11/24/2012 selling DECK; buying RE

Small Portfolio	XLF & IAU	18.25%
Position	Date	Return	Days
DECK	6/15/2012	-31.07%	161
RIMM	7/16/2012	60.83%	130
SEAC	9/25/2012	9.79%	59
CAJ	9/25/2012	3.84%	59
DDAIF	9/25/2012	-7.32%	59
CFI	10/31/2012	3.42%	23
CGX	11/5/2012	13.52%	18
MO	11/8/2012	6.62%	15
EL	11/12/2012	3.70%	11
BOKF	11/19/2012	1.00%	4
S&P	Annualized	3.20%
Small Portfolio	Annualized	12.30%
Large Portfolio	Annualized	20.95%

 

Rotation: selling DECK; buying RE.

DECK has had its chance.  It’s still a good buy, but RE is a better buy.  Hurricane Sandy has had a good run in making the REINSUR industry a bargain for us, so it’s time to test those waters.

But last week I promised a bit more on taxes.

So, taxes…

Regardless of the difference between the Bush and Obama tax rates, they do appear to have one thing in common: the short term rates are 20% higher than the long term rates in either scheme.

That makes the math easy, but it’s not the entire answer.

Or perhaps I should say, it’s not the PERMANENT answer.

Here’s the graph:

Seems simple.  The green line is the sector model in an IRA account.  The orange line is the sector model after the Bush tax rates.  The red line is the sector model after the Obama tax rates.

And while these are all profitable when the S&P goes nowhere for a decade, I do not yet know how profitable they will be when a new secular bull market begins.

That’s not likely before 2020, so I have some time.  Until then, my model should continue to outperform the broad market, even AFTER Obama’s tax rates take effect.

For now, it’s good enough.

I hope everyone has enjoyed a lovely Thanksgiving with their family.  That’s what’s important.  I like math.  I love my family.

For a life, that’s more than good enough. J

Tim