“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

April 30 SPY Signal..

April 29th, 2017

April 30, 2017

Your 4,905 share investment in SPY, $ 1,096,415 as of the close December 31, 2016, is now worth
$1,167,782.

SPY’s April 28 price $238.08 is comfortably above its 200 day moving average price of $222.18.

The rule says stay invested.

Richard Maurice Gore

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.