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.