04/07/2013 Mousetrap

Sector Model XLB -0.42%

Large Portfolio Date Return Days
BBRY 7/16/2012 102.76% 265
SEAC 9/25/2012 38.07% 194
CAJ 9/25/2012 0.76% 194
RE 11/26/2012 21.32% 132
BOKF 2/4/2013 10.38% 62
SWM 2/12/2013 7.06% 54
GMCR 2/19/2013 19.91% 47
OKE 2/25/2013 0.67% 41
TAC 3/25/2013 -2.06% 13
TTM 4/1/2013 -3.24% 6

S&P Annualized 8.07%
Sector Model Annualized 24.35%
Large Portfolio Annualized 31.67%


From: [url]http://market-mousetrap.blogspot.com/2013/04/04072013-zero-heroes.html[/url]

No rotation today.

This was a weird week. The correction everyone is expecting started and then stopped.

The sector model whipsawed again between industrial expansion (XLI) and inflation (XLB).

Everyone (myself included) is waiting for something to happen.

At the same time, Central Bankers are doing everything they can to make sure nothing happens.

Welcome to the next round of indeflation. Don’t bother looking in a dictionary; I just made it up. For that matter, don’t bother looking up what Bernanke and Company are doing, because they are just making it up too. This next round is from Japan, which is pumping American levels of QE into a money supply only one third of the size, for an even less predictable result.

Not only is the market wildly overbought, but my industry model is wildly over-bullish. Even a hedged version of the model would be net long.

The current investments are very inflation friendly: auto, tobacco, gold&silver, groceries, oilgas, gasdivrs. Heck, even furniture is back in the buy zone, and I could find myself back into CFI on the next rotation.

I feel like the wheels are coming off the tracks and the train is still rolling. I keep my eyes peeled for the inevitable crash, but central bankers have thrown so much padding out there I’m not sure what a crash would look like any more.

I give Bernanke a hard time, but I’m not sure what his alternative is. There is over a quadrillion in unfunded liabilities on the planet.

That’s 1,000,000,000,000,000

The entire national “debt” everyone is so afraid of is just shy of 17 billion. The actual global exposure is SIXTY TIMES as bad.

Humans owe ourselves more money than exists.

Hence the printing.

If you try to protect yourself from the crash you’ll get crushed on the way up. If you try to ride the gravy train all the way you’ll get crushed on the way down.

Just don’t be over leveraged in EITHER direction.

Tim

PS – sorry for the short gloomy picture. I’ve been laid up sick in bed most of the weekend. I’ll be back to Buffett when I feel a bit better.