Theory versus Reality

June 22, 2012

Based on the way the market sold off yesterday, June 21, 2012, I believe I should give you a fuller explanation of how I am investing the theoretical $ 1 million I have talked about in previous posts.

To begin with, the theoritical $1 million is a real $1 million.

Instead of investing in thirds on the 10th, 20th and month end, I am draining the money sequentially from four different brokerage accounts.  What isn’t drained for SPY will remain invested in BSV, BND, BOND,VCIT, LQD and VCSH until October 31.

Every 10 days I am investing approximately $83,000 in SPY ( or IVV, or VOO ) until $750,000 is invested, ( or not invested) based on the relationship of SPY to its 150 day moving average.  This process should take 3 months,  or longer.  The final $250,000 of the $1 million will not be invested if its turn comes before October 31.  This is out  of deference to the Play Till May then Go Away strategy which I respect and want to measure against the Moving Average strategy.  If its turn does not come until after October 31, it will be invested on the same basis of the first $750,000.

On June 11, 2012 an investment of $83,000 was made in SPY.  On June 21 only $40,000 ( of $83,000 ) was invested in IVV, because I always split my buys into 2 purchases, one at 10am and the other at 3:30 pm.  By the time we reached 3:30pm on the 21st, SPY had gone over a precipice and rather than fight the tape, I stood aside.  That purchase will be completed on the 22nd if the market trades in a balanced manner. ( done June 22 )

There is one more purchase to be made to complete the June program, $83,000 as of the close Friday, June 29,2012 to be invested ( or not invested ) on the next market day. That purchase, if made, will have drained brokerage account number one for this program.

Any part of the $1 million not invested will remain invested in the ETFs listed in paragraph 4.

So, there you have it.

I will continue to talk about the theoretical investment in 1/3s because it puts more focus on the validity of timing SPY and less on the nuts and bolts of my particular management.   However, at some point down the road I will compare the result of the theoretical modus with my actual result, with the result of not risking a penny on SPY, and the result of going 100% long SPY on June 11th and holding through  thick and thin up to result comparison day.

And, you should know that my cost of SPY on June 11 was $133.56 per share and $135.47 per share for the IVV purchased on June 21st. ( $133.93 per share for the IVV purchased June 22,2012 )

I will be using the SPY price of $133.56 to calculate results for (a) not investing in this system and (b) going 100% long on 11June

Bye for now..

Richard Maurice Gore ( aka ) Richard, Rich, RMG, Dick, Richie from Throggs Neck and Smiley from Woodlawn.

 

 

 

 

 

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