04/14/2013 Mousetrap

Sector Model XLB 0.70%

Large Portfolio Date Return Days
BBRY 7/16/2012 88.14% 272
SEAC 9/25/2012 31.09% 201
CAJ 9/25/2012 7.15% 201
BOKF 2/4/2013 10.40% 69
SWM 2/12/2013 9.54% 61
GMCR 2/19/2013 29.40% 54
OKE 2/25/2013 4.20% 48
TTM 4/1/2013 3.32% 13
MWW 4/11/2013 -0.67% 3
ABX 4/11/2013 -7.52% 3

S&P Annualized 9.30%
Sector Model Annualized 25.07%
Large Portfolio Annualized 31.45%


From: [url]http://market-mousetrap.blogspot.com/2013/04/04142013-bad-press-good-press.html[/url]

No rotation tomorrow.

I continue to be amazed at the resilience of this market.

That has less to do with the market than my own bad instincts. Everyone everywhere is printing money. This is like the Weimar republic on a global scale. Of course prices are going up.

But what about the economy?

Well, now, that’s a different matter. You can’t print prosperity any more than you can tax and spend it. Money is the result, and not the cause. To start with money is to put the cart before the horse.

What we have is a runaway cart.

The horse is stuck in the shed.

In a piece labeled “The Worst Four Years Of GDP Growth In History: Yes, We Should Be Worried”, J.T. Young gives the following comparison of average GDP growth:

1948-57: 3.80%

1958-67: 4.28%

1968-77: 3.18%

1978-87: 3.15%

1988-97: 3.05%

1998-2007: 2.99%

2008-2013: 0.73%

[url]http://www.forbes.com/sites/realspin/2013/04/12/the-worst-four-years-of-gdp-growth-in-history-yes-we-should-be-worried/[/url]

Obviously, this does not cover the entire “history” of GDP growth, but those last five years should give us pause. The stock market has been on a tear and company profits have been skyrocketing, while total employment has been stalled, at best. Those profits are at the expense of a reduced workforce.

Regardless of your views of industry efficiency and automation, at some point people need to have a job.

This week I had a taste of it when I got my first ever case of gout and was forced to miss three days of work.

Now, having a weekend is good. A vacation is even better. But in both of those cases you CAN go back to work.

I couldn’t. I was stuck, unable to walk, and bored out of my skull. After last week, T.G.I.M(onday)!

And no, no Buffett post this week. I’m still recuperating and looking forward to another nap.

But I will say this: you can’t trade the news, and you can’t trade the economy either.

This economy stinks, and it’s stunk for years now.

Trade good companies with bad press; not bad economies with a good printing press.

Tim

Just a short timing note.

My full model has an experimental hedged version, which reflected a market with an 80% long bias yesterday morning.

After the selloff that version of the model now reflects a 90% long bias.

An ideal hedged version, however, would still be 100% long because it only trades once every 1-2 weeks.

Please keep in mind that this version of the model is still in testing and I do not plan to list those trades whenever they may occur. The public model is long-only. Also, since the holding period on my model is longer than 1 quarter, it is not designed to navigate around short term corrections. What the model DOES indicate, however, is that there is no sign yet of a market top.

In June-July 2007 there was a violent selloff that quickly reversed back to an all-time high. Most traditional market timers would have lost money in both directions. Don’t try to get fancy here unless you have a VERY sophisticated model.

(This is just a generic blog note, that I'm copying here for reference. I'm not including Pascal on my "don't try this at home" warning, because he's one of the two people on the planet I WOULD follow around a correction.)

The sector model has sold XLB and bought XLI.

More whipsawing in the sector model. Selling XLI and buying XLB.