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6 comments:
Very clearly put, Roger. I'm doubtful of this rally turning into a sustainable advance in the equity markets - there's still too much negative news out there; from housing to debt to energy supply surprises.
Although saying that, the un-manageable debts seem to be restricted to a fraction of western consumers while most are still working and buying stuff (although maybe cheaper stuff than before) and the newer eastern consumers have been saving their money as always. Sure the western deficits are growing which isn't sustainable but how much of the growth has been because of two wars being fought? I've read that Iraq now produces 4m barrels per day, the taxes from which *should* do a lot to reduce the costs of security. Or am I being naive?
Roger,
You've disclosed many times that you use the 200-DMA to determine your level of market exposure, but I don't think you've given any numeric guidelines. I realize you have compliance issues to deal with, but could you give us a "hint" of how much you vary the market exposure of your "generic account"? For instance, when the S&P drops below its 200-DMA you start reducing volatility (e.g., beta), but by how much? I know you don't get out of the stock market completely (i.e., go all the way to beta=0), but do you go to beta=0.66, or beta=0.5? The lower you go, the more you risk missing the start of the next bull market... but if you don't go low enough then you miss the whole point of using the 200-DMA.
Thanks,
aagold
can you buy into the idea that defensive is part science but part art as well?
for me the science is the 200 DMA. th art is exactly what to do which depends on what is going on. I have disclosed being 15-20% cash in most instances and having about a 3% weight in SDS. that combined with the one agri stock, GLD and things of that ilk have really lowered the correlation to the market. from here if the market were to go lower SDS would grow within the account to hedge more portfolio.
occasionally i have made some tweaks. added an absolute product and sold a little STO back in May.
when it goes back above the 200 dma i know i will move toward reequitizing but i do not know exactly how I will do it. I have names prepared to buy, at some point i remove SDS but i don't know what comes first or how quickly i will do this. if we panic higher i would be more skeptical. if we bounce along a low level for a while and the 200 DMA comes down to meet the market i would be less skpetical.
Roger, does a strengthening or weakening US dollar affect you allocation to international or commodities. Thanks, JCarr
Jcarr, it depends.
I own GLD as a counter strategy. My hope it will zig when stocks zag. With that in mind the rest does not matter.
Foreign equities I have VERY little exposure to euroland which along with UK (which I do have exposure to) seem to be lining up for the worst of the bunch of foreigns. Most of the countries I have bought into have very specifc stories, effects or both that I am trying to capture.
the violent spike up in the dollar combined with a lack of fundamental justification leaves me skeptical that this is anything more than a snapback. if that turns out to be wrong, i would lean more US by a couple of names upon reequitization.
My timing model doesn't seem to like this rally very much, suggesting some profit taking is in order. Pessimism is unwinding rapidly but we still haven't breached the 75 day moving average, let alone the 200 day moving average. Basically, the intermediate term trend is still down even considering this rally.
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