03/17/2013 Mousetrap

Sector Model XLI 2.71%

Large Portfolio Date Return Days
BBRY 7/16/2012 106.62% 243
SEAC 9/25/2012 44.31% 172
CAJ 9/25/2012 5.61% 172
CFI 10/31/2012 42.10% 136
RE 11/26/2012 23.67% 110
BOKF 2/4/2013 10.83% 40
SWM 2/12/2013 7.15% 32
GMCR 2/19/2013 22.14% 25
OKE 2/25/2013 -5.15% 19
CASH 3/14/2013 0.00% 2

S&P Annualized 8.64%
Sector Model Annualized 26.62%
Large Portfolio Annualized 34.98%


From: [url]http://market-mousetrap.blogspot.com/2013/03/03172013-double-double-toil-and-trouble.html[/url]

No rotation for Monday.

The market maintains a long bias, but it continues to weaken technically. Right now the cash version of the Mousetrap is 90% long.

That empty 10% is like a nag on my screen, screaming “opportunity cost!”

Yes, it is an opportunity cost.

But the goal of a model is to end the day with the most money, and not always to be statically invested. The market is in a feeding frenzy, and money is beginning to paint a picture.

Of the best long industries we have:
ENTTECH
FURNITUR
ELECFGN
BANKMID
OILGAS
TOBACCO
WIRELESS
REINSUR
POWER
AUTO
GROCERY
GOLDSILV


Of the best short industries we have:
OFFICE
ENTRTAIN
RETAIL
CABLETV
RETAUTO
BIOTECH
DIVERSIF
PIPEMLP


Notice that both Retail and Retail Auto are shorts.

More intriguing is that Auto remains a long (notwithstanding the sale of TTM last week). The theme is clear from Furniture, Oil & gas, Tobacco, Power, Auto, Grocery, Gold & Silver mining. Things. Invest in things. Don’t invest in demand from consumers (retail). Invest in inflation instead.

Yes, yes, I know that the whole “Gold & Inflation” idea has become out of favor – but that’s how investment opportunities are made. We appear to be in the latter phases of a pre-inflationary surge. Breadth in the broad market should continue to tighten as investors pile into index funds and large caps. Commodities should pick up. Bonds should soften. And the market should have an annoying acceleration that will give pain to the hedges I have in my (unlisted) discretionary short positions.

I say, “should” a lot in that last paragraph. Truth is, no one KNOWS any of this for sure. You can’t invest in “should” very well, can you?

The problem is that the Fed has promised QE infinity, and has tried to talk it back a bit, without slowing down the money printing. At the same time, end consumers have had their take home pay cut by a few critical percentage points.

But, but, but, hasn’t the dollar stopped falling? Indeed it has, but the dollar isn’t measured against commodities. The dollar is measured against other currencies. If EVERYONE is printing money, then the dollar could rise AND commodities could rise too.

This kind of absurd environment is what separates theory from reality. Can we say it together? Ready?

“Bubble.”

Or rather:

Double, double toil and trouble
Fire burn, and cauldron bubble.

Macbeth Act 4, scene 1, 10–11, etc



My own model should (there’s that word again) have some trouble navigating this, while mindless momentum chasing should (and again) take the lead. This is where Buffett exits stage left, while Sauron, er Soros, comes out of the shadows and says, “Boo!”

People don’t trust Soros because they don’t understand him. But he explained himself quite clearly in an interview a few years back when he said that he chases bubbles.

He’s a bit of a mutant, so he can do that.

I’m not a mutant, so I’ll have to defer to Soros here. All I can do is go for the boring trade.

And my boring trade is about to get REAL boring for a while.

Watch for a weird market.

Although I plan to avoid the excitement, I WILL get some popcorn and 3D glasses to watch the fun.

No doubt Soros will get richer right now – hopefully not off of MY money…

Tim