Monday, December 2, 2013
Even though I made no trades, it feels that way! (a) Remember the EEM/RYWVX positions I closed on Friday at 42.2x/ 14.27? They ended up at 41.46/ 13.74 today. (b) GDX -6.2% to 20.90? We all saw that coming. Capitulation can't be far off. That's temporary capitulation, by the way. I don't think we see full capitulation until the reappearance of the 16-handle seen in '09.
Friday, November 29, 2013
Here's what I see. (a) Reprint of a June 2007 article: http://www.dailyreckoning.com.au/bull-market/2007/06/25/ (b) Market momentum is worrisome: http://money.cnn.com/data/fear-and-greed/?iid=H_INV_QL I actually like emerging markets at current valuations. But should the US indexes correct, the only backstop offered by EEM is a lesser pullback. For now, I'll take the money and run.
Tuesday, November 26, 2013
What a difference five years can make. November 2008 we were all struggling to stay afloat amidst a relentless bear market. By 2010 most of us had recovered. We learned lessons that to this day serve us well. We now have a bear market redux in miners. Life is full of second chances. But it hands out only so many. To survive a -40% drawdown, only to be met with a -60% hit in the mining sector? It's quiet on the Western front- understandably so. Is capitulation around the corner? I don't pretend to know. But we'll likely recognize it when it arrives.
Friday, November 22, 2013
Friday, November 15, 2013
Whaddup? The paired trade wafted into consciousness during the noon hour. I tried tweaking it to include an inverse Dow, but the sixth sense rejected that idea. I see now that RYPMX and RYWYX have a correlation coefficient of -0.38: http://www.invescopowershares.com/tools/correlation.aspx That's the kind of rather uncorrelated split trade I like. I also like the timing option that RYWYX offers. There is a good chance Emerging Markets pull back early Monday morning, only to reverse to close in the green. Should that scenario unfold, I'm able to close the Rydex fund at the 1030 am est trading window, and immediately switch into RYWVX or EEM. Should I be wrong entirely, I have the flexibility of two trading windows to work with> for instance, I'm able to hedge a gap up in Emerging Markets with an additional position in EEV/EDZ (2x/3x inverse Emerging Markets) until the RYWYX position plays out. btw, a low correlation with the broader indexes is one reason I'm comfortable holding ZGNX despite a bearish tilt: http://www.invescopowershares.com/tools/correlation.aspx
Thursday, November 14, 2013
[After composing the following post, I noticed that the percentages reported using Yahoo Finance charts are not necessarily accurate, probably due to failure to account for dividends, especially if reinvested. But I'm too freaking tired to re-calculate everything. I'll correct one entry: AOM is up +8.62% YTD, rather than the +5.6% print in the YHOO chart. It doesn't really matter. The points I'm making should be clear either way.] (1) 2013 has been a very good year for any portfolio invested in the US indexes. (2) Any diversification away from the US indexes has hurt performance. Let's take a look. (a) DIA (DJIA) is up +18% YTD: http://finance.yahoo.com/echarts?s=dia#symbol=dia;range=ytd;compare=;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; (b) SPY (SPX) is up +22% YTD: http://finance.yahoo.com/echarts?s=spy#symbol=spy;range=ytd;compare=;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; (c) EEM (Emerging Markets) is down -9.8% YTD: http://finance.yahoo.com/echarts?s=eem#symbol=eem;range=ytd;compare=;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; (d) EFA (EAFE ETF [developed markets in Europe, Australasia, Far East) is up +13.2% YTD: http://finance.yahoo.com/echarts?s=EFA+Interactive#symbol=efa;range=ytd;compare=;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; (d) BND (Vanguard Total Bond ETF) is down -3.83% YTD: http://finance.yahoo.com/echarts?s=BND+Interactive#symbol=bnd;range=ytd;compare=;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; (e) GDX (Miners) is down -49% YTD (ouch!): http://finance.yahoo.com/echarts?s=gdx#symbol=gdx;range=ytd;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; So what's performance been like for the average Joe, invested in a diversified portfolio? Let's use AOM as a proxy (iShares Moderate Allocation). You've heard of hedge funds that are comprised exclusively of mutual funds (a fund of funds)? AOM is an ETF of ETFs (comprised of other iShares ETFs), with exposure to both stocks (US, Europe, emerging markets) + bonds (short- and long-term Treasurys, TIPS, corporate). In other words, a prudent mix of assets (note that the mix/percentages are quite similar to the La-Z-Boy portfolios I mentioned earlier in the year). AOM is up +5.6% YTD. What about so-called target date funds? FFKDX (Fidelity Freedom Fund 2020) is up +7% YTD. Hey, suddenly my own portfolio (which clocks in at a paltry +5.5% YTD), isn't looking too bad! (Considering I've sat in cash for most of the year, it actually looks half decent.) Let me close with two points: (1) If you have to stay in the La-Z-Boy, consider reallocating assets from the US to Emerging Markets for the next 12 months. (2) Don't get too comfortable with the recliner setting!