Tactical Allocations

Markets have been very robust and my model says it is time to begin taking on small cap equity risk. Small cap has under performed large cap by a large amount over the last few years yet over longer historic periods it typically outperforms. In the Enhanced portfolio I am adding the Gabelli Global Small & Mid Cap Value Trust GGZ . It is a closed end fund that invests in global small cap companies. This adds a few risks relative to VTWO . First of all it includes non-US securities, it also has some leverage and focuses on value companies. I expect it will be less volatile and have a higher income (dividend) than VTWO . It is also currently selling at a 20% discount to the underlying NAV which adds additional capacity for out performance over time. I will make these trades on Monday August 3, 2020 and will post the details of the trades later that day. Note: The sells are approximately 1/12th of the total portfolio and will be made later today. The Equal portfolio:   N...

The Origins of My System: This will likely be too in depth for many but I wanted to put my process out there for those who might be interested. So how did I create my system for taking risk.  It actually was an effort that progressed through about 10 years as I learned of new techniques and thought of new ways to implement the information.  Below is a high level overview of the process. I began by collecting many different economic indicators that I felt might give some indication of upcoming performance.  I found that many indicators had a cyclical nature to them and so I looked at these relative to the next year of returns on a bunch of different indices. If there was a strong correlation between the level of the economic indicator and the index return then I kept it as valuable information. I then studied the indicators that gave the strongest signals and noticed that some of the indices went up when the indicator went down and others moved the opposite direct...

YTD 2020 through June we have seen a sharp decline followed by a steep reversal. This year has been a perfect example of why you want to stay  fully invested and not trade based on emotions. If you pulled out of the market when everyone was scared (as COVID became reality in March) you would have sold at low prices and missed a huge rally.  By staying invested and being disciplined about the type of risk you are taking, which is what my approach does, it has allowed us to weather the storm and generate solid returns without taking on inordinate risk. It is nice to see the Enhanced portfolio starting to produce better results. Early results were hit by a bet on international equities and the US did much better. The recent positioning in low quality bonds has been quite beneficial. June performance of the holdings in the various portfolios from the highest to lowest return: HIX 7.2%, DSL 6.7%, IEMG 5.7%, VTWO 4.1%, VONE 1.6%, AGG 0.5%, GOVT 0.0%, JNK -0.8%. ...

Below are the trades made within the portfolio's on July 1st 2020 followed by a listing of the current holdings in each portfolio. Equal Weight Portfolio: Cash balance $948.93 Bought 9 shares of JNK at 101.05 with $0 commission. Total cost $909.45 Ending cash balance of $39.48 TA Portfolio: Cash balance prior to trade $419.93 Sold 78 shares of  VONE  at $142.75 with $0.23 SEC Fee. Total proceeds $11,134.27 Bought 114 shares of  JNK  at $101.05 with $0 commission. Total cost $11,519.70 Ending cash balance of $34.50 Enhanced TA Portfolio: Cash balance prior to trade $540.89 Sold 76 shares of  VONE  at $142.75 with $0.23 SEC Fee. Total proceeds $10,848.77 Bought 722 shares of  DSL  at $15.77 with $0 commission. Total cost $11,385.94 Ending cash balance of $3.72 The Portfolios after the trades on 7/1/2020: Equal Weight Portfolio:   Cash = $39.48 VONE  = 225 Shares VTWO  = 247 S...

We are still adding to our High Yield exposure this month. The markets are recovering and mid month is looked like we would be adding small cap however the risks changed and we are going to increase high yield bond exposure again. Note: The sells are approximately 1/12th of the total portfolio and will be made later today. The Equal portfolio:   Use cash in account to buy $948.93 of JNK The TA portfolio: Sell 78 shares of  VONE Buy as much JNK  as possible with proceeds and cash  The Enhanced portfolio: Sell 76 shares of  VONE Buy as much  DSL  as possible with proceeds and cash Target Allocation Prior to trades: Large Cap Equity (VONE):     41%   Small Cap Equity (VTWO):      0%   High Yield Debt (JNK):            24%    Inv. Grade Debt (AGG):           34%   Equal Weight Portfolio:   VO...