Archive for August, 2013

Market Close August 31, 2013 – – Hold Tight

Saturday, August 31st, 2013

August 31, 2013

VTI closed out August at $84.77, putting it 5.79% above it’s 200 day moving average.  At the close of July, VTI was 11.4% above it’s 200 day moving average and I invested an additional 25% of my liquid market assets over the first days of August. 

“VTI”  is the Vanguard Total Stock Market ETF covering the entire USA stock market which includes a basket of 2,000 plus stocks .  Minimum investment is one share for $84.77 plus a brokerage commission of +/- $7.00 ?  Can diversification get any less expensive ?  I don’t believe so. 

My next move, ….  25% in,  or 100%  out,…..   is after the close September 30, 2013.

If in, my 25% will be invested as follows:

VTI      45%,   /   SPY    20%,  /   QQEW    20%,  /   VB   15% , purchasing as many shares of each ETF as possible with each allocation.

If out,  my 100% will be put in what I consider to be relatively safe liquid assets pending the next month end that VTI closes above its 200 day moving average, which, to me, is the equivalent of ” surfs up ” , “risk on ” or whatever you want to call it.

Let the countdown to September 30 begin.

In doing all of this I am ignoring ” Play till May ” …” Oh Oh,  its that dangerous time of year, September / October ” ,  and all the noise relating to  “tampering”.  I am not ignoring the fact that short term interest rates remain very low.

 

Richard Maurice Gore

 

Keeping Score

Tuesday, August 27th, 2013

August 27, 2013

How much money should you expect to make trend trading stocks and ETFs ?

The real question should be….How much can you afford to lose ? , because that will have a huge bearing on the strategy you pick and how much you risk.  It will have a bearing on whether you swing for the fences or aim for a high on base percentage.

Assuming that you subscribe to the number one Wall Street rule….Don’t Lose Capital….I would think that your first question to yourself would be….what is a reasonable and prudent expectation ?

I have often read that over the past 70 years the market has averaged about a 10% return per annum.  That conforms to my methodology in reconciling reward and risk.  My rationale is geared to a multiple of a risk free 10 year US Treasury instrument…. currently +/- 3%.    If I invest in this  market I want 3% for my money, 3% for the additional risk , 3% for my expertise and  3% as an inflation kicker.  Total = 12%.

If the 10 year Treasury were 4%, the total would be 15% and all risk would be measured against the likelihood of achieving that return.

In this market SPY has returned 16% year to date.  Facebook has returned plus 50% and an investment in the Brazil ETF – EWZ has returned negative 25%.  Within those parameters, 12% looks like an  entirely reasonable and realistic goal to strive for.

KEEPING TRACK…. Using big round numbers,  a 12% return on a $1 million nest egg would mean I’d need to average $2,300 per week or $460 per trading day.  This assumes you are ” all in “.  If you are only 50% invested, such as I am at the moment,  you need to double your daily result to reach your 12% goal.  The 50% you haven’t invested may be safe, but it will require a lot more return and more risk on the invested portion for you to achieve your 12% target.  Plus, not only are you earning practically zero on your 50% cash , but this money is sitting there being eroded by inflation.  So, lots of time taking no risk means being caught between the devil and the deep sea.

I keep a daily / weekly log of results to give me a better picture of what needs to happen going forward to achieve my goal.

None of this addresses how strong your stomach needs to be to cope with accumulating loss on your investment portion.  Today the market is down 1.4% ( $14,000 on 1 Million ) at 2:30 pm and here I am, hoping to achieve my daily average of  positive $460 by 4pm.  Think its going to happen ?  I don’t.  I’m beginning to wonder ( not worry )  about another $14,000 down day tomorrow.  How many days in a row can you swallow $14,000 before your emotions begin to kick in.  Its probably better ( for my psyche ) to say 1.4% down day rather than $14,000.  I’m committed to a strategy that requires a lot less courage than ” buy and hold ” .  If the market is below its 200 day moving average at the close August 30…I’m gone and I can tell myself it was all planned in advance as part of a scientifically back tested strategy. What has a buy and holder to look forward to….a 56% grinding decline such as occurred in 2009 ?.  That would try a brave man’s soul.  Yes, the market would ( did ) come back, but how many years do you need to spend under water to make you afraid of the sea ?

That’s why I’m a trend following timer with a plan for going in and a plan for exiting the market with my confidence unshaken.

Richard Maurice Gore

 

 

 

 

 

Update of My Fantasy Picks for 2013 Versus the Indexes

Wednesday, August 21st, 2013

August 21,2013

My Fantasy Portfolio for 2013 contained 10 ETFs and one equity…..Verizon.   See Post January 14,2013

This portfolio has grown 11.47% as of August 21, 2013.

But….VTI has grown 17% and SPY has grown 16.1%

So much for my ability to cherry pick sector risk  and geography risk  versus market risk…… the primary USA Equity Indexes.

Lets see what happens further down the 2013 road.

Richard Maurice Gore

Told ( Telling ) you so !

Saturday, August 17th, 2013

August 17, 2013

Direct quote from my Post of January 1, 2012….

“Egypt and Libya  are all smiles on Facebook at the moment.  Just wait !  All that can change in a hurry.  The Moslem Brotherhood is working hard behind the scenes toward what they see as inevitable.  And, when that happens, Egyptian and Libyan smiles will be at a premium “

For those who don’t get it and seriously listen to our political representatives talk about a democratic solution, remember this !  Hitler was elected democratically.  You may democratically elect a horror show, but that doesn’t make it a democracy, it makes  it a horror show !

There are 1.6 billion Moslems in the world as of 2013.

Think we can rely on the ” good ” Moslems to control the extremists ?   How far did it get us thinking the ” good ” Germans could control Hitler.  There is a very thin line between democratic elections and the unintended consequences that can follow.

So, I am just a bit afraid something huge is on the distant horizon…something like a cocktail of drones and biologic super weapons that in the right ” wrong ” hands can wipe out civilization as we know it for the greater glory of a fanatical idea for which people are  prepared to die.

This being said, I believe these times call for drastic actions including some that may stress the boundaries of democratic thought  and individual rights.  The trick will be to somehow get through it without forgetting who we are and totally sinking  to the level of  what we are fighting against.  When it comes to this, I’m moving away from my liberal bias and heading toward somewhere right of center.

I believe its time we stop talking about how to achieve a democratic Middle East.  It isn’t going to happen.  This is not about politics.  Its about religion,  and for  extreme action and reaction , religion  trumps politics every time.

The big challenge for the secular status quo will be how to separate, isolate and eliminate those Moslems who want a  War of the Worlds jihad against the western devils.

 

Richard Maurice Gore

 

PS – If you are wondering why I am making the above comments given that this is a Financial blog intended for investment neophytes….my answer is I have more time to think about the big picture now that that my investment research / learning process is not as  demanding as before.   So, with your permission, I’ll move forward commenting on any macro topic about which I have strong ideas that I need to express.  If you think I can benefit from your comments, please don’t hesitate to comment.  I am still especially  interested in the Middle East after working on the Mid East – Africa Desk for Citibank 1960 / 1962 and very nearly being assigned to Jeddah,  for a tour,  instead of Johannesburg !

 

 

JULY 31, 2013 > RMG Action

Thursday, August 1st, 2013

July 31, 2013

VTI closed out its month at $ 87.42, putting it 11.4% above its 200 day moving average.

This means over the next days I will invest an additional 25% of my market designated resources as follows:

VTI –               45% of  funds allocated

SPY-                20 % of funds allocated

QQEW –         20% of funds allocated

VB –                15 % of funds allocated

I will purchase as many shares as possible with each of  the designated amounts hoping, over time, to receive 13 eggs to the dozen etc.

The same dollar amount will be injected September 30 if VTI is still above its 200 day moving average on that date.

I will sell all accumulated shares on August 31 ( or any month end )  VTI’s closing price is below its 200 day moving average. Then I would wait for the next month end that VTI’s price is above its 200 day moving average and go all in over the next several market days.

To give you some flavor of the market, I show below the progress of the principal ETFs I follow.  It shows that the  rewards for going beyond plain vanilla index funds into sector funds can be enticing. On the flip side, you can be reasonably certain sector ETFs carry the potential for  punishment beyond index  funds if the market turns  or if the relative strength of the theme driving the performance  dissolves.

Since June 30, 2013

XIV  – plus 35.1%  – (  derivative inverse VIX ),  FBT – plus 9.5% – (  biotech sector equal weight-  20 names ),  KBE – plus 8.8%  ( money center banks sector ) ,  XLV – plus 7.2%  ( health care sector ),

QQEW – plus 7.1% (  Nazdaq 100 index – equal weight ),  VB – plus 6.8% ( Vanguard small cap index ),  RPG – plus 6.1%  ( S&P 500 growth selections ), SDY – plus 5.8% ( S&P 500 consecutive dividend payers )

VTI – plus 5.7% ( Vanguard Total USA Stock Market Index ), RSP – plus 5.6% – ( S&P 500 equal weight ) OEF – plus 5.3% – ( S&P 100 Index ),  XLF – plus 5.3% ( Financial Sector ),

SPY – plus 5.2% ( S&P 500 Index ),  DIA – plus 4.2% ( Dow Industrials 30 ),  GLD – plus 7.4% – ( physical gold held in storage ) ( the only year to date negative performance – negative 21% )

I’m remaining with plain vanilla  ( VTI, SPY, QQEW, and VB ) and trusting my trend following model to deliver performance.

Richard Maurice Gore