Tactical Allocations

March Allocation: Markets continued to rebound and are now close to their previous peaks (stating the obvious). There is a concern raising around the amount of leverage in public companies. Much of the leverage has no restrictions. Now we are beginning to see earnings growth slow. This is concerning because earnings are what companies use to pay the interest on their debt. The lack of "covenants" or restrictions on the debt adds complexity to the problem. It is less clear how problems will be resolved because there are no legal requirements. I expect we will be hearing a lot about this in the next couple of years (on CNN). My signals are back to saying Large Cap Equity . Although I personally believe this is a lull before a storm. Because we bought Large Cap Equity a year ago, there is no change to the allocation. I will put a defensive alternative into the Enhanced portfolio. Updated Allocations: Large Cap Equity (VONE):     83%   Small Cap Equity (V...

Retiring  is easy, its funding a decent lifestyle in retirement that is difficult. Everyone makes retirement planning way too difficult. It should be very simple. Let's see what we can do to simplify it in this blog. The ultimate goal is to have enough in savings to support you for the rest of your life.  Complexity comes because we try to factor in things we do not know and cannot control. Let's focus on the things we can control. For the uncertain aspects, I will share some rules of thumb that work pretty well. First of all, the only number that matters as you prepare for retirement is your Savings % . How much of your salary are you saving every year? In formula it would be: Savings / Income = Savings % Is it 5%, 10%, 15% or more?  This is all you need to worry about when thinking about retirement. I will get into why in a moment. Before I go there I want to look at a related question. How do you know when you have enough to retire? My rule of thumb is tha...

Historic Track Record Report Card: A record of all of the completed positions I have taken in the TA and Enhanced portfolios. One year performance as of January 31st (in order):   AGG(2.2%),  JNK (1.9%) ,   VONE (-2.3%) ,  VTWO (-3.5%)   . TA:   Position taken one year ago:  VONE Rank:   3rd History 1st 2nd 3rd 4th Number of Bets:   2  5  2  0  % of Bets:   22%  56%   22%  0 % Enhanced:  Position taken one year ago:  DBCMX (-7.9%) Rank : - Negative History     +   =   - Number of Bets:     3   1   5 % of Bets:   33%  11%  56% PORTFOLIO UPDATE (as of 2/15/2019): Current Performance: The ETF's and other funds that make up the portfolio's MTD Returns: Ticker 2/15/19 VONE 8.4% VTWO 11.5% JNK 5.2% AGG 0.9% DBCMX 5.3% IEMG 9.6% KXI 5.6% JXI GOVT 5.1% 1.0% Co lor significance: ...

January saw a nice rebound after the fourth quarter (Q4) drop. In looking back at Q4, there was an oddity. Equity moved before debt. Typically debt holders get uncomfortable with companies and reduce prices before equity holders. Debt holders are looking at a companies ability to generate enough cash to pay the coupon for the next few years. This longer term focus (relative to equities which tend to focus on the next quarter's earnings) means they usually spot trouble first. Traders are blaming systematic trading (computer generated) as the cause of the Q4 downturn. The culprit is that most computer trading algorithms include a momentum factor as part of their decision making process. This means that the more stocks go up, the more they buy and the more stocks go down, the more they sell. This can create self sustaining moves both to the up and down side. These moves can also get started without any fundamental catalyst, like an economic downturn. This is important to be awa...

Trades made within the portfolio's on February 1st followed by a listing of the holdings in each portfolio. Equal Weight Portfolio: Cash balance on January 31st = $25.91 No Trades TA Portfolio: Cash balance on January 31st = $53.47 Sell 78 shares of VONE at $123.79, with $7 commission = $9,648.62 Bought 90 shares of AGG at $106.96, with $7 commission = $9,633.40 Cash after transaction = $68.69 Enhanced TA Portfolio: Cash balance on January 31st = $9.74 Sold 844.47 shares of DBCMX at 9.40, with $7 commission = $7,931.02 Bought 319 shares of GOVT at $24.80, with $7 commission = $7,918.20 Cash after transaction = $22.55 The Portfolios as of 2/1/2019: Equal Weight Portfolio:   Cash = $25.91 VONE  = 225 Shares VTWO  = 234 Shares AGG  = 244 Shares JNK  = 737 Shares TA Portfolio: Cash = $68.69 VONE   = 775 Shares AGG  = 179 Shares Enhanced TA Portfolio: Cash = $22.55 VONE  = 454 ...