an eye on the exits and no one wants to be caught napping. On the other hand, the present situation does not add up to a euphoric situation which normally signals a top.

The more I read the climate/wind as unpredictable, the more likely I am to keep my money in a passive index fund, SPY, and not in specific stocks.

Anytime I venture into individual stocks, I am saying that conditions are safe enough for me to attempt to outperform SPY. And, that is an unattainable goal for 80% to 90% of professional portfolio managers. Even the great Warren Buffett admits that in most years beating SPY is exceedingly difficult.

My quest to beat SPY is part hubris , part seeking a return that will balance an increasing annual expense budget. ( I retired January 1, 2007 ) and part, a learning exercise which I find enjoyable,… an absorbing game of me versus SPY….a 365 day mental marathon. To me , the stock market is a 65 Chevvy, whose engine I enjoy working on.

The stocks I follow are those that have been winnowed from a stream of interesting names from any written or verbal source for further investigation. Since I don’t have a lot of time, cursory investigation is quick and ruthless. And, the most efficient way for me to come to a fast and ruthless conclusion is the stock chart….Blink. ” What you see is what you get ! ” Thank you Confucius !

Once I select a stock for further evaluation, I investigate other data areas such as the back story underpining its chart, the relationship of free cash flow per share to price per share to determine how quickly my investment will be repaid. I am also interested in earnings growth, but even more important, how much am I paying for that growth ( PEG Ratio ).

Other measures I consider are debt to equity ratio, dividends, share buyback program, debt paydown program, need for cash for R&D and cap ex-investment etc., whether growth has been organic or based on acquisition.

Once I decide I would like to own the stock, the next question is when. So, the name becomes one of the 150 or so stock charts I review each weekend, ( my farm system ! ). Each stock is assigned a weekly score of 1 to 5. A stock rated 5 is a buy, 4, a very small monitoring position, 3 means do nothing, 2 is a sell and 1 means cut from the chart review list if the back story confirms chart action.. Like everything in life, there are exceptions.

I started this blog in August 2010 with the intention of recording my journey and that of my 401K funds through the jungle I refer to as Wall Street. Since I have a degree in Economics and in International Finance, and was trained by Citibank to become a resident overseas bank officer, I wasn’t about to sit myself down at the desk of my bank investment advisor and give them a slice off the top.

What I didn’t have, by design, was a licence to give financial advice for remuneration. What I do have are plenty of associates and friends who I believe can benefit financially ( or at least preserve their capital ) by looking over my shoulder…no charge.. If I have helped at all , a thank you will do.

Richard Maurice Gore

SPY Strategy for 2017

January 1st, 2017

January 1, 2017

Looking forward to 2017.

I have 4,905 shares of SPY at a cost basis of $203.87. SPY presently $223.53

But, I’m at a fork in the road in determining how I follow SPY (Buy and Hold or follow the 200 Moving Average Model) and then, whether or not I should consider including other passive index funds which may do better than SPY.

Last year SPY Buy and Hold was the way to go… Except for IWM ( 21,6% which is twice as volatile )

If you had bought and held SPY, your shares would have appreciated by 9.64%, excluding dividends

If you had followed the 200 day Moving Average Model and exited December 31, 2015 and repurchased at the March 31, buy signal, you would now have 4,785 shares worth $ 1,069,591 plus dividends, not 4,905 shares worth 1,096,415, plus dividends.

As a separate test, I intend to follow both Buy and Hold and the 200 day average Model in 2017. I will take half the $116,500 market value and divide it in two,$ 558,250 each. Part A will be Buy and Hold. Part B will follow the Model.

But, I need to wait for the next Sell and then Buy Signals ( earliest sell January 31 ) to implement the plan.

Here is how other passive index ETFs compared with SPY over 12 months…including dividends.

SPY…12%,

Russell 1000 ( SPY plus next group of 501-1000 ) 12%,

IWM ( Russell 2000, (1000 -3000 ) 21.6% ( the generals are following the infantry..supposedly a good sign )

Dow …16.4 %

Richard Maurice Gore

Congratulations..2016 Result for SPY…11.65%

December 31st, 2016

December 30, 2016

You can close the books on 2016 by congratulating yourself for having stayed the course on SPY.

The 4,905 shares you started with on January 1, 2016 ( $1,000,000 ) are now worth $1,096,415. a gain of 9.64% and, don’t forget to add on the dividend yield of 2.01%….11.65% total appreciation.

Your $ 1 million is now worth $1,116,500……a gain of $116,500.

Your SPY portfolio…with one entry, SPY alone, has outperformed 84% of actively managed portfolios over the past 5 years.

Your welcome.

Happy New Year !

Richard Maurice Gore

November 30, 2016 SPY Signal = HOLD

November 30th, 2016

November 30, 2016

Your $1,000,000 investment in SPY ( 4905 shares )as from January 1, 2016 is now worth $1,080,964.

That is a gain of $80,964 for watching grass grow. ( excluding dividends ).

No commission, no risk associated with owning a specific equity, and no share going to a third party investment advisor.

You can also take comfort in knowing that SPY is the standard against which all professional portfolio managers are measured and in knowing that more than 80% don’t outperform SPY.

What is ahead ? Just market risk for the 500 big cap USA companies in your SPY portfolio. And, that risk will be addressed by the fact that, as a trend follower, I will not sit still for a protracted ride down. At any month end where the price of SPY is below SPYs 200 day trailing average of price, I will exit the market.

As of November 30, 2016 the price of SPY was $220.34 while its 200 day moving average was $209.47 and that is why I am staying in the market and holding SPY.

Richard Maurice Gore