09/30/2013 sector change

Seems like my confidence in wrapping up XLK into XLU was premature.

Sold XLK and bought XLB.

So, I still have two positions: XLB and XLU.

09/29/2013 A Few Changes Under the Hood

Sector Model	XLU & XLK	0.75%
Style Model	Small Value
Large Portfolio	Date	Return	Days
ABX	4/11/2013	-23.24%	171
TTM	5/6/2013	2.87%	146
BTI	7/1/2013	4.84%	90
CLH	7/8/2013	10.68%	83
FAST	7/22/2013	7.39%	69
VAR	8/2/2013	1.34%	58
OUTR	8/19/2013	-18.27%	41
QCOM	9/3/2013	1.66%	26
FLR	9/16/2013	5.71%	13
GCO	9/24/2013	0.51%	5
(Since 5/31/2011)
S&P	Annualized	10.33%
Sector Model	Annualized	22.75%
Large Portfolio	Annualized	28.37%

 

Rotation: selling CLH; buying NEM.

Since the news from Washington D.C. has been so contradictory, I’ve spent the time making a few upgrades to my model.

One is hitting today, and another hitting soon.

Today’s change is NEM: it’s in the same industry as ABX.  In some limited circumstances that can occur, and today is one of those circumstances.  Although not part of the evaluation, it’s indicative to note that the entire industry is two standard deviations below its long term median regression.  GDX, for instance is at 25.11, while the long term mean is 46.08 – an 84% difference.

That’s like the S&P being at 1015.

The suppression of gold has to do with global deflationary pressures that are being aggressively fought by the Fed.  The hint of taper has been taken off the table, and the continued dysfunction in D.C. will accompany a continuation of Fed easing.

Although nothing is ever certain, gold is a reasonable bet at this point.

The next change is in the sector model.  It is currently running two ETFs, and when one of those rotates off in the near future I will retain only one.  The most likely scenario is for XLK to outperform and then cash out, leaving XLU.  But we’ll see what happens.

No need for market comment.  Everything is being held hostage by partisan politics.  And remember: it takes two parties to really make a mess.  This is a shared pile of poop.

Tim

 

09/24/2013 rotation: selling OKE; buying GCO

Sector Model	XLU & XLK	2.33%
Style Model	Small Value
Large Portfolio	Date	Return	Days
ABX	4/11/2013	-23.99%	166
TTM	5/6/2013	1.21%	141
OKE	6/17/2013	21.65%	99
BTI	7/1/2013	5.83%	85
CLH	7/8/2013	10.22%	78
FAST	7/22/2013	6.94%	64
VAR	8/2/2013	4.19%	53
OUTR	8/19/2013	-23.61%	36
QCOM	9/3/2013	4.07%	21
FLR	9/16/2013	5.52%	8
(Since 5/31/2011)
S&P	Annualized	10.67%
Sector Model	Annualized	23.31%
Large Portfolio	Annualized	28.39%

 

Rotation: selling OKE; buying GCO.

As I noted on the blog yesterday, the negative gap in FAST prevented the scheduled rotation.  After recalculating last night, FAST moved out of the sell window.

I actually like this rotation better.

Tim

 

09/23/2013 no rotation

Because of the negative gap between FAST and CXW, there was no trade today.

09/22/2013 You can't control the market, but you can control yourself

Sector Model	XLU & XLK	1.54%
Style Model	Small Value
Large Portfolio	Date	Return	Days
ABX	4/11/2013	-22.91%	163
TTM	5/6/2013	1.17%	138
OKE	6/17/2013	20.67%	96
BTI	7/1/2013	5.84%	82
CLH	7/8/2013	10.47%	75
FAST	7/22/2013	7.73%	61
VAR	8/2/2013	3.96%	50
OUTR	8/19/2013	-25.95%	33
QCOM	9/3/2013	4.19%	18
FLR	9/16/2013	7.14%	5
(Since 5/31/2011)
S&P	Annualized	10.94%
Sector Model	Annualized	23.11%
Large Portfolio	Annualized	28.53%

 

Rotation: selling FAST; buying CXW.

Rather bizarre rotation – selling a building supply company and buying a REIT.  No clue what that means, but I’ll follow the model.  CXW has basically gone nowhere in forever.  If we’re headed toward some kind of market decline, that may not be such a bad thing…

No market comment today, though.  Too many external variables to get any meaningful read on market internals.

Taper, no taper, shut down, no shut down, war, no war.  Eh.  Can’t control it.  What I CAN control is the methodology of my model.  The data is continuing to mature, and the model is definitely developing into two sets: one for an IRA account and one for a Taxable account:

A taxable account clearly performs better for longer term holding periods, but I do not yet have a rotation point.  I’m quite intrigued by the resilience of the selections well past two years from their original trade.  The spike at one year, of course, is the difference between long and short term capital gains taxes.

Lesson for now: track your trades – when you open them, when you close them… and AFTER you close them to see how they would have done on a longer hold.  You might discover something useful, as I am here.

Tim

 

09/18/2013 If they never taper QE...

Just for giggles, I calculated what would happen to the total U.S. money supply if they never tapered from the 85 billion per month, and compared it to their "normal" target of 2% annual inflation.

The question is, exactly how long would it take for QE to "taper" itself.

Not too long at all... in geologic terms... We'd hit equilibrium around the year 2229:

09/15/2013 rotation: selling CAJ; buying FLR

Sector Model	XLU & XLK	1.29%
Style Model	Small Value
Large Portfolio	Date	Return	Days
CAJ	9/25/2012	-6.83%	355
ABX	4/11/2013	-26.59%	157
TTM	5/6/2013	-1.25%	132
OKE	6/17/2013	16.13%	90
BTI	7/1/2013	3.77%	76
CLH	7/8/2013	11.49%	69
FAST	7/22/2013	7.56%	55
VAR	8/2/2013	1.84%	44
OUTR	8/19/2013	-8.33%	27
QCOM	9/3/2013	3.47%	12
(Since 5/31/2011)
S&P	Annualized	10.40%
Sector Model	Annualized	22.98%
Large Portfolio	Annualized	28.47%

 

Rotation: selling CAJ; buying FLR.

FLR is in the Engineering and Construction industry, but the depressed price comes primarily from the weakness in the mining industry (which Fluor has a part in).  As such, this is partially related to my ABX investment.

No more for this post, though.  I’m working on another report detailing exactly why penny stocks won’t even leave you with pennies…

In any case, this trade may not be possible tomorrow, with the Summers-exit relief rally in the morning.  We’ll see.  If CAJ gaps better than FLR, the trade is on.  If not, then I’ll have to hold.

Tim

PS on the Sector Model.  I’ve been stating in previous posts that I planned to only hold one of these stocks at a time and ignore all whipsaws.  In practice, however, I’ve mostly still been holding both.  The hardest thing to DO in the market is “nothing,” and staying out of any position is psychologically difficult to pull off.  A good lesson for those siren calls NOT falling in line with the model.