August 1 Action Signal

August 1st, 2018

August 1, 2018

 

SPY still on a Buy Signal after 588 days and total return of  43.02%.

Next update September 1, 2018.

See archives going back to August 2010 from additional comments

Richard Maurice Gore

 

Methodology Review- SPY 200 Day Month End Model

June 30th, 2018

June 30, 2018 for July 1, 2018

I’ve been publishing this blog monthly since August 2010.

The purpose was and is to help protect those in the IRA jungle who have a small to medium nest egg at risk.

I don’t have a license to give advice because a license would give me the legal right to monetize my ” expertise “, and that is not what this is about.

What I can say to justify my opinions is that I have had a formal education in economics and finance including graduate school, three years assisting Wall Street ” higher ups ” focusing on Africa and the Middle East, two years as an overseas operations officer of a global bank, 20 years as CEO of a company founded by my father, and 20 years as the USA Country Manager and CEO of the USA subsidiary of an Italian Conglomerate with branches and subsidiaries worldwide.

That being said, my ” expertise “, in my opinion,  boils down to my confidence that I know the difference between real gold and fools gold.

I recognize that your career may not have given you the inclination and expertise to research what you should know before you put your money into an investment idea.

My first piece of advice would be to eliminate the fees and commissions of as many investment professionals as possible. They are not worth the money unless they prove consistently that they can beat the “market “.  And, what is the market?

For you, the market should be, in my opinion, a basket of stocks which contain the 500 largest companies in the USA stock market.  The basket trades as one stock, SPY and you don’t pay 500 commissions to buy 500 stocks. You pay between $5 and $10 per trade irrespective of whether you buy 1000 shares of SPY  or 10 shares of SPY.

You begin by opening an account at a discount brokerage such as Charles Schwab or TD Ameritrade. The account should give you the option of moving money between their low-interest Money Market Fund and actual investments. one of which is in the symbol SPY.

Now here is where it gets interesting.  Warren Buffett of Berkshire Hathaway and John Bogle CEO of Vanguard say invest in a passive index fund or ETF such as SPY and leave it there.  This investment is in the market and carries market risk.  If you wander into no man’s land and purchase individual stocks or a managed investment, you are adding layers of ” specific risk” on top of your market risk.   Buffett and Bogle say don’t go there. They say that a passive ( not managed ) index investment in the S&P 500 ( SPY ) is all you will ever need.

If you followed their advice without considering whether, at the time of your investment, the market is at low tide or high tide, you are accepting ” timing risk” .

Better to break your investment capital into parts (10 to 20 ) and average your cost to achieve a rational investment price per share.  The goal here is to adhere to rule #1 ….don’t lose money. I don’t care whether the consensus is that the market is on a straight up trajectory. The opposite could be true.

Now, here is where Buffett, Bogle and I part company. I  say it is possible to time the market providing your timing mechanism is not your emotions. During the last major downturn, if you had just held SPY, you would have lost 55% of your money at the bottom.  Very difficult to sit through that without panicking and exiting with a big realized loss. If you held tight for the ride,  you would have had to wait almost 10 years before surfacing with zero realized gain.  Not my idea of a good time.

I subscribe to a backtesting service which allowed me to track SPY from January 1, 2000 to the present. During that time you would have been involved in only six trades of which 5 were winners.

The model I follow which I refer to as the  SPY , month end, 200 day moving average model.

Underpinning the model is the acceptance that you will probably leave some money on the table ( not a lot ) at market tops and bottoms. And, there is the possibility of being caught in a straight down plunge, But, you should never be caught in a grinding downdraft which a bear market typically goes through.

An important factor is that you are allowed to trade only at month end.  To do otherwise, according to the model will involve you in a lot of whipsaws and less acceptable results.  By following the model, history has demonstrated you would have made considerably more money since 2000 than ” Buy and Hold.

SPY is currently in the 566th day of an uptrend which has returned 24% per annum, ( 37.71% since its last buy signal, March 31, 2016).  Want more return than that.  Go ahead. Wander into Wall Street’s No Man’s Land where the counterparty in every trade probably knows more than you and, in fact, may have an edge.

Summary: We continue on a BUY signal for SPY . If you are new to this model I would either be patient and keep my investment in the money market ( park ) until you get an exit signal. You would re-enter ” all in ” at the next buy signal following the exit signal.  I’ve supplied enough data here to allow you to make your next decision a safe decision. And none of the possible choices involve you taking on the Specific Risk of individual stocks

 

Richard Maurice Gore

 

 

547 And Counting

May 31st, 2018

May 31, 2018

Following SPY can show you how boring investing can be, even if all hell is breaking out over Italian debt, tariffs etc.

That’s how it goes with SPY.  You can just buy and hold knowing every portfolio manager and hedge fund analyst is breaking his butt just to equal your performance.  Why pay anyone a commission or a handling fee when you can own a passive investment that will perform as well as the USA stock market’s top 500 stocks and trades as if every symbol in the market was compressed into one share.  You can trade as little as one share or a thousand for the brokerage fee of approximately $5 per transaction….total !

For the month ending May 31, 2018 ” SPY ” closed at $271.25 which is  2.98% above SPY’s 200 day moving average.  SPY price above 200 day moving average on last day of any month,  means you can leave your SPY investment undisturbed as it has been for the past 547 days, returning 37.97% since the buy signal on March 31, 2016.  Of course, year to date SPY has appreciated only 1.64%, from  $266.86 on January 1 to $271.25 now.   That is what the top 500 companies in the USA have achieved year to date.  Before this year is over, you will either have been told by the 200 day model  to get out of the market, or the market will have appreciated or stayed the same and 90% of the analysts will have performed worse than you,… your lack of knowledge, interest or time notwithstanding. Even Warren Buffett says SPY is the benchmark nut to crack.

So you might ask, why would someone even bother to own any domestic stock other than SPY.?  The answer is a combination of a quest for recognition ( applause ), a better return ( but at more risk ) and higher fees to you for your advice ( if you are part of the fortunate 10% to outperform SPY ).

My reason for picking investments other than SPY is that it gives me a sense of security to know that I am smarter than the market.  So, I use SPY just as an indicator that its safe to go offshore for bigger fish .  I leave the market when the SPY 200-day month end signal says step aside or…. lets beach this sucker !.

As of yesterday’s close, I was 10.8% above even for the year, which allows me to stand admiringly in front of the mirror with a smile on my face.  If  I were down 10.8%, I’d be trying like the devil to find out where I went wrong and that could have been as simple as ignoring the old adage ” play till May, then go away “.

I know that when I venture beyond SPY, I am leaving the relative safety of market risk and taking on an ocean of specific risk.  This means you better learn how to pick stocks and when to say adieu….understanding that no one ever went to the poor house taking a smaller profit.  Or being like a boxer. Hit, but don’t get hit !

Some of the stocks I am invested in are AMZN, FB, MSFT, TWTR, MA, MCO. JPM, GOOG.

Some of the ETFs I am invested in are SPY, DIA, QQQ, MDY, IWM, ITA, SBIO, XBI.

Oh yes, one final word. I don’t have a license to give financial advice, so take all of this free financial chatter as being worth zero.

Richard Maurice Gore

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.