Sunday, November 27, 2016

11/27/2016 Where we are, and where we're going

Mouse
XLB
3.56%
Rabbit
Date
Return
Days
NVR
12/16/2015
-3.48%
347
CASY
5/12/2016
7.47%
199
AVB
5/24/2016
-9.35%
187
AEM
6/7/2016
-18.51%
173
AMED
6/16/2016
-17.31%
164
FRO
6/27/2016
-2.57%
153
ASTE
7/12/2016
15.49%
138
BSET
8/3/2016
17.28%
116
MFC
9/1/2016
29.25%
87
CFFN
9/12/2016
15.15%
76
Turtle
Date
Return
Days
BT
8/11/2015
-34.94%
474
DY
10/30/2015
-0.76%
394
TMK
11/23/2015
18.58%
370
UPLMQ
12/1/2015
82.04%
362
CMP
2/19/2016
17.06%
282
NVR
2/22/2016
0.59%
279
ENOC
3/15/2016
-13.93%
257
AMWD
3/17/2016
13.39%
255
ESRX
6/13/2016
1.30%
167
SFM
9/8/2016
9.35%
80
Since 5/31/2011
Annualized
S&P
64.54%
9.49%
Mouse
128.00%
16.18%
Rabbit
66.60%
9.73%
Turtle
120.87%
15.51%
Previous
YTD
S&P
51.94%
8.29%
Mouse
77.79%
28.24%
Rabbit
57.21%
5.97%
Turtle
58.35%
39.48%

So where are we?

With about a month left to the year, the Turtle continues to outperform the Rabbit, which is set to be officially absorbed into the Turtle for 2017.  I’ll continue with the same 20 stocks but rotate and select on the time schedule and fundamentals the Turtle has been using:

Small cap stocks with room to grow, low current P/E driven more by rising earnings than falling prices, and good 3-5 year projected returns in an industry that looks bottomed out on its unique business cycle (no two industries are exactly alike in this respect).

The holding periods will average about five years as well – some longer and some shorter, with a typical trade about once a quarter for the best trade in the portfolio.

The Sector Model continues to function as expected:



The current deviation from the regression line is -0.11406489.  A standard deviation between 2 and -2 is entirely normal behavior.  This is barely more than a tenth below the regression line.  It can’t get more “normal” than that.

The post-election rally hasn’t yet shown up in the sector ratios, so we are still showing a bear market configuration:




And what of Trump?  He’s an unknown.  A real bull market COULD be sparked by a perfect combination of taxes and regulation, but it would require an INCREASE in both trade and immigration.  Trump is in favor of lowering taxes and regulations, but campaigned to renegotiate trade agreements and cut down on illegal immigration.  It’s not impossible for him to increase legal immigration and increase trade by no-tariff bi-lateral agreements.

But Trump is running into the same problem that Clinton (or anyone) would be facing in these next three years: the long term demographic trends pose a serious head-wind to the market, pointing to another major bear market taking the S&P back into the 1600 range by 2019 (going into the next election).



The current value of the S&P is 2213.35.  The projected value of the S&P should be 2228.43.  We are exactly on target.

Without some kind of massive inflationary stimulus, we shouldn’t pass our current levels again until 2023.

Demographics aren’t destiny, but they aren’t to be ignored either.

If I were President I’d ramp up both trade and targeted immigration, and cut taxes and regulations.  But I’m not President, and none of the candidates promised to do all four of those actions.

We may be in for a long rough ride.


Tim

2 comments:

  1. Great information Tim. I am going to sign up for your emails. I am a friend of Josh.

    ReplyDelete