The Tasgall Group

Yes, Virginia, you can time the markets. It begs more careful research but this is an interesting read for the more passive investor. You have to be careful about ever-changing cycles and transaction costs etc. but I like the idea that this is based not just on observed correlations but on a logical explanation for the occurance of this correlation.

I was visiting my commercial mail drop today to collect my mail.  All my mail is sent there and all my accounts show that address as my home address.  Nowhere is my name linked to my home address except in the records of utility companies, something I couldn’t avoid easily (though it is possible).  As I was leaving the maildrop, the proprietor informed me that a Durham County Sheriff had come in looking to serve me with papers.  (more…)

With my current >90% exposure in equities, I’m feeling that I’ll be one of the first victims of a bear market.  With the recent minor run-up in the US equity markets, I’m thinking that the time is ripe to move at least a 10% chunk of my US equity exposure out and into either a money market account (like the VMMXX with it’s 5% yield) or into Bonds.  I’m becoming increasingly alarmed at the market conditions now and I’m interested in moving my main holdings out into cash in stages and allow my dollar-cost-averaging approach to continue on with my current asset allocation plan.

What are your thoughts?

I’m thinking that if the market continues to show strength throughout the day, I probably will move 5 - 10% of my Large and Mid-cap US equity positions.  I’m feeling very much exposed on these fronts.  Areas I’m probably not going to touch for now are my Small-cap, Foreign and Energy holdings.  Small-cap has already had a tough year and I’m probably going to keep those relatively untouched for now.  My international holdings are all up around 8 - 10% YTD and showing no clear signs of pulling back at the moment, so I’m planning on leaving these untouched for now.  I still feel that Energy has plenty of upside and I’ll continue to hold these funds for the foreseeable future.

Let me know if you think my concerns are unwarranted or you think I need to lay out my case for why Large and Mid-cap equities are heading for a significant drawndown in the future.

As individual investors, we have a unique advantage that most institutional investors don’t have… the ability to staand aside when the market is not favorable. That means either not trading, or getting out of your buy-and-hold investments and moving to cash or cash equivalent investments. (more…)

One area that I’ve always thought was under-represented was closed-end funds (CEFs). Most people know mutual funds and invest in them, primarily because they can buy mutual funds without incurring commissions (a pretty good reason when you’re investing with every paycheck). (more…)

I commented a while back on the fact that we need more asset classes when defining our asset allocations. A lot of people think that it’s enough just to divide your investments between stocks and bonds. I think the world has come a long way since the original research was done when those were the only two classes of investment.

I’d include the following asset classes in my allocation strategies:

• US Stocks
• US Bonds
• International Stocks
• Inetrnational Bonds
• Real Estate or REITs
• Commodities
• Gold and Precious Metals
• Timber
• Cash

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I named this post because of the Peter Principle, which essentially states what the link says it states.  I was reminded of the mention in Running Money of the fund managers who, when they reached a goal for rate of return, took windfall profits and sat on them so as not to miss their targets for the month.  So my question is, should an investor call it quits during a given timeframe if they hit a good run and, if so, when and for how long? (more…)

There can be (or should be) a distinction between “setup” for a trade, and the “entry” signal for a trade. For example, with our PowerRatings, having a high rating might not be the only criteria for entry… instead, you may want to consider a high rating a “setup”, and then wait for a entry signal (e.g., the price moving in your favor) before plunging into a position.

This could be accomplished several ways, and should be tested before using (after all, maybe this extra step causes you to lose money). One way would be to watch the shares at open, and only go long if they’ve already started an upside move. Another way would be to place a stop buy order just above the close of the prior day — if the price goes down, your stop buy never gets filled;if it goes up, you get filled, though you may face more slippage with a stop order. (more…)

My topic for today’s meeting will be a tactical one, and I hope to answer the question, “How can I limit the risk of the fundsI put into a given mutual fund?”

I use mutual funds for general asset allocation, usually for funds in taxable accounts to minimize taxable sales. (I use my retirement accounts for trading that typically creates holdings of less than 1 year.) At times, I might choose to invest large amounts in a single mutual fund to get to my asset allocation targets (e.g. 20% in international stocks).

If international stocks or gold stocks go down a helluva lot (which they have great tendency to do), do I just accept it as my fate? Not I… So, how do I limit my risk?
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Every day, Trading Markets has a web link to Everything you need to know for day-of-the-week. Consistently in the past week, nothing’s been out of the 3, 4 or 5 range, which based on their site means that none of their indicators are leaning in any particular way on these stocks. While they don’t tell you want indicators are used in the PowerRating formula, I’ve found that you cannot get a PowerRating on any stock that hasn’t been trading for more than 200 days. A “How To” for PowerRatings can be found here. Based on their studies which have been back-tested to 1995 (yeah, I know, it’s relatively easy to find something that would have worked if you only knew about it), stocks rated 9 or 10 have on average been the S&P 500 over the next 5 days by a better than 14-1 margin. The success rate? Unsure, and there’s a paucity of information that I could find by searching for independent testimonials, independent commentary, or external reviews of the PowerRatings system.

Make no mistake, there’s something slightly shady about this since everything on the site points to standard glitz and glam to make things look so easy. What I’ll do over the next month is come up with several batches of stocks (let’s say 30), get PowerRatings on this batch and see how the do after 5 days. I’ll do this as many times as I can and report the results here.