|
Small Portfolio
|
XLU & IAU
|
16.18%
|
|
|
Sector
|
XLU
|
24.90%
|
|
|
Secular
|
IAU
|
7.46%
|
|
|
Large Portfolio
|
Date
|
Return
|
Days
|
|
RIMM
|
7/16/2012
|
62.62%
|
166
|
|
SEAC
|
9/25/2012
|
15.79%
|
95
|
|
CAJ
|
9/25/2012
|
12.59%
|
95
|
|
DDAIF
|
9/25/2012
|
4.36%
|
95
|
|
CFI
|
10/31/2012
|
24.18%
|
59
|
|
RE
|
11/26/2012
|
4.16%
|
33
|
|
GLW
|
12/3/2012
|
1.96%
|
26
|
|
CGX
|
12/12/2012
|
-1.66%
|
17
|
|
PAAS
|
12/20/2012
|
1.51%
|
9
|
|
OKE
|
12/28/2012
|
-0.21%
|
1
|
|
S&P
|
Annualized
|
2.67%
|
|
|
Small Portfolio
|
Annualized
|
9.94%
|
|
|
Sector Model
|
Annualized
|
15.09%
|
|
|
Large Portfolio
|
Annualized
|
25.68%
|
Rotation: selling GLW; buying STRA.
GLW (Corning) is an Electronics support company, specializing
in LCD display screens.
STRA (Strayer Education) is, as its name suggests, in the
Education industry.
So let’s take a step back from my “inflation” comment the
other day. Inflation generally implies
demand growing faster than supply as the economy heats up and demand for raw
materials drives up prices. PAAS and OKE
are certainly in various aspects of the commodity sector.
But when the model pulls the Education industry out of its
hat, something is amiss with a pure “inflation” play.
Even worse, on Friday the sector model flipped (barely) from
XLF to XLU – that is, from financials to utilities.
That’s not inflation.
If anything, it’s stagflation. That bogeyman we’ve been hearing about for
the past four years is peering over the horizon again like a perennial Kilroy cartoon
we’ve all learned to ignore. We’re certainly
due for stagflation, but these sure thing bets are never a sure thing. I’ll shrug my shoulders and follow the models
into Utilities and Education if that’s what they call for.
But we’re all at the hostage of Washington D.C. at the
moment, right?
Eh, no.
Regardless of what you’ve heard each side declare, this
battle is not about the economy. It’s
about political power. Coming to a
budget and taxes agreement is a snap if that’s what you’re after. You have the House pass a bill and the Senate
pass its version, and then you reconcile the two before the President signs the
compromise. Math is EASY to average if
you are interested in doing so. Two and
Four average to Three, and you move on.
So why all the trouble?
The President has a chance, if he plays his cards right, to destroy the
Republican control of the House. Right
now polls show that 45% would blame a lack of compromise on the Republicans,
and 30% on the President. So the
President is doing what I would do if I were him: every time the Republicans
try to give him what he asked for the LAST time they talked, he moves his
position and they have to start over. He
demands 800 billion until the House agrees, and then he demands 1.2 trillion
until the House agrees, and then he demands 1.6 trillion.
No, seriously – go look.
You have to dig through the rhetoric and spin, but that’s basically what’s
happening. Lucy is pulling the football
from Charlie Brown over and over again because Lucy isn’t trying to play
football; Lucy is just trying to knock Charlie Brown out. And as long as the polls show that people
would blame the GOP, Obama will keep moving the football.
But what about the economy???????????????????
Oh, that.
Well, the President isn’t stupid. Japan and Europe are in full blown recession
and the U.S. leading / lagging indicators are confirming the ECRI estimate that
we are ALREADY in a recession. My sector
model has been in bear market configuration for the past year and a half. The market’s only been going sideways because
of all the money Bernanke has been throwing from his helicopter.
So, if we are ALREADY in a recession, then an agreement with
the House will just make Obama look powerless to save the economy. Granted, he campaigned on that, but still… if
we are going into a recession anyway, and the GOP can be blamed for it, then
why not manufacture an impasse that would turn the House over to Democrat
control in 2014?
I’ve said many times, and I’ll say again, President Obama
may be a lousy President, but he is a MASTER campaigner. He never stops the campaign long enough to
govern, but that’s okay if your GOAL is the campaign.
Enjoy the recession.
It will happen no matter what happens in D.C. this weekend. None of this show is about the economy at
all. It’s just about the next election.
Tim
