Archive for June, 2012

” Stockpicker’s Market “

Thursday, June 28th, 2012

June 28-2012

Everytime I hear that expression, I almost laugh.

Do you personally know anyone , including yourself, who has the expertise to successfully and consistently find, analyse , select and manage a portfolio of  20 specific stocks ? (  5% exposure per investment rule  )  And,  if you should be so fortunate, what about knowing when to sell.  Have you ever heard of the expression ” Stockseller’s Market ” ?….. I haven’t !

If  , nevertheless, you want to buy individual stocks, then please understand you and your money are located dead smack in the center of Wall Street’s  information jungle. Here, ” Advisor Risk  ”  gets added to the entire spectrum of  risks including “Specific Risk”;  those unique risks relating to holding a specific stock.   Advisor risk includes fees for well intentioned but,  maybe,  not such good results.   You may emerge from the jungle, but chances are you’ll emerge  with a chunk of  your  money left behind.

Can you fault any advisor who suggested JPM  a month ago ?  When you woke up this morning and discovered that JPM’s derivitive hedge investment loss exposure is being re-estimated at  approximately $ 9 billion, who can you blame  ?  Was your advisor supposed to know what was going on at JPM London when he suggested JPM ?.   And,  by the way,  Advisor Risk includes  advice  to hold on to your  JPM  for the long  term .  Maybe in certain instances that could  be correct , but I abhor living with dead money, and, certainly,  I am not a collector of distinguished equities.  That ended with my mania for baseball cards in the 1950s .  Maybe that’s why no one ever  mentions stock selling when they talk about stock picking.

What situations like this remind me to do is to stay away,  as far away  as possible,   from stock picking and stock picking advisors.

My investment journey, which began when I began to turn over my company to SAATI, Italy  in 1987,  is now  25 years old.  I began sharing my journey with my first post, August 2010 ( see Archives ) and writing has helped me  find clarity and ground where, finally,  I feel safe.

Bottom line….I have come out of the jungle, almost  in one piece,  and, I’ve found the two lane highway!!  I’m going to be OK !!!  Check that . .. I believe I’m going to be a lot more than OK !!!!

With just one investment, SPY, ( the ETF symbol for a basket of 500 S&P stocks,{ the S&P 500 } ) I have diversified myself about as far away from the jungle of specific risks as you can get.   Instant diversification.  Do you know anyone who has priviledged information that suddenly can move all 500 stocks,  ( except maybe a terrorist or an insider leaking  a bombshell relating to the Euro ).  – I’ll accept the SPY risk because I know its temporary and transparent and that SPY will fully recover.

Am I a stock picker ?  Technically, yes….except that I am picking  500 stocks simultaneously !

So with SPY, the risk boils down to market risk.  Risk On / Risk Off .  Something  like black or red in Roulette except Roulette  is pure hunch and probability.  For me, investing in SPY is based on macro analysis,  technical analysis and timing mechanics, ….not  hunches.   For me  Black 29 is much more risky than just betting Black,  and the payoff certainly reflects it .  And,  AAPL is much more risky than SPY, but the SPY payoff , unlike Black, in my opinion, can still be compellingly attractive if you know how to track a medium term trend.

Can I still be temporarily wrong ? YES !  But, I have a lot more faith in being temporarily under water clutching  SPY than being under water clutching  an equity such as RIMM with bubbles of  bad news gradually escaping as the stock sinks inexorably deeper toward zero or the residual value of its patents. 

And, if it comes to that, I’d rather lose money because of my bad, but correctable,   timing mechanics  than by discovering that the counter party of my specific stock trade is smart…. I mean too smart….I mean smarter than anyone has a right to be. !

Richard Maurice Gore ( aka ) Richard, Rich, Dick, RMG, Richie from Throggs Neck and Smiley from Woodlawn.

Theory versus Reality

Friday, June 22nd, 2012

June 22, 2012

Based on the way the market sold off yesterday, June 21, 2012, I believe I should give you a fuller explanation of how I am investing the theoretical $ 1 million I have talked about in previous posts.

To begin with, the theoritical $1 million is a real $1 million.

Instead of investing in thirds on the 10th, 20th and month end, I am draining the money sequentially from four different brokerage accounts.  What isn’t drained for SPY will remain invested in BSV, BND, BOND,VCIT, LQD and VCSH until October 31.

Every 10 days I am investing approximately $83,000 in SPY ( or IVV, or VOO ) until $750,000 is invested, ( or not invested) based on the relationship of SPY to its 150 day moving average.  This process should take 3 months,  or longer.  The final $250,000 of the $1 million will not be invested if its turn comes before October 31.  This is out  of deference to the Play Till May then Go Away strategy which I respect and want to measure against the Moving Average strategy.  If its turn does not come until after October 31, it will be invested on the same basis of the first $750,000.

On June 11, 2012 an investment of $83,000 was made in SPY.  On June 21 only $40,000 ( of $83,000 ) was invested in IVV, because I always split my buys into 2 purchases, one at 10am and the other at 3:30 pm.  By the time we reached 3:30pm on the 21st, SPY had gone over a precipice and rather than fight the tape, I stood aside.  That purchase will be completed on the 22nd if the market trades in a balanced manner. ( done June 22 )

There is one more purchase to be made to complete the June program, $83,000 as of the close Friday, June 29,2012 to be invested ( or not invested ) on the next market day. That purchase, if made, will have drained brokerage account number one for this program.

Any part of the $1 million not invested will remain invested in the ETFs listed in paragraph 4.

So, there you have it.

I will continue to talk about the theoretical investment in 1/3s because it puts more focus on the validity of timing SPY and less on the nuts and bolts of my particular management.   However, at some point down the road I will compare the result of the theoretical modus with my actual result, with the result of not risking a penny on SPY, and the result of going 100% long SPY on June 11th and holding through  thick and thin up to result comparison day.

And, you should know that my cost of SPY on June 11 was $133.56 per share and $135.47 per share for the IVV purchased on June 21st. ( $133.93 per share for the IVV purchased June 22,2012 )

I will be using the SPY price of $133.56 to calculate results for (a) not investing in this system and (b) going 100% long on 11June

Bye for now..

Richard Maurice Gore ( aka ) Richard, Rich, RMG, Dick, Richie from Throggs Neck and Smiley from Woodlawn.

 

 

 

 

 

Alert – Buying SPY#2

Thursday, June 21st, 2012

June 21,2012
With SPY closing above its 150 day moving average on June 20, 2012,  I am now purchasing $333,000 of  IVV ( the I Shares equivalent of SPY) and calling the purchase SPY#2.

This investment will be held until July 20,2012 and be sold if SPY closes under its 150 day moving average on that day.

As of today, June 21, 10:21am, SPY#1 ( $333,000 ), purchased on June 11, is ahead $3,644- ( 1.07% ).  It will be held until the market close July 10, 2012  and then reviewed for sale or hold.

My final purchase ( or pass ),  SPY#3,  ( $333,000 ) , will be reviewed for possible purchase ( or pass ) at the market’s close on June 29, 2012.  If a purchase is made, it will be via symbol VOO ( the Vanguard equivalent of SPY ) and be called SPY#3.

So, my next action will be triggered by the SPY close on June 29, 2012

Bye, for now…

Richard Maurice Gore ( aka ) Rich, Dick, RMG, Richie from Throggs Neck and Smiley from Woodlawn.

Alert – Buying SPY#1

Saturday, June 9th, 2012

June 8, 2012

As of Friday’s close, SPY  is above its 150 day moving average.

That means on Monday, June 11, 2012 I will invest 1/3 of a theoretical $1,000,000 to purchase approximately 2500 shares of SPY which closed Friday at $133.10

I’m naming this SPY Portfolio #1  calling for a decision to hold or sell every 30 days, on the 10th

I will face decisions for SPY #2 and SPY # 3 on the 20th of June and at month end, to buy or do nothing, as determined by whether the price of SPY is above or below its 150 day moving average.

Let the games begin…

Richard M Gore ( aka )  Rich, Richie from Throggs Neck, Dick, RMG, and Smiley from Woodlawn

June 1, 2012 Reflections and Moving Forward

Friday, June 1st, 2012

June 1 ,2012

The bad news is that between Jan 10 and April 23 my market winnings were an embarassing $272 ( with $4,000 ) in dividends.  The good news is that if I hadn’t liquidated my portfolio on April 23  ( see that Post ” Sell Alert Its Almost May ” )  I would now be down $116,000 on an invested amount of $1,000,000.

So, in the final analysis I did  preserve my  capital AND that is rule # 1 through #10 in risk management.

Yesterday, the market ( SPY ) closed below its 150 day moving average and, for me, that  is a confirmed sell signal.

Based on all the backtesting I have been doing with SPY, it looks like the best result in terms of fewest trades and highest return ( mechanically ) is  to wait until month end to buy or sell.  Buying or selling at moving average  price crossovers of the 150 dma seems to result in more whipsaws, a great many more trades and smaller returns.

But, I suppose  watching SPY’s  price break down on the second day of the month and then being forced to wait  till month end to sell if the SPY  price is still below its 150 dma is similar to wondering if a parachute will open.  Definitely, I am not a skydiver. …..So

I’ve decided to modify the model to allow for possible SPY crossover action on the 1st, the 10th, and the 20th.  This means splitting my investment into 3 parts and allow each part to act independently of the other.  At the moment, I am all in cash,  and my rules won’t let me  act till the 10th, if then. I’ll let you know…

Meanwhile, I’ve split my cash among FDIC Insured savings accounts and the following ETF symbols: BSV, VCSH, VCIT, LQD, BOND, BND.  These ETFs are invested primarily in short and medium duration investment grade commercial credits offering a higher dividend than I can get in the money market.  BOND is the ETF equivalent of PIMCO’s very popularTotal Return Fund.

Having a mechanical signal on the 10th to look forward to will keep me insulated from all those urges to buy trouble.

Plus, I have almost 15,000 comments ( not hits – comments ! ) that I need to screen for spam. That should  keep me occupied ( I am retired )  and smiling  !  Thanks for responding so positively !

Bye for now…

Richard M. Gore…aka Rich, Dick, RMG, Smiley from Woodlawn,  …..