February 28, 2019 Allocation

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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 (VTWO):     0%  
  • High Yield Debt (JNK):             0%   
  • Inv. Grade Debt (AGG):          17%  

Trades will take place on February 1st.

The Equal portfolio: The cash balance is under $1000 so we will not make any trades for this portfolio.

The TA portfolio: No trades in this account as I bought VONE a year ago and that is the call again for this month. Cash balance is $116.67 which is not enough to justify a trade. 

The Enhanced portfolio: The purchase I made one year ago was DBCMX (a commodity fund). I will sell the remaining 844.47 shares and buy DVY with the proceeds and cash that has accumulated in the account. DVY is a Large Cap Equity fund that focuses on US based companies that pay high dividends. These often outperform in difficult equity markets.

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. I own all of the securities suggested in all three portfolio's.  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

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