SPY – Good News / Bad News

March 30th, 2018

March 30, 2018

The good news is that there was no Sell signal, yesterday March 30,2018.

The bad news is, if you have been faithful to the dictates of the  SPY 200 day, month end, trading model since December 31,  you are down $18,198, year to date on, the 4,905 shares you have been holding.

SPY , December 31, 2017  , $266.86

SPY , March 30,2018,   $263.15………difference ..( $18,197.55 ) negative

With only 1/3 the above investment, I am ahead $14,969, year to date,  the reason being I don’t invest in SPY ( market risk ), I use SPY only as the canary to tell me whether its ok for me to be in equities ( market risk plus specific risk ) or be on the sidelines. If I didn’t have the financial background or analysis time to invest in Equities, I too would be following the SPY 200 day model and$18,197.55 unrealized loss would not have me worried.

Truth be told, I was ahead $33,000 in equity profits just two weeks ago. Equity Profits can melt fast in a downdraft.

Now, SPY notwithstanding, I am investing only 10% of my investible funds.  I could have been ahead $100,000 if I had all my investible funds invested in equities as of January 1. So I am ahead $80,000 less than what would have been had I followed my convictions 100%. No tears.

From the above, you can conclude that the specific risk of equity investing  ( as opposed to just the market risk of SPY ) can get you if you don’t select the appropriate stocks and ETFs.  I have learned not to ignore what the charts are telling me. To rely on big up days with volume ( conviction ) saying buy….is not enough.  In the case of Amazon, I walked into a whipsaw created by someone’s obsession to “get ” Jeff Bezos, founder of AMZN and owner of the Washington Post. It wouldn’t have happened if I had concluded just from the chart that there is no reason to rush back in.

So, there is a smile on my face only because I now know that charts can not only  help me quickly separate  equities that deserve analysis, but  that charts can be useful in telling me which stocks, above all others, are ready for more money or are not looking like compelling vehicles

Richard Maurice Gore

March 1- SPY persists as a Buy

March 1st, 2018

March 1, 2018

 

I have to admit, as January turned into February with SPY still a BUY, it looked as though SPY’s 200 day moving average would never hold for the entire month and that investors would be mightily tempted to beat the crowd. to the exits.  And , what followed, explains why there have been only 6 sell signals of the month end SPY model since January 1, 2000.

SPY ended February at $ 271.65.

SPY’s 200 day moving average is $ $255.62

By definition, SPY remains on a buy signal.

What this means for me.  I can stay invested in SPY, or take on risk beyond “market ” risk and invest in sector ETFs …” Sector risk”  or even purchase individual equities ” Specific  risk “.  All it means to me is that the market is in an uptrend and you are a trend follower, as I am, you follow the trend to the end.

What this means for you.  I don’t have a license to give advice. So, I won’t , except to say , if I were inclined to start investing in SPY, I would do it incrementally over time, understanding that if a sell signal interrupted my program I would gladly take a small loss rather than hop onboard for a 55% drawdown which is what happened during the last recession.  My goal is to make a reasonable amount of money or , at worst , take a small loss with the knowledge I have protected my capital to play again at the next buy signal.

 

Richard Maurice Gore

 

 

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On a BUY ?…..or What ?

February 8th, 2018

Feb 8, 2018

What I have been saying about interest rates and inflation versus earnings yields is coming true.

The market is adjusting to the fact that the Trump / Republican budget is a calculated gamble that the tax reduction in the face of increased spending will not cause inflation, increased government spending, and a higher national debt to be financed in the bond market via higher interest rates.

The SPY model says we are on a buy signal and it has been right 5 out of 6 times since 2000. The model says hold till the close February 28 and exit if the 200 day moving price average of SPY is higher than SPY at the close that day.

This is an across the board sell off, so the risk is not in stock picking. This is market risk, pure and simple.

I have allowed my emotions to overule the model and I am now 1/3 invested and  still acceptably profitable for the year to date.

The balance I wanted to find is to look forward to the market’s close each day in anticipation of the market climbing, even though I am only settling for 1/3 of what could have been.

On the other hand, if the market continues to sell off, I can console myself that I am only 1/3 invested and positioned to invest 2/3 of my investible funds at lower prices.

The Republicans and Trump are swinging for the fences, instead of slow and easy like Obama and his Federal Reserve.  I can tell you that a home run, or better yet, a Trump home run is far more satisfying to the Donald than a high on-base percentage.

This approach landed him in trouble in Atlantic City and it reached the point where no USA bank would lend him money because of his Chapter 11 bankruptcies.

Now he is carrying the enabling Republicans with him and together they are gambling with the full faith and credit of the United States.

It may very well be that Trump’s approach to borrowing as the self-described ” King of Debt ” is the dreaded black swan the market has long feared.

Richard Maurice Gore

 

 

 

 

Believe it or not !

February 1st, 2018

As of the market close January 31, 2018

What do you make of all the assurances coming from economic numbers?

The answer, at least for me,…….Short-term  ( 30 days ) positive , Long-term…. I’ll follow the SPY trend following model.

Today,  I have consulted with Confucius and he has suggested I take a good look at a chart of SPY, the ETF which represents a basket of 500 stocks which make up the S&P 500 Index. They trade as a single stock and you are in or out for approximately $6.95 per trade, whether you are trading 1 share or 1000 shares of SPY.

For Confucious, a picture was worth a thousand words, For me, a chart is worth 1000 words.

My SPY chart tells me SPY closed January with its price above its 200 day moving average, That means I should either own SPY or some alternate Index ETF which presents in a way you are confident will outperform SPY.

Or, you  can go riskier  and pick a  managed sector ETF such as BOTX ( robotics ).  Good luck!  Or, you can pick an individual risk stock such as AAPL.  Again, good luck.

SPY closed at $266.86 December 31. 2017  It closed today at $ 281.90.  That means the value of your investment in 4,905 shares of SPY grew by $ 73,771.20 just during January.  That’s right, just during January.

Your SPY investment has grown from $1 million  to $ 1,382,000 over the past 2 years. For doing exactly nothing….the very definition of Capitalism.

Is this performance based on the assumption that Trump and the Republicans will grow jobs and hours?  I don’t know,  and I don’t  care.  I follow the model. The model has been backtested to January 1, 2000.  I should be “all in ” until the trend ends  ( any month end SPY’s price ends lower than the 200 day moving average of its price ).

At the present time, my biggest risk seems to be not being fully invested in SPY and ignoring or doubting the upside trend while it lasts.

 

Richard Maurice Gore

 

 

 

SPY -Confession Time

December 30th, 2017

December 30, 2017 for January 1, 2018

Did I outperform Spy for the year?   Yes,  because I earned 19.8% plus dividends 0n my portfolio which operates under the SPY model umbrella while SPY earned only 19.3% plus dividends.

That makes me a pretty good stock picker but, on honest reflection, I put in a far less than stellar performance as a  portfolio manager because I wasn’t fully invested…..expecting a correction that would allow me to reload by buying great stocks at great prices.

By making the assumption of a correction and being invested at only 30%, I cut my return on the total of funds at my disposal to 6.9%.  And, that is a lesson learned,  even though I can console myself by saying nobody ever went to the poor house making less profit and my return was better than any CD or Government Bond.

The learned lesson is that by not following the SPY model exactly, I didn’t follow the trend to the letter and cheated myself in terms of year end result.  My expectation for a correction may still bear fruit, but I did fail in terms of not following the advice I would have given you, if I were to give you advice.

That doesn’t mean I will quit picking stocks, it means 70% of my money will be in SPY, 15% will be in equities and ETFs under the SPY umbrella and 15% will be held out to buy on corrections.

SPY finished the year at $266.86 which on 4,905 shares =  $1, 308,948. versus a starting value of  $1,096,413.

Going forward a couple of facts give me the courage to invest more in SPY.  Interest rates are low, and there has been no expansion in PE multiple over the past year, so that SPY is not in a bubble.  As a trend follower, I am not supposed to even consider these facts as any such thoughts can lead to emotional decisions. And, during 2017 I simply out-thought myself instead of following the trend.

Mea Culpa…Richard

Richard Maurice Gore

 

 

 

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.