Archive for June, 2017

June 30: Half Year Update

Friday, June 30th, 2017

June 30, 2017  Close

If you are invested in SPY ( Spider S&P 500 Index ETF )…

Here is where you stand after 6 months of 2017.

On December 31, 2016 you held 4905 shares of SPY worth $1,096,415.

Today you still hold the same 4905 shares but they are valued at $1,186,029.

Your paper profit …$ 89,614 or an average of  $14,935 per month for the 6 months.

The longer picture, You would have started with $1 million on March 31, 2016, have been invested for 315 consecutive days and have an investment that has appreciated 20.45%.

You are invested in an ETF called SPY which is a basket of 500 stocks which trades as one stock.

You are a trend follower…following a model which tracks the simple 200 day moving average of SPY’s price.

You invest when the model says to invest and you get out when the model says to get out and go into money market funds at the same brokerage through which you hold SPY.

The model says to invest when the closing price of SPY at any month end is above the  200 day simple moving average of SPY’s price.  I follow this model, so if you see what I am doing you can decide whether to follow me or not.  When SPY ends a month below its 200 day moving average, I move to the sidelines by selling my entire SPY position and investing /depositing the proceeds in the Money Market at the same broker.

What would I do if I haven’t yet invested in SPY and today’s signal is BUY.  I wouldn’t commit all my funds at once.  I would invest a third now and another third if the market is still a buy at the end of July and another third if the market is still a buy at the end of August.  If a sell signal is generated at the end of July or August, I would move to the sidelines and wait to go ” all in ” when the next buy signal is generated.

An alternate strategy, ( non-model ), would be buy in the increments described above and hold and hold and hold and continue to add as you go along.  This is the advice of Warren Buffett and John Bogel of Vanguard. My stomach can’t stand watching my position melt away, so I follow the model which has been backtested to the year 2000. The maximum drawdown for the model has been negative 17.3% whereas the maximum drawdown for buy and hold has been 55.2%. I can’t hold my breath that long.  As a matter of fact, I can’t hold my breath for 17.3% and that is why I am out at the end of any month the model says to fold’em, with me gladly accepting the possibility of a small loss knowing that I have preserved my capital to play again.

Since the year 2000 the model has been involved in 4 winning trades and 1 losing trade.

Going forward, I don’t care what Trump does except to recognize that the market doesn’t like uncertainty and to recognize that if the earnings yield on stocks is greater than the yield on the 10year Treasury Bond the chances are very likely that stocks will go up.  By following the model, all I really need to do, if I am interested,  is listen to half hour news updates on the stock market, examine my  monthly brokerage statement to see how rich I am getting , and see how  the month end closing price of SPY relates to its 200 day moving average ( available by Googling ).

Richard Maurice Gore

SPY wealth tracker as of May 31, 2017

Thursday, June 1st, 2017

May 31, 2017

SPY $241.44

SPY closed May still on a buy signal initiated March 31, 2016.

This makes 294 consecutive days in this trade…The model says take no action.

The 4,905 shares of SPY you held on December 31 @ $ 223.53 per share ( $ 1,096,415 ) are now worth $1,184,263….an increase of $ 87,848 ……. or 8.00% %. Add on dividends of 1.45% per annum.

Going forward, the case for this market moving higher rests on two assumptions.

#1 Assumption. That earnings yields will continue to be more attractive than fixed income ( bond ) yields.

#2 Assumption. That Donald Trump and the Republicans will continue to sustain a viable relationship.
This means, at a minimum, no nasty surprises ( criminal charges against Trump ) on the legal front.

The Republicans hold the key to Trump’s survival. Impeachment will not take place so long as criminal charges don’t overpower the lesser charge of inappropriate behavior. However, if the Republicans can’t turn their agenda into law, and blame it on the direction of the Trump investigation or his disruptive antics, they may consider it prudent to go after Trump rather than surrender their seats in 2018. But, don’t feel bad for Trump. He really is a Democrat ( without ideological portfolio ) who made a deal with the Republicans to hijack political power from them.

As of right now, only one piece of legislation has made it through the House, the Health Bill. Tax Reform, the Budget, Infrastructure, and Senate reworking of Health will have a major impact on whether the stock market will continue to be patient and await all the good things for business on which the Trump bump rests.

As bad as Trump is, in my opinion, the Republican ” promises” to themselves are worse. Their budget has been described as ” hateful ” and their assumption of 3% growth is grounded in fantasy according to some pretty knowledgeable lawmakers with deep budget experience.

So, the clock is ticking on jobs, jobs, jobs and all the other Trump promises because this market’s pricing assumes all will end well. If it doesn’t end well or begins to show cracks you can expect the market to let you know in no uncertain terms.

Working under SPY’s ” buy ” umbrella, I have sold Twenty QQQ put contracts @ $ 132 June expiry, Two Amazon put contracts, @ $840, expiry August and five Facebook @ $139, expiry June.

And, I have some long positions in the equities indicated below, none of which amounts to more than $10,000. Here, I am not following the SPY model… I following a BUY and HOLD and BUY MORE model when and if the market sells off heavily. CGNX, AMZN, GOOG, RTN, GS, WMT, COST, MSFT, NVDA, YHOO, MCD, WB, AAPL, HON, CRM, INTU, plus 2x larger long positions in ETFs ….RYH, ROBO,  TQQQ. I continuously monitor how QQQ relates to its 50 days moving average as separate from SPY and its 200 day support.

Richard Maurice Gore