Archive for December, 2017

SPY -Confession Time

Saturday, December 30th, 2017

December 30, 2017 for January 1, 2018

Did I outperform Spy for the year?   Yes,  because I earned 19.8% plus dividends 0n my portfolio which operates under the SPY model umbrella while SPY earned only 19.3% plus dividends.

That makes me a pretty good stock picker but, on honest reflection, I put in a far less than stellar performance as a  portfolio manager because I wasn’t fully invested…..expecting a correction that would allow me to reload by buying great stocks at great prices.

By making the assumption of a correction and being invested at only 30%, I cut my return on the total of funds at my disposal to 6.9%.  And, that is a lesson learned,  even though I can console myself by saying nobody ever went to the poor house making less profit and my return was better than any CD or Government Bond.

The learned lesson is that by not following the SPY model exactly, I didn’t follow the trend to the letter and cheated myself in terms of year end result.  My expectation for a correction may still bear fruit, but I did fail in terms of not following the advice I would have given you, if I were to give you advice.

That doesn’t mean I will quit picking stocks, it means 70% of my money will be in SPY, 15% will be in equities and ETFs under the SPY umbrella and 15% will be held out to buy on corrections.

SPY finished the year at $266.86 which on 4,905 shares =  $1, 308,948. versus a starting value of  $1,096,413.

Going forward a couple of facts give me the courage to invest more in SPY.  Interest rates are low, and there has been no expansion in PE multiple over the past year, so that SPY is not in a bubble.  As a trend follower, I am not supposed to even consider these facts as any such thoughts can lead to emotional decisions. And, during 2017 I simply out-thought myself instead of following the trend.

Mea Culpa…Richard

Richard Maurice Gore

 

 

 

Making Money with the ETF “SPY”

Friday, December 1st, 2017

December 1, 2017

Unless you are convinced you know what you are doing, and are willing to put in the time, the most successful market gurus will tell you to invest in an index fund such as SPY and just hold it through thick and thin.

My approach differs only in that I am interested in capturing the upside movement and eliminating as much as I can of the downside. That makes me a market timer.  I have searched for and found a backtested model of the ETF ” SPY” ( January 2000 ) which has served me well, so far, in terms of winning versus losing trades.  I subscribe to a timing service which has backtested the model I like ( 6 trades since 2000 and 5 of the 6 were winners).

The model dictates that whenever the price of SPY is below its 200 day moving average, at any month end, exit the market by selling your entire position in SPY.  Conversely, return to the market or gradually enter the market, when the price of SPY is above its 200 day moving average at month end…as it is now. For me, the best entry point is the month end when SPY turns positive. Not advice.

You originally entered the market with $1 million two years ago.  As of December 31, 2016 you held 4905 shares of SPY valued at $ 1,096, 413.  At today’s price of SPY  $264.87 x 4905 shares, your SPY position is worth $1,299,187,  a profit of $202,743  for 2017….18.49 percent excluding dividends.

Pretty good return for watching grass grow.  The sum total of your work is to make certain the price of SPY is above its 200 day moving average on the last day of the month….as I do and report here. And that is as close to the definition of Capitalism as I can get.

But, for me, retired as I am, that is not quite good enough.  I know SPY is the benchmark by which the performance of all market and portfolio analysts are measured.  And, I know that very few analysts can beat SPY and that Warren Buffett acknowledges this to be true.

So, to prove to myself, that I know a thing or two, I go beyond SPY and invest in situations which conform to my beliefs about how to make money in the market. Thus far in 2017, I am beating the performance of SPY  ( 18.49% ) by 5.57% on the money I have invested in the market.  This money includes stocks, ETFs and Selling Put options.

For my purposes, SPY is the canary in the mine.  I own zero SPY, but I’ll sell everything when the SPY model turns bearish.  My perception is that SPY won’t turn bearish until the yield return on the 10 year US Treasury begins to challenge the earnings yield of SPY with inflation lurking in the background.

Richard Maurice Gore