Archive for May, 2013

Now You See It, Now You Don’t

Monday, May 27th, 2013

May 16, 2013

Despite the weight of evidence pointing to a market which will grind steadily higher ( see my immediately pre-ceding post ),  a couple of incidents relating to relatively minor ( intellectual exercise ) investments  have alerted me to the capability of this market to whipsaw equity and ETF sector investments, in a heartbeat.

I was ahead $5,000 in Linked In ( LNKD  ) until the company  made a less than robust revenue forecast.  My $5,0000 was gone in one trading session, and me too, but,  with no loss..  That was followed by a smarty pants investment in an ETF ( DXJ ) which represented a long bet on Japanese exporters combined with a short bet on the Yen.   Ahead $5,000 until someone decided to question the resolve of the Japanese government to weaken the Yen.  That was all it took overnight for a $5,000 of profit to be  gone, and me gone too ! In both these cases momentum was snapped in a heartbeat, leaving me with  a clear impression  that although this market deserves to go higher, the tape will be the tell, and the tale,  not fundamental arguments  open to any doubt whatsoever.

So, with the market ( SPY ) 10% above its 200 day moving average , for sure, there is risk that Mr. Market will decide that 10% is too much to accommodate opposing scenarios and decide to sweep chips from the table while the getting is good.

Under these circumstances, the question of sustainability of market momentum, can be answered by ”  a pullback is healthy “.  But, not healthy if your position averages 8% above the 200 day moving average mainly because you yourself have exhibited cowardly trend following behavior with lots of profit already realized and new more dangerous positions subsequently established and open..

Under the above circumstances, it pays for me  to withdraw all my funds and then cautiously re-enter the market as follows:

Starting May 31 take my newly replenished investible resources and divide into 4 equal piles of money.

Invest dollars equal to 25% in VTI every 60 days at month end.  ( May – July- September – November )

If the price of VTI is below its 200 day moving average at any of the above month ends,  reduce the scheduled investment by 75% ( in dollars ) and invest only 25% of investment scheduled. I will not sell any shares of VTI accumulated up to that date.

Once the price of VTI finishes a month above its 200 day moving average, I will invest all my postponed investments at once and include any funds which remain scheduled.

Once all my resources are invested, I will liquidate entire holdings any month end  the price of VTI finishes below its 200 day moving average.

Once the VTI price again is above  its 200 day moving average at month end, I will re-enter the market 100% in tune with my stated methodology.

And so on and so forth

Bottom line…surfs up….but you better have a plan on how to ride these waves.


Richard Maurice Gore


Eleven Days in May

Saturday, May 11th, 2013

May  11, 2013

On May 1, out of respect for ” Play Till May ” I took roughly 75% of my SPY type money off the table into realized IRA profits.

Then,  I started to look for market clarity.

Now, eleven days later, what is emerging is a very strong rationale for not going away in May.   As of the close Friday, I increased my SPY type holdings to 50% and, starting Monday, will increase the percentage to almost 75%.

What I see are lots of handholds in the ” worry wall ” that this market is climbing.

#1 – Technical confirmation on top of technical confirmation that we are in a strong market….Moving Averages,  A/D line,  Percentage of stocks above 200 day moving average,  New highs, Dow theory confirmation………. My ” Surfs Up ! ” indicator does not stand alone !

#2-  A very discernible rotation out of bond market money into equities.  The bond market dwarfs the equity market.

#3 – A very discernible rotation of cash out of   “mattress money ” ,  ( aka Money Market Funds  and Savings Accounts),    into equities.  This money is starting to be put to work.  Fear of missing ” a big move ” is increasing.

#4 – Low interest rates and QE in the USA.

#5 – Central banks all over the world simultaneously lowering interest rates and  printing cash to reflate their economies without gaining an advantage against each other.

All that money is fueling what may turn out to be the mother of all worldwide expansions in business activity.

At this point, I should either get out of the water altogether or ride the wave.

I’ve decided to ride the waves in the wave set I see forming.

I’m re-investing my money in a blend of SPY type ETFs , each with a slight twist on the overall theme.

SPY Types:

VTI ( entire USA stock market – 3500 stocks in this basket ! ) ,

SPY ( VOO ) S&P 500 ( largest USA big caps ),

SDY ( S&P 500 re-sorted for long term dividend results ),

MDY ( VO )  Midcap 400, ( This is where the next crop of S&P 500 equities will come from, so more robust than S&P 500. )

VB   1700 USA grass root small caps,

QQEW ( Nazdaq 100 -but equal weighted, not cap weighted ),

VEU  ( Vanguard world equity index – ex USA ).

SECTOR Types:  More risky than SPY types but bigger reward if you read the macro argument correctly.

DXJ – My biggest investment of this type.  Japanese stock market hedged to remove dollar / yen  cross currency risk  that could wipe out any market profit  obtained in Japan..

FBT –  Biotech based on belief that big pharma needs to buy these companies to re-stock its drug pipeline.

KRE – Regional Banks – Acquisition targets for cash flush money center banks.

XHB – Home building….. plus renovation building supplies,  home decorating supplies and furniture..

And now there is talk about ” managed ” ETFs that focus on thematic alternative investments such as mergers and acquisitions.  I have bought 300 shares of MRGR just to learn more about these ETFs.  My instincts say” beware”.  If index funds can outperform managed mutual funds, why shouldn’t the same hold true for managed ETF’s.

So, Its May 11 and I’m still here, back out in the deep water,  ready to ride waves in what  could be a wave set  of historic dimensions.


Richard Maurice Gore



Rationalizing a Slight Liquidation

Friday, May 3rd, 2013

May 3, 2013

An article in Seeking Alpha by Doug Short included a chart that showed SPY’s average annual performance during May since 1928 has been negative 0.14%.  This is the third worst performance after February, negative 0.16% and September, negative 1.09%.  To me this means ” Play till May ” has some validity,  enough for me to pull out of the SPY wave I have been riding since January 29.

According to Mr Short’s table,  July is the best month of the year for big breakers ( positive 1.49% ).  So believing its safe to be in the water, but not seeing any waves that will justify a ride, I’ve decided to pause and take some profits and re-enter the market sometime after June 15 when the big rollers should come into view.

I still have roughly 30% of my money tied up in names that pre-date my SPY conversion and my rationale is that these names ( energy ETFs ) are an inflation hedge.  So, I’ll sit with this ” black gold “.

My April 30 data indicated it was safe to stay invested and I temporarily acted against my own data out of respect for ” Play till May “.

Richard Maurice Gore