6/24/2018 A tariff is a sleight of hand trick

Sector Model	XLI	-1.54%
Full Model	Date	Return	Days
BT	8/11/2015	-54.97%	1048
TMK	11/23/2015	41.42%	944
NVR	12/16/2015	80.90%	921
CMP	2/19/2016	5.02%	856
NVR	2/22/2016	88.53%	853
AMWD	3/17/2016	37.02%	829
CASY	5/12/2016	-4.77%	773
AEM	6/7/2016	-9.12%	747
ESRX	6/13/2016	4.37%	741
AMED	6/16/2016	72.49%	738
FRO	6/27/2016	-10.38%	727
ASTE	7/12/2016	4.10%	712
MFC	9/1/2016	49.03%	661
SFM	9/8/2016	14.02%	654
CFFN	9/12/2016	7.15%	650
FOSL	5/11/2017	114.68%	409
HIBB	7/25/2017	75.57%	334
FOSL	7/27/2017	180.80%	332
HZO	8/1/2017	48.82%	327
BCE	5/31/2018	4.15%	24
(Since 5/31/2011)
S&P	Annualized	10.74%
Sector Model	Annualized	14.85%
Full Model	Annualized	16.52%
S&P	Total	105.59%
Sector Model	Total	166.00%
Full Model	Total	194.52%
Sector Model	Advantage	4.11%
Full Model	Advantage	5.78%
	Previous	2018
S&P	98.38%	3.63%
Sector Model	172.95%	-0.55%
Full Model	145.63%	19.90%

A word on trade wars and zero-sum economics.

Trade wars are like sleight of hand tricks.  Here’s how they work:

1)      Announce an industry you are going to “save”.

2)      Charge Americans extra tax when they try to buy from foreign competitors of that business.

3)      Show how much you helped that industry.

What’s wrong with that?

Here’s what’s wrong – while you are busy watching that industry you are distracted from all the other industries, jobs, and consumers who are being hurt.

Take steel. Make it more expensive and you might help the steel manufacturers, but you hurt the car makers and consumers.  Worse, the less money consumers have after buying a car that they need, the less they will have left over for other purchases that are discretionary.  So anything from amusement parks to restaurants will get hurt as well.  But you can’t make the direct connection intuitively, and you won’t be paying attention to how restaurants fare while everyone is shouting “Look at the steel makers!”

And that’s just a tariff YOU create.  What about retaliatory tariffs?

Ultimately if America walls itself off from trade, the rest of the world will just trade around us – and leave us in the dust.

But a few steel makers will sure be on hand to sing the praises of those tariffs.

This is like a magician who waves his hand around an empty palm while he snatches the wallet from your pocket.

Tariffs, ultimately, don’t work.  Oh, they might seem to work for the one industry everyone is watching.  But it is at the expense of everyone else.

Tim

6/22/2018 Sector Model Trade

I've sold the XLV position in the XLV/XLI split and put the remainder in XLI.

The Sector Model is now back into one sector: XLI.

6/15/2018 Double Sector Trade

Continuing the annoying pattern, the Sector Model remains temporarily split.

It sold the XLP and XLU positions to buy XLI and XLV positions with a favorable gap.

6/11/2018 Double Sector Trade

The Sector Model (currently split) sold XLB and XLI and bought XLP and XLU with favorable gaps (i.e. the sells were up more than the buys on intraday prices).

The split between the model is temporary.

6/10/2018 Potential Double Trade in Sector Model on Monday

Sector Model	XLI and XLB	1.66%
Full Model	Date	Return	Days
BT	8/11/2015	-56.89%	1034
TMK	11/23/2015	45.75%	930
NVR	12/16/2015	92.71%	907
CMP	2/19/2016	8.76%	842
NVR	2/22/2016	100.83%	839
AMWD	3/17/2016	51.43%	815
CASY	5/12/2016	-13.89%	759
AEM	6/7/2016	-9.91%	733
ESRX	6/13/2016	3.27%	727
AMED	6/16/2016	59.31%	724
FRO	6/27/2016	-21.23%	713
ASTE	7/12/2016	3.25%	698
MFC	9/1/2016	50.37%	647
SFM	9/8/2016	8.49%	640
CFFN	9/12/2016	4.99%	636
FOSL	5/11/2017	96.68%	395
HIBB	7/25/2017	95.42%	320
FOSL	7/27/2017	157.25%	318
HZO	8/1/2017	65.99%	313
BCE	5/31/2018	3.16%	10
(Since 5/31/2011)
S&P	Annualized	10.89%
Sector Model	Annualized	15.02%
Full Model	Annualized	16.59%
S&P	Total	106.80%
Sector Model	Total	167.36%
Full Model	Total	194.12%
Sector Model	Advantage	4.13%
Full Model	Advantage	5.70%
	Previous	2018
S&P	98.38%	4.25%
Sector Model	172.95%	2.14%
Full Model	145.63%	19.74%

The Full Model continues to pull away from the benchmark set by the Sector Model – now split in a double whipsaw and set to trade tomorrow into XLU and/or XLP out of XLB and/or XLI.  The sector model trades are dependent upon intraday moves.

In any case, the Full Model is finally populated with enough data to run on its own adaptive metrics, and it unlikely to make a trade until October.  The two exceptions would be a perfect setup where the fundamental and technical buy and sell metrics line up, or if one of the positions is thrown into cash by a corporate buyout or privatization.

Tim