Eleven Days in May

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

 

 

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