May  11, 2013

On May 1, out of respect for ” Play Till May ” I took roughly 75% of my SPY type money off the table into realized IRA profits.

Then,  I started to look for market clarity.

Now, eleven days later, what is emerging is a very strong rationale for not going away in May.   As of the close Friday, I increased my SPY type holdings to 50% and, starting Monday, will increase the percentage to almost 75%.

What I see are lots of handholds in the ” worry wall ” that this market is climbing.

#1 – Technical confirmation on top of technical confirmation that we are in a strong market….Moving Averages,  A/D line,  Percentage of stocks above 200 day moving average,  New highs, Dow theory confirmation………. My ” Surfs Up ! ” indicator does not stand alone !

#2-  A very discernible rotation out of bond market money into equities.  The bond market dwarfs the equity market.

#3 – A very discernible rotation of cash out of   “mattress money ” ,  ( aka Money Market Funds  and Savings Accounts),    into equities.  This money is starting to be put to work.  Fear of missing ” a big move ” is increasing.

#4 – Low interest rates and QE in the USA.

#5 – Central banks all over the world simultaneously lowering interest rates and  printing cash to reflate their economies without gaining an advantage against each other.

All that money is fueling what may turn out to be the mother of all worldwide expansions in business activity.

At this point, I should either get out of the water altogether or ride the wave.

I’ve decided to ride the waves in the wave set I see forming.

I’m re-investing my money in a blend of SPY type ETFs , each with a slight twist on the overall theme.

SPY Types:

VTI ( entire USA stock market – 3500 stocks in this basket ! ) ,

SPY ( VOO ) S&P 500 ( largest USA big caps ),

SDY ( S&P 500 re-sorted for long term dividend results ),

MDY ( VO )  Midcap 400, ( This is where the next crop of S&P 500 equities will come from, so more robust than S&P 500. )

VB   1700 USA grass root small caps,

QQEW ( Nazdaq 100 -but equal weighted, not cap weighted ),

VEU  ( Vanguard world equity index – ex USA ).

SECTOR Types:  More risky than SPY types but bigger reward if you read the macro argument correctly.

DXJ – My biggest investment of this type.  Japanese stock market hedged to remove dollar / yen  cross currency risk  that could wipe out any market profit  obtained in Japan..

FBT -  Biotech based on belief that big pharma needs to buy these companies to re-stock its drug pipeline.

KRE – Regional Banks – Acquisition targets for cash flush money center banks.

XHB – Home building….. plus renovation building supplies,  home decorating supplies and furniture..

And now there is talk about ” managed ” ETFs that focus on thematic alternative investments such as mergers and acquisitions.  I have bought 300 shares of MRGR just to learn more about these ETFs.  My instincts say” beware”.  If index funds can outperform managed mutual funds, why shouldn’t the same hold true for managed ETF’s.

So, Its May 11 and I’m still here, back out in the deep water,  ready to ride waves in what  could be a wave set  of historic dimensions.

Richard Maurice Gore

May 3, 2013

An article in Seeking Alpha by Doug Short included a chart that showed SPY’s average annual performance during May since 1928 has been negative 0.14%.  This is the third worst performance after February, negative 0.16% and September, negative 1.09%.  To me this means ” Play till May ” has some validity,  enough for me to pull out of the SPY wave I have been riding since January 29.

According to Mr Short’s table,  July is the best month of the year for big breakers ( positive 1.49% ).  So believing its safe to be in the water, but not seeing any waves that will justify a ride, I’ve decided to pause and take some profits and re-enter the market sometime after June 15 when the big rollers should come into view.

I still have roughly 30% of my money tied up in names that pre-date my SPY conversion and my rationale is that these names ( energy ETFs ) are an inflation hedge.  So, I’ll sit with this ” black gold “.

My April 30 data indicated it was safe to stay invested and I temporarily acted against my own data out of respect for ” Play till May “.

Richard Maurice Gore

April 20,2013

For every $1 million you have in the market, a 1% down day means a loss of $10,000 – for the day.

Even with confidence in the performance statistics of your timing mechanism, to see a loss of 2.32% in one day, such as occured on April 15 means you are looking at  a loss for the day  of $23,200-per million invested.   That’s OK if you believe its a blip and you have accumulated some profits as a cushion.  But when it is followed on Tuesday by a gain of  $14, 800  and then a loss of $14,600 on Wednesday, you feel like texting the pilot to gain altitude and fly over the turbulence.    Then you remember,  you are the pilot.

It makes you begin to wonder whether ” play till May then go away ” is still appropriate.  Is April 15, the new May 1. ?

And,  somehow,  I must confess,  I feel more stress giving back hard won profits at the rate of $23,000 per day than any stress I feel  anticipating the possibility of losing core capital at the time I open a position.  Somehow, to me,  losing money on an  investment  decision ( with an exit strategy ) is  acceptable,  but giving back money already won is somehow negligent. Yet,  I do see some timers accept letting their  unrealized profits be dragged underwater, only to then emerge from the curl of the wave to continue to build.

Somehow, when the trip turns turbulent, I begin to become much more susceptible  to background market noise.  What about breadth divergences in worldwide equity indexes and within US equity markets ? . Why has the relationship between corporate bonds and stocks diverged ?  What about the relationship between payrolls and the S&P ?  Why isn’t technology leading this market higher ?  Will housing prices begin to weaken ?  Is gold really signaling deflation ? You get it.  None of this stiffens my resolve.  What I want is a smooth non-eventful ride.

During the past two years, the market took back 15% to 20% starting each May and that  also plays into it.

My conclusion is that market investment  capitalism isn’t just passive return on money invested over the long term, ( especially if you don’t have a long term ).  Market  timing is  work  and worry invested for  what  better be more  than a  passive buy and hold return.   If you are the ” capitalist ” you had better develop  good emotional balance because that is what is required to successfully ride the ” SPY ” ( ETF ) surfboard through turbulence.

My model says don’t do anything till the close April 30.  I just hope I have the fortitude to stick it out because every time  I’ve bailed  out of a wave with a small profit,  telling  myself  “you don’t go to the poorhouse taking a smaller profit”, its been the wrong decision and I should have waited for the final technical trigger signal, even if it meant risking a loss for the ride.  Back testing my model, I see losses happening, but not with anywhere near the frequency of successful trades nor the degree of loss.  The only specific risk I see is my nerves !

Richard Maurice Gore

March 30, 2013

The last trading day for March was Friday.

My technical indicators say ” do nothing – except enjoy the ride “.

And, that is exactly what I intend to do .

SPY 123 Portfolio June 11, 2012  ( SPY / IVV / VOO blend ) is up 16.3%  and would be returning $162,636- on a $1 million investment.

SPY Jan 29, 2013 Portfolio ( blend ) is up 4.4%  in 60 days.

And my storefront FANTASY Portfolio is up 9.6% since January 1 -  This Portfolio is comprised of  FBT, KRE,  MOO,  QQQ,  SPY,  VEU, VNQ,  VTI, VZ, XHB, XLV.  I  hold  varying amounts of shares in all except MOO, QQQ, VEU, VNQ,  and XLV.

Here is how the index type ETFs I follow ended the first quarter of 2013:

SDY   + 12.7%,  VB  + 12.5%,  RPG + 12.2%,  + VO + 11.9%,   IJR +  11.5% ,   RSP + 11.3%,  DIA + 11.0%, QQEW + 10.7%,  VTI + 10.1%,  SPY + 9.7%,,  QQQ+ 5.6%.

I own all of these except RPG, DIA, QQEW, and QQQ.

Potential liquidation decision moved forward to April 30 when Charts versus “ Play till May”  will be tugging for a decision.

Richard Maurice Gore

March 8, 2013

Year to Date Performance of  “Customized ” SPY ETFs

SPY     +8.8%

RSP   +10.2%

SDY   +10.8%

RSP is SPY  converted from investment  allocation based market capital weighting to equal weighting.   To illustrate, compare the top allocation, number 10 and number 25 in each portfolio..

In SPY the top allocation is Exxon which represents 2.96% of the value of the total 500 equity portfolio.  Number 10 is Pfizer which accounts for 1.5% of the total portfolio. and, at number 25, Qualcomm which represents 0.82% of the entire 500 portfolio.  On the other hand ( equal weighting ), Netflix represents 0.35% of the RSP portfolio, followed at number 10 by Genworth Financial – 0.25% and Pitney Bowes at number 25 representing o.23% of the portfolio’s value.  Exxon, Pfizer and Qualcomm are still in the portfolio with each representing about .023% of the total portfolio.  The net impact of the change to equal weighting is a tilt toward Mid Cap and Value performance ….with a bit more volatility.

SDY – This ETF holds the 60 highest yielding names in SPY that have increased dividends every year for the past 25 years.  The yield is presently 3.2% versus 2.04% for SPY.  Number 1 in allocation is Pitney Bowes at 2.91% of portfolio’s value ( yielding 10.69% ! ) , followed at number 10 by Johnson and Johnson ( 1.80% of portfolio ),  yielding 3.14%, followed by Eaton Vance Corporation at number 25 representing  1.43% of the portfolio with a yield of 1.98%.

An equally blended portfolio of SPY, RSP and SDY would have appreciated 9.93% since January 1, 2013 versus 8.8% for SPY alone.

I hold all three with SPY and cousins ( VOO , IVV and VTI ) accounting for 50% of value.

All buying and selling decisions for the mix are driven by SPY alone.

Richard Maurice Gore

March 5, 2013

Just to give you some idea of  the interesting profit potential of SPY and its cousins  ( VOO / IVV ), as of today, $ 1 million invested on June 11, 2012 has grown by $143,000 ( 14.4% ) in just under nine months with no SPECIFIC risk….just MARKET risk.

In his latest letter to Berkshire Hathaway shareholders, Warren Buffett compares Berkshire performance to SPY indicating that SPY beat Berkshire on the latest year to year comparison and that SPY will probably always outperform Berkshire in better than  good market years.  What else is left to say ?  If Buffett’s Berkshire can’t outperform SPY, what do you think of your chances  ( or others managing your financial investments )  to outperform  Warren Buffett ?!!

I suggest you read the full text of Buffett’s  2013 letter to Berkshire Hathaway shareholders.

So, for me, that narrows everything down to one variable, TIMING the market……  And for me ( and you, as a layman investor, )  that’s a lot easier to deal with than the multi dimensional array of risks  offered by individual companies.

Richard Maurice Gore

February 28, 2013

SPY closed at $151.61 which is 5.6% above my $143.06 sell trigger and 2.3% above SPY’s 50 day simple moving average.

The FED has given its blessing, so, at minimum I’m in until March 31 with present position.

Going forward,  I’ll either add more to my SPY like positions or be ready to write a PUT with a near year end expiry, an attractive premium and at a strike price where I believe I can safely accept assignment.

Richard Maurice Gore

February 20, 2013

With the Dow and S&P 500 hitting 5 year highs yesterday, and with the A/D line at a record high, it seems that this is an appropriate moment to add to SPY type holdings and bring such holdings to a level of $750,000 with $250,000 reserved for writing puts or for more purchases.

Additions: 700 shares IJR ( small cap index ) @ $85.59 and 900 shares SDY ( S&P 500 Aristocrats – Dividends ) 900 shares @ $63.62

Next decision day for possible sales….February 28 Close.

Current Portfolio, net of  changes, is ahead $23, 178 ( 3.2 % )   before these purchases today.

Richard Maurice Gore

February 9, 2013

This is a follow up to my post of November 2011, ” Its November but Risk Off “ and,  December 29, 2011 ” A Review of Posts to this Site “ in which I promise to become more familiar with issues that are systemic in nature and troublesome to our USA sense of economic fair play on a level playing field.

There is no denying the rich are getting richer at a far faster rate than the middle and lower stratas.   And, the gap  is getting more and more obvious and irksome.  This is not to deny the meritorious a  just reward. It is about making the system more balanced so that all sides see more justice in the system. The alternative is a slide toward social unrest and the danger that social unrest can only be solved by political ( military ) means.  Step one of the slide  - “Occupy Wall Street”

Without balance you have the following at work.  Upper Strata……$2,000 per hour x 40 hours per week equal $4,160,000 per annum  – - Upper Mid Strata …..$200 per hour x 40 hours equal  $416,000 per annum ……Middle Mid  Strata ……$100 per hour x 40 hours equal $208,000 per annum.  Lower Mid Strata $50 per hour x 40 hours equal $104,000 per annum.  ( needs two salaries to qualify for  “yuppie “ status )  Working Poor $25 per hour X 40 hours equals $52,000 per annum ( needs two salaries to subsist with children and no health issues ).  Guess where this has to end up !

Here you are heading toward a fork in the road that offers 2 solutions

#1  Political -   Direct Confiscation ( Estate Tax ) and punishingly higher tax brackets for millionaires……..Confrontation / Gridlock.

#2 Economic – More sophisticated balanced ways to narrow the wealth gap…..

For instance …..The .003% solution.   There is an article in the NY Times , Feb 7 issue, page B5  – which describes an opportunity to narrow the wealth gap in a way  that is painless and funds the avoidance of  cutting the Social Security / Medicaid Safety Net.  This would be the introduction of a transaction tax of 3 cents on every $100 traded to be paid by financial traders via a transaction charge on every trade. It could raise $358 billion over 10 years.  It is aimed at no group, just an activity.  Trading costs have gone down drastically over the past ten years  and trading volume has soared.  In fact many blame the lower costs to trade for the frenetic speculative daily volume and wild swings  including  flash trading  issues.

Very interesting ( to me ) is that if the tax stamp isn’t linked to a  transaction, then neither the transaction or any legal action arising from the transaction could be enforced by the USA judicial system.

As a New Yorker, I will find it very interesting to follow the actions of my senior Senator Charles Schumer  a  ” heavyweight Democrat ” who serves on the Senate Finance Committee.  It is said that Senator Schumer often acts as if his main constituency is Wall Street. So, it will be interesting to see how he reconciles his allegiances on this issue.   Social Capitalists ( such as I )  would be happy to pay the tax  and I would hope  that  Warren Buffett  and Barak Obama would be for the transaction tax)

I consider this proposal a good and constructive step toward a gentle narrowing of the wealth gap while simultaneously helping those threatened with loss of medical benefits and social security through no fault of their own.

Richard Maurice Gore

February 9, 2013

Here is the gist of a note from one of the ” timers ” I follow…The Chartist…..All of the major averages are in bullish channels and are comfortably above up trending  50 day and 200 day moving averages. Technical momentum is bullish and the Fed is supporting the bulls.

To which I can add….are we riding a wave or what !!

Portfolio:

Shares                       Cost                  Unrealized Profit

VTI …..1930  …..         $77.31                      $ 2,065

VOO     2495                $66.83                      $ 8,683

VO         1400               $88.04                     $1,526

IVV        828                 $146.62                    $4,910

RSP        900                $   57.10                    $  423  ( new Feb 6 )

—————————————————————–

Total Invested       $ 627,959

Realized Profit       $  13,000  ( Jan 8 sale )

Unrealized Profit   $  17,608

Total Profit              $  30,608 = 4.87%