The past 2 months have been frustrating. Market up, market down, often sending contradictory messages and moving the opposite of what would be expected from news releases. So while it has still been a good year, I am tired of giving back gains in a market that changes dramatically each day.
As of now, I have positioned my IRA as follows:
~75% Cash
~8% Corporate Bonds (Ford and NOVA Chemicals)
~17% Large dividend companies and consumer non-discretionary.
Yes, a very bearish position that is trying to avoid volatility.
I exited my positions in financials, short treasuries and precious metals. On-going turmoil in Europe and a strengthening US dollar has not helped my portfolio. With little action from either the European Central Bank and the Federal Reserve, I have found myself on the wrong side of market movements.
So I turn my attention to 2012 and whether there are any longer-term "investable" trends or if volatility will make only the most talented trader wealthy. At this point my 6-12 month outlook is quite bearish and I have decided to "stop banging my head against the wall" in this volatile market, which feels much better.
Happy Holidays to everyone and May the Markets be Fortunate for You.
Wednesday, December 14, 2011
Thursday, December 1, 2011
Whipsaw November
In November I violated my first rule of investing, which is "To make money, don't lose money."
For the month my IRA declined 4.1%. The main reason for the loss was that I positioned the portfolio for a brightening outlook driven by monetary stimulus and short-term fixes in Europe. I expected the yield curve to steepen, the dollar to decline, and US economic data to remain passable. Well the increasing monetary stimulus may have started yesterday, the last day of the month, but was too little too late to allow my portfolio to recover. Part way through the month I "cried uncle" and retreated to about a 60% cash position, allowing for a more peaceful night of sleep but also removing the opportunity to fully participate in upside. Yesterday I did move back into financials and shorted longer-term treasuries based on the coordinated actions of the central banks. However, my cash position remains close to 30%, highlighting my uncertain outlook about the direction of the market in the short-term.
Over the next month I expect a "Santa Claus" rally based on increased central bank activity, a large amount of cash on the sidelines, and possibly some short-term fixes in Europe. Of course, I was too optimistic about European politics last month, thus a more conservative portfolio this time.
For the trailing year my IRA has increased 19.9%, outpacing the S&P 500 annual increase of 5.6%. The top fund increased 42.6% over the past year, which was Vanguard Extended Duration Treasury Index Instl. Of the over 16,000 funds the 20th best performing fund produced a one-year increase of 19.8%, based on Morningstar. The average performance of funds over the past year was an increase of 2.1%. Obviously the average fund has underperformed the market, suggesting fund managers may try to play catch-up in December if the markets start to rally.
For the month my IRA declined 4.1%. The main reason for the loss was that I positioned the portfolio for a brightening outlook driven by monetary stimulus and short-term fixes in Europe. I expected the yield curve to steepen, the dollar to decline, and US economic data to remain passable. Well the increasing monetary stimulus may have started yesterday, the last day of the month, but was too little too late to allow my portfolio to recover. Part way through the month I "cried uncle" and retreated to about a 60% cash position, allowing for a more peaceful night of sleep but also removing the opportunity to fully participate in upside. Yesterday I did move back into financials and shorted longer-term treasuries based on the coordinated actions of the central banks. However, my cash position remains close to 30%, highlighting my uncertain outlook about the direction of the market in the short-term.
Over the next month I expect a "Santa Claus" rally based on increased central bank activity, a large amount of cash on the sidelines, and possibly some short-term fixes in Europe. Of course, I was too optimistic about European politics last month, thus a more conservative portfolio this time.
For the trailing year my IRA has increased 19.9%, outpacing the S&P 500 annual increase of 5.6%. The top fund increased 42.6% over the past year, which was Vanguard Extended Duration Treasury Index Instl. Of the over 16,000 funds the 20th best performing fund produced a one-year increase of 19.8%, based on Morningstar. The average performance of funds over the past year was an increase of 2.1%. Obviously the average fund has underperformed the market, suggesting fund managers may try to play catch-up in December if the markets start to rally.
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