06/03/2012 Couple of small changes

Condition	Bear Market
S&P Target	1230
Small Portfolio	IAU & XLF	3.42%
Margin (short)	XLU	-4.46%
Position	Date	Return	Days
GCI	7/14/2011	-6.59%	325
CSGS	10/3/2011	29.35%	244
NLY	10/25/2011	6.59%	222
KBR	10/27/2011	-17.01%	220
VG	10/27/2011	-48.02%	220
TTM	11/30/2011	20.20%	186
BT	1/4/2012	-0.55%	151
PDLI	3/7/2012	3.78%	88
CLF	3/19/2012	-35.42%	76
SAI	5/30/2012	-1.81%	4
S&P	Annualized	-4.94%
Small Portfolio	Annualized	3.39%
Mousetrap	Annualized	1.05%
Margin	Annualized	9.27%

Couple of changes:

When I began the model I was experimenting with hedging alternatives, and only actively reported those later in the summer of 2011.  Because of that, I did not report the short position I had on ERX in real time, and did not list those returns during the Beta test period.

The Beta test period was completed on 5/31/2012, after a full year of testing.  I am now reporting the returns I made shorting energy. Since ERX was a leveraged short, I’m only reporting the percentages that would reflect the unleveraged XLE.  The difference is less than 1% between the two.  Accordingly, the “Hedged Portfolio” has been deliberately under-reported, and now will reflect the true numbers.

I’ve also changed the name of the “Hedged Portfolio” to “Margin Portfolio”, since I will apply light leverage when the Bear Market conditions change to a Bull Market.

Also, since I will be rotating stocks on a periodic basis (next rotation tentatively scheduled for 7/5/2012), there is no need to list the calls for each stock as a “Buy” or “Hold.” 

Finally, now that the model has more than a year of live trade history, the annualized numbers will begin to be more stable than before.

For the Beta test, I compared the model’s returns versus SPY, along with two control sets.  Since the model combined a Greenblatt fundamental filter and the technical filter on my sector model, it had to beat the average of those two control sets.

As of 5/30/2011, these were the numbers for the Beta test:

S&P (benchmark): 2.25%

Greenblatt (measured on validea.com) underperformed by -29.25%.

The sector model outperformed by 7.25%.

The average of the two control sets underperformed SPY by -11%.

Not that high of a benchmark, but the Mousetrap (long only, unleveraged) model had a return rate of 10.49%, which outperformed SPY by 8.24%.

Not stellar, but a successful test nonetheless.

No changes on the market condition after Friday’s action.  The S&P target has fallen slightly to 1230.  What the market does short term is anyone’s guess.  Kass is calling for a “face ripping” bounce of 50 points on the S&P.  Most of the universe is watching Greece.  The Supreme Court and Bernanke are going to make pronouncements that should affect the market as well.

June will be an interesting month.

Tim