Tactical Allocations

Monthly Portfolio Update: There is no change to the tactical allocation for March, it remains:   Large Cap Equity:   100%   Small Cap Equity:     0%   High Yield Debt:        0%    Inv. Grade Debt:        0%   The Equal portfolio:   This account now has $1068.65 in cash so it will purchase about $534 each of JNK and AGG (both are now only a 23% weighting in the portfolio). The TA portfolio:  There is no change from the previous month so no trade is needed for this portfolio. The Enhanced portfolio:  There is no change in allocation for this portfolio, however I am going to make a diversifying trade. I will increase exposure to commodities DBCMX and reduce exposure to DSEUX. Commodities tend to do well in the late stages of the business cycle. I will sell about 8% of the DSEUX and buy as much DBCMX as possible with the proceeds and cash in the account. I will make the trades on March 1st and post the details shortly thereafter. Note: The DBCMX ha

"I'd rather be lucky than good" ~ Lefty Gomez In the case of my post, on December 15th, about Bitcoin , and my post on February 9th, about Volatility , I would like to think I benefited from a little of both. Bitcoin: When I wrote the post, I did not know that regulators would come out to stop speculative trading (bought on borrowed money) or that it would hit its peak just two trading days later. But I did know a couple of things. I knew that it was a bubble, that many people who had no idea what it was were speculating in it and that eventually it would drop severely. Below is the last 6 months of Bitcoins price movement. The blue line is when I posted my warning. It could bounce back up again but given the combined Government and bank actions against crypto currencies I think it is unlikely. For additional context, bitcoin traded at five cents per coin in 2010, it is conceivable that it could go back to that price. Volatility: This month we got a taste

"Any fool can know. The point is to understand."   ~ Albert Einstein Just a quick note as many of you have been concerned about the markets this week. What you are seeing is an unwinding of short volatility trades. In English this means that people have taken on too much market risk (because that risk seemed lower than it was) and when markets started going down (the true risk became more apparent) they needed to reduce risk. It looks to me like it is nearing the end but that will not be confirmed for a couple more days. My advice is to not panic. Almost always, reactionary trades are bad trades. Nothing I have seen yet indicates concern that we are going into a recession. Basically this is the result of too many people having a similar exposure to the markets and all deciding to exit at once it is not an indication that the markets think we are moving into a recession. If you want to track the key indicator that is driving the market right now it is the VIX which i

MORNINGSTAR PEER RANKS: Often the most difficult test is to look at a fund against its peers. How does performance stack up against the other active managers who are trying to run a similar strategy? I went out to Morningstar and found a Tactical Allocation Peer group ( you can see it here ). These numbers will be more meaningful as my strategy gets a longer history and I can compare 1, 3 and eventually 5 year numbers. As of January 31, 2018: 1 Mo 3 Mo 1 Yr 3 Yrs 5 Yrs Equal   33%   36%   -na-   -na-   -na- TA   95%   99%   -na-   -na-   -na- Enhanced   56%   35%   -na-   -na-   -na- # of Funds    300   299   291    249    190 Max  9.08%  12.44% 31.20%  13.04% 12.37% Min -2.34% -3.86% -6.67% -10.03%   -7.97% COMMENTARY: The TA fund has had a very good three months. The Enhanced fund has struggled recently but looked better this month. The short term metrics can jump around a lot (all three strategies have had one and three month marks in the 90's). The mos

PERFORMANCE: Cumulative returns of each of the strategies as though you had invested $100,000 in them at the beginning of the blog. In January the  Equal weighted portfolio  returned 2.0%. This portfolio is my version of a buy and hold portfolio and I use it as my benchmark for the two portfolio's below.  The  TA portfolio  was the best performing portfolio and returned 5.5%. This portfolio invests in the same securities as the Equal weighted portfolio but actively allocates by adjusting how much is invested in each asset class. The  Enhanced portfolio  returned 3.1%. This portfolio uses the allocation of the TA portfolio and seeks to enhance those returns by buying funds that access the asset class in a different way. COMMENTARY: Equal Portfolio:   This portfolio is invested about 25% in each of four asset classes ( investment grade debt ,  high yield debt ,  large cap equity  and  small cap equity ). It is the baseline or benchmark against w

TRADES  (performed on February 1st) : Equal Weight Portfolio: Beginning cash $901.94 No Trades TA Portfolio: Beginning cash $613.89 No Trades Enhanced TA Portfolio: Beginning cash $132.91 Sold 777.6194 shares of SDEUX at $11.93 per share, $7 commission, total proceeds $9270.00 Purchased 909.17 shares of DBCMX at $10.35 per share, $7 commission, total cost $9,402.91 No cash left over DISCLAIMER: Past performance is not a guarantee of future performance.  This strategy is presented for informational purposes only and is not a solicitation to buy or sell any securities.  October is one of the peculiarly dangerous months to speculate in stocks in.  The others are July, January, September, April, November, May , March, June, December, August and February. ~ Mark Twain