Mousetrap 02/05/2012

Condition Bull / Bear Boundary
S&P Target NA
Small Portfolio IAU & XLF 12.76%
Hedge XLU -1.88%

Position Date Return Days Call
SE 6/27/2011 15.50% 223 Hold
CLH 7/6/2011 25.60% 214 Hold
GCI 7/14/2011 9.55% 206 Hold
CSGS 10/3/2011 34.84% 125 Hold
NLY 10/25/2011 4.51% 103 Hold
DD 10/27/2011 7.55% 101 Hold
KBR 10/27/2011 15.17% 101 Hold
VG 10/27/2011 -23.26% 101 Buy
TTM 11/30/2011 49.54% 67 Hold
BT 1/4/2012 8.98% 32 Hold

S&P Annualized -0.03%
Small Portfolio Annualized 18.65%
Mousetrap Annualized 23.21%
Hedged Annualized 20.46%

Bernanke is the opposite of chicken little. He doesn’t shout about the sky falling – but he makes the ground fall instead, by perpetually printing more money.

Europe, fortunately, is printing money too (though they are calling it a “loan”).

So the sky is falling, but the ground is falling even faster. Welcome to the fake bull market, or what I like to call “the baloney market.”

A fake bull market is a dangerous place for cash, because it is losing real value all the time. It’s also a treacherous place for market timers, because each time the market is prepared to collapse, Bernanke shoots it with another infusion of money.

The Mousetrap model doesn’t do very much timing. In an obvious bull market it will remove the hedge. The rest of the time it stays hedged and doesn’t care if the market goes up or down. The idea is to lose money slower and make money faster than the S&P – and it’s doing that just fine.

If the market doesn’t collapse this week, it will probably look something like this:

<a href="http://s1009.photobucket.com/albums/af213/teclontz/?action=view&amp;current=120205-Projection.jpg" target="_blank"><img src="http://i1009.photobucket.com/albums/af213/teclontz/120205-Projection.jpg" border="0" alt="Photobucket"></a>

[ATTACH=CONFIG]12631[/ATTACH]

That’s basically just meandering around for another year in the 1350-1450 range.

There’s nothing much to do with the model, and there is no confirmed bull in either of my timing models – so this “projection” is what a bullish result would look like… nothing to get excited about. Right now I’m keeping the XLU hedge until both timing models confirm a bullish bias. They are still technically in a bear, with a target of 1020. But at this point I thought it would be fair to show what an optimist could expect.

VG remains the buy, and seems to be stabilizing. If the market holds, I expect it to recover as the other stocks in the portfolio did.

Tim