9/1/2013 Don't cry for me...

Sector Model	XLU & XLK	0.13%
Style Model	Small Value
Large Portfolio	Date	Return	Days
CAJ	9/25/2012	-13.08%	341
ABX	4/11/2013	-20.67%	143
TTM	5/6/2013	-15.58%	118
DLB	5/13/2013	-8.39%	111
OKE	6/17/2013	16.86%	76
BTI	7/1/2013	-0.06%	62
CLH	7/8/2013	9.33%	55
FAST	7/22/2013	-5.52%	41
VAR	8/2/2013	-3.76%	30
OUTR	8/19/2013	-0.54%	13
(Since 5/31/2011)
S&P	Annualized	8.97%
Sector Model	Annualized	21.48%
Large Portfolio	Annualized	27.07%

 

Rotation: selling DLB; buying QCOM.

This is the second trade in the revised version of the model, and so far as bullish vs. bearish industries is concerned, it’s relatively neutral.  The sector model is also neutral, poised between expansion and contraction.

And, finally, the cycle chart is hovering around a market top, but refusing to cross into a bearish pattern.

Short answer: the so-called “smart-money” is playing the “heck-if-I-know” trade (when you can’t alliterate, hyphenate…).

There are two major reasons for the indecision: 1) they really don’t know if we will continue a “bull” market or go into a bear, and 2) no one knows what a “bear” market would even look like with Larry Summers at the helm.  From what I’ve been reading, the man is just a political hack who will make Bernanke look positively frugal.

I can see Bernanke in an evening gown, with his long laced gloves stretched out toward the crowds adoring him as he sings to them from his balcony, “Don’t cry for me Argentina…”

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)

 We’ve been lucky so far.  Bernanke has merely been printing enough money to camouflage deflation.  Summers is another beast altogether.  He’ll print money for political purposes.  Everything the Republicans accused Bernanke of doing, Summers will actually do – causing the Republicans to be embarrassed about what they said of Bernanke even as their worst fears finally come true.

A bear market in such an environment may not show up in the nominal “values” at all, but will only show up in the ratio of the market to commodities.

If you are in cash, your cash will be worth less.

If you are in gold, you’ll hold your own in real “value” while being taxed on fake “profits” and still end up with less.

And if you are in the market, well… you’ll either go up, down, or sideways.

Hence the confusion with the smart money.

Regardless, I’ll try to own companies that will go down less, and up more.  And I’ll pop some Dramamine if the rollercoaster ride gets me sick to my stomach.

Oh, and Syria?  Just noise.  Terrible, tragic, horrifying, noise… as far as the markets are concerned.  Worry about the lives that are lost and the children butchered instead of your account.  Value investors don’t have to monitor their accounts day to day – which should give them time to worry about people with real problems.

Tim