Archive for June, 2013

SO, WHAT TO DO ABOUT GOLD ?

Saturday, June 29th, 2013

June 29, 2013

When I own GOLD its via the  Exchange Traded Fund…….” GLD” .  Its physical GOLD because each share represents a specific quantity of gold held in the London vaults of HSBC.

Yes,…. What happens if HSBC or anyone else in the custodial  chain screws  up ?  That is a risk I am prepared to take.  I take comfort in knowing GLD is among the largest and most liquid of the ETFs. And, I know I have neither the warehouse  storage charges nor casualty insurance premiums that go with owning real gold bars.

Another reason I like GOLD is  because very few equities trade with as much  fear and greed as underlying drivers .  To me, GLD  seems like a credit default swap ( insurance policy ) on the inflationary damage that can result from the  money printing activities of international central banks.  There’s lots of analysis to read ( if not to act on ),   and I like the excitement of knowing China, India or George Soros could be opposite me on any trade.  How’s that for arrogance !

The last time I was involved with GLD was November 28, 2012 when I sold 1,270 shares of GLD at $166.32 and realized a profit of $ 138- before commissions.  Chump change, right ?  The only problem with that is that if I hadn’t sold , as of today, I’d have lost $61,000 by holding on to ” my investment “.  I wasn’t trend following at that time.  My exit decision was based on watching the tape and my feeling that GLD’s momentum had noticeably diminished.  Was I good or lucky ?   I say nervous and lucky !  No ” sitting tight ” for me while herds of Chinese and Indian elephants  were grazing nearby.

Since then,  I’ve really become a dedicated trend follower.  I’ve done back testing on GLD trades at different moving averages and  moving average crossover points.  For me,  the best way to trade GLD is based on where its price is relative to its 200 day moving average at month end….  Not at each penetration of the moving average line,  and not at the 100 day,  50 day,   or 20 day moving average.

Going back to the start of GLD , November 2004, there would have been only 4 selling trades, 2 winners and 2 losers.  The profit from this activity till today would have been 126.9% ( before commissions ) resulting in an average annual profit of 15.86%.  If I had bought GLD at issuance in November 2004 and held till today, my return would have been 98.9% / 8 years =  12.36% per annum.  To me, that 3.5% per annum differential is a sufficient reason to trend follow.  PLUS, I didn’t need to court a stomach ulcer as a result of my reacting  physically to each and every wave of  my fear.  Its better to play golf than to feel the worry relating to the viability of a long position !

At present, using my methodology, GLD is not a buy.  I know the price looks cheap at $119.11, only 3.8% above its 52 week low of $ 114.68,  and 31.5% below its 52 week high of  $174.07.  To me, it won’t be a buy until it positively penetrates its 200 day moving average overhead resistance  at a month end, ( presently $155.29 ).  Yes, I am prepared to miss  $36.18 of that move.  To me, its more important to get in sync with a positive trend than to declare ” I’ve heard the gong ”  and announce ” At $119.11, we are at GLDs bottom ! ” The reason(s) why GLD will  or won’t rebound to $155.29 are  not my business.  Buying  when it does, is my business !

Richard Maurice Gore

June 30 – The VTI Buy Signal Of December 31, 2011 Lives On.

Friday, June 28th, 2013

June 28, 2013

VTI has closed the month at $ 82.67.     This is   6.98 % above its 200 day simple moving average, $76.99

Those who bought VTI  at the December 30, 2011 close should stay 100% invested in VTI.

The next possible sell day is July 31, 2013.

Those who bought at the closing price December 30, 2011 are ahead approximately 30% and are in sync with the trend.

I am not part of this ” in sync ” crowd because I was still a ” stock picker ” on December 30, 2011.  And,  in fact, I  was out of the market because things looked so bad, both here and in Europe.  So, I also let negative macro fundamentals  divert me from the action I should have taken…..Buy VTI….All In !

Now, that I am a full fledged trend follower,  I am just looking to get in sync with the trend.  Since I’m not in sync, I’ve decided to ” dollar cost average ” my way into the trend,  diversifying  by time.    This means buying a fixed dollar amount of VTI at regular intervals (every other month end ) in the hope that the VTI 200 day moving average will approach or be above my average purchase price by the time a sell signal is generated.  The longer this market can grind higher, the better chance of that happy convergence happening.

I picture the trend as a shark.   I’m  a pilot fish.  If I swim next to the shark ( trend ),  I’ll eat and be safe.  If I swim against the trend ( shark ) , I’ll be seen and be eaten.

That’s my situation…..trying to get closer to the side of the shark without being noticed and eaten. .  .

Onward to July 31 !

Richard Maurice Gore…..ex stock picker and ex analyst of macro fundamental trends.

Count Down to Investment

Saturday, June 22nd, 2013

June 22,2013

On July 31, 2013 I will invest 25% of investible funds in VTI  if VTI closes  above its 200 day simple moving average on that day. ( or )

On July 31, 2013 I will invest 6.25% of investible funds in VTI,  if VTI closes below its 200 day simple moving average that day.  If this happens, I’ll be waiting for the next alternate  month end close,   ( September  30 ) to invest another 6.25%,   if VTI ‘s price remains below its 200 day moving average.  And so on….

The first month end  VTI re-emerges and closes above its VTI’s 200 day moving average will be the “all in” signal.

Its more important to be on the correct side of the trend than to purchase VTI at a lower price.  But, I don’t see any harm in lowering my average cost,  over time,  if VTI makes an extended stay below its 200 day moving average.  The market can move fast.  In two trading days this week, the market erased two months worth of gains. The month end proviso in my plan can eliminate a lot  of whipsaws.  Instead of 5 trades over the past 13 years, there would have been 50 trades  if I had acted  ( any day end  )  VTI crossed its 200 day average ( in either direction )  and only 11 trades of the 50 would have been winners.  The 13 year return would have been 72% versus 200% for the action at month end only  strategy.

As of the close, Friday June 21 @ $ 81.97 VTI was 6.84% above its 200 day moving average.  ( SPY was 6.65% above its 200 day moving average @ $159.07 )

 

Richard Maurice Gore

 

 

Where am I ?? …… What am I aiming at ??

Saturday, June 15th, 2013

June 15, 2013

 

Answer:  Trying to get re-invested in the Vanguard Exchange Traded Fund ” VTI”   ( which is ” SPY ” expanded from 500 USA equities to 3,300 USA equities  ) and to  be in sync with VTI’s 200 day moving average trigger.

If you have been following my posts, you know that I’ve cashed out to take profits .  Now,  I need to find my way back into the market at a price  point where I don’t get sucked under water if VTI  violates its 200 day moving average support level  (8.7% below where we are now ).  I’m only 25% invested,  and each alternate month end I intend to invest more until I am 100% invested.

This ” in sync” process could take a few  months unless VTI suddenly dives below its 200 day moving average one month end,  and, just as suddenly,  re-emerges above its 200  at a month end….soon. At that point I’d go  ” all in ” and finally be in step  with the program.

I have done back tests ( via a subscription to  “ETF Replay”  ) which demonstrate the 200 day moving average month end  strategy has been superior to ” buy and hold “ since the year 2000 with 5 wins and no losses and a gain of about 200% while the ” buy and hold ” methodology delivered only 136 percent ( and no profit whatsoever if  you simply held  for the 10 year period from  January 3, 2000 to January 5, 2010 ).   If that 10 year round trip to nowhere isn’t bad enough,  during the period October 9, 2007 to March 9, 2009  ” the market “, as represented by the ETF ( ” SPY ” )  dropped by  56%.

Could you have stomached that kind of grinding, 18 month,  drawdown ?  Or, would you have given in to fear and left 56% on the table.?  Remember, on March 9, 2009 the prevailing sentiment was ” lookout below ! ”  Nobody was  ringing a gong announcing we were at a market bottom.  Think your emotions could have overcome that ?    Definitely not  a happy day for  procrastinators or  emotionally driven  individuals who frequently buy at the top and sell at the bottom. !  Definitely not my way of making a living !   The 200 day moving average / month end strategy would have totally side stepped all that anxiety !  Of course, I’m not saying it will sidestep with the same degree of success in the future,  but I like to learn from history,   and I like my chances.

As of now, I’m content that I’m  only 25%  invested.  That contented  feeling  could  change next week  if the market rises and I give up potential profit.  But I can accept that.   Its that  8.7%  dive  ($87,000 per  $  million )  to the 200 day line that would  give me  a queasy,  high anxiety, I’m going to wipe out,  type feeling.   I’ll pass on that !   Instead, I’ll just continue to leisurely paddle out to deeper and deeper  water…. knowing that ” Go Away  May”  could  still rear its ugly head above the waves  ,  while  the normally expected  November – ” Risk On ” rollers are still far beyond my line of sight, and  over the horizon.

Stay tuned for market updates.

 

Richard Maurice Gore

 

 

Off We Go….Again.

Monday, June 3rd, 2013

June 3 2013

VTI is my substitute for SPY.

Because….. it offers greater diversification,  holding  3,300 US equities versus 500 for SPY at a cost of only 0.06%.  VTI has returned 8.73% year to date versus 7.91% for SPY.

VTI closed out May on Friday 9.68% above its 200 day moving average which means its a keeper for those holding until the price of VTI crosses its 200 day moving average to the downside. ..at month end.

As you know from my previous post, I exited this market last week because I trade within the parameters of the buy signal.  I didn’t like the vibes, so like the nervous Nelly I am, I took my money off the table.

Accordingly, I am now back in the water purchasing $125,000 of ETFs on Friday.  Of the dollars invested, 60% VTI and 10% each RPG, QQEW, VB and VO. which tweaks the portfolio toward small and mid caps.  Unfortunately, I invested at 2:15 pm,  just before the downturn,  but fortunately by holding back till today for  the complete purchase ( another $125,000 ) I saved $ 2,100.  And, I may wait as much as a few days to complete my May 31 scheduled purchase.

I don’t have the specific risk of individual stocks but I do have market risk which, of the two,  I will gladly accept.  That means I had  better read the NY Times everyday and attempt to anticipate all the twists and turns…..within the context  of the existing VTI ( or SPY ) buy signal which ultimately rules.

In my first post I said I was trying to determine whether an ordinary person can make a living from the stock market without professional help.

Last June 11, I came to the conclusion that SPY was the only way to invest.  If someone had a retirement resource of $1,000,000 and invested it in SPY on that date and had done nothing since, except play golf, they would be ahead as of today $215,000 – with one week to go.  That’s a living.  Right ?!

 

Richard Maurice Gore