Archive for July, 2013

Safe to Invest ?

Saturday, July 20th, 2013

July 20, 2013

Each week, or, as often as useful, I will record for reference purposes,  the positioning of  the closing prices of some major ETFs in relation to their 200 day moving averages.  What I want to know is how much I would lose if I invested 100% of my investment capital and, the ETF retreated to its 200 day support line and, I sold out, as my trend following strategy requires.

My only way around all this, is to invest nothing and wait until the ETF price negatively penetrates its 200 day support,at a month end, and then, at a subsequent month end,  re-emerges above its 200 day moving average resistance . and go ” all in “….OR,

Dollar Cost Average into a position over a period of months, understanding I’d sell everything at the negative penetration,  and then go ” all in ” at a month end 200 day positive re-emergence.

I’m following the dollar cost averaging strategy.

Symbol                                        VTI                        SPY      

Price ( July 19 )                         $87.53               $169.17

200 DMA price                           $77.87                $151.24              

 % above 200 DMA                     12.4%                 11.85%             

Loss per $ 100,000                  $11,036                $10,597

 

Symbol                                        QQEW                 XLK

Price  (  July 19 )                      $32.01                 $31.45

 2oo DMA price                          $28.03                $29.83

 % above 200 DMA                     14.9 %                5.4%

 Loss per $100,000                   $ 12,433             $6,424

 

Symbol                                           GLD                     XLE

 Price ( July 19 )                          $125.11               $83.72

 200 DMA price                           $151.38                $75.81

 % above 200 DMA                 (    17.35 % )            10.4%

 Loss per $100,000               $20,989 profit        $9,445 

 

I’m not investing in GLD now  with the hope of profiting  $20,989  should GLD  re-test its $ 151.38 moving average.  I have no idea how much further GLD will fall, but I have a reasonable expectation, based on back testing, that if GLD successfully re-emerges above $151.38, I’ll be in sync with a positive trend.  At that point I would consider opening  a GLD position equal to 15% of my investment funds ( maybe more if SPY / VTI are not in play )

Also, please notice that the potential loss, at this point, of QQEW ( Nasdaq 100 ) which contains lots of big cap technology, is substantially more than XLK (  pure technology )

Richard Maurice Gore

 

Bogle, Buffett and Me

Monday, July 8th, 2013

July 8, 2013

 

In my post of January 14, 2013 I chose my 2013 ” Fantasy Portfolio ” of  nine ETFs and one equity ( Verizon ).  ( See entire list in my January 14, 2013  Archive shown to the right of this article.)

I imagined having a storefront where I could advise  ” investors ” who were converting from 401K accounts  to brokerage IRA accounts

With all due respect to John Bogle ( Vanguard ) and Warren Buffett  ( Berkshire Hathaway ),  I thought I could  obtain performance superior  to their repeated suggestions that the only way for the average man to beat Wall Street is Buy and Hold investing in Index Funds..

I supposed I could come up with a 10 name portfolio which represented a group of sectors and sub-sectors which largely eliminate specific risk while  simultaneously possessing better performance characteristics than SPY or VTI .  ( I should say here that SPY is the ETF that represents the 500 largest USA companies as per Standard & Poors. and that VTI is Vanguard’s total USA stock market index and contains 3300 names ).  Plain vanilla, right ?

So, how am I doing so far in 2013 ? 

I updated my January 13 list ( See January Archive – Amended ) and based on July 6, 2013  closing prices here are the year to date results:

( My Fantasy Portfolio average profit…….  13.58% )      ( VTI profit……  15.01% )      (  SPY profit……  14.5% )

So, there I am, bringing up the rear, with more risk, more commissions and more internal fees.

If it were true that all my clients needed were investments in SPY or VTI, what would that do to my role as an advisor ?  My clients wouldn’t need me beyond the first visit !!

Except for one thing…….I remain convinced that ” tampered ” timing   via the use of  a  200 day moving average (  month end ) strategy , as opposed to ultra sensitive 20 day timing and 50 day timing methods is superior to the Buy and Hold strategy,   unless you have both  the courage and patience to Buy at the right price, (  blood in the street ),  and then,  have a strong enough stomach to Hold , by withstanding the gut wrenching sensation of  what could become  a  56% drawdown !   ( October 9, 2007  to  March 9, 2009 )…17 months of agony with  absolutely no certainty the closing price of March 9, 2009 was going to hold.  

At this point it looks as though  my fantasy storefront will never be occupied by me…..unless I can find a way to sell the notion of charging  just one fee for just one lesson that will totally  immunize an investor  for life against all the surprises lurking in the Wall Street’s  jungle…. hmmmm !

 

 Richard Maurice Gore