The chart shows the results for the last four months. Two times he beat the market and two times he lagged.
Here is the portfolio for this month.
iShares S&P Global 100 (IOO) 18%
SPDR (SPY) 18%
iShares EAFE (EFA) 27%
Vanguard Europe (VGK)
Vanguard Mid Cap (VO) 9%
iShares Russell 2000 (IWM) 9%
Pro Shares Short Dow 30 (DOG) 10%
The changes made to get to this portfolio were selling the 18% in Dow Diamonds (DIA) to buy IOO, sold 18% in Mid Cap SPDR to add 9% to EFA and create the 9% in VO and he swapped a 10% weight in double short S&P 500 (SDS) into DOG.
First I don't get selling MDY to buy VO. The correlation is 0.96. He wanted to reduce mid cap exposure, OK that could be right or wrong but for people playing at home that is double the trading cost.
Swapping completely out of SDS to buy DOG is lost on me as well. I may not explain this well but SPY and DIA have a 0.948 correlation. The corresponding short ETFs should also have similar correlations. If getting less short is the idea, fine, but why not sell half the SDS, again less trading, less commissions.
The IOO fund, do you know this one? It is a mega cap ETF 47% weighted in the US and the rest is pretty much in the EFA countries so again what is the point. Instead of buying this fund why not add to the domestic big cap ETF you already have and EFA, weighted accordingly?
While I can't imagine these trades are so he has something to write about, I just don't get tactics for repositioning. To be clear I am not questioning his strategies, they will either work or they won't and that is fair but to the title of this post does anyone do this?
8 comments:
Seems like rearranging the deck chairs on the Titantic. That portfolio is a bland vanilla attempt to match or beat the market by an eyelash. Might as well buy 26 week treasuries or GE Interest Plus and forget it at this point in the cycle. Or am I missing something clever?
I watch the excessively profain Deadwood on HBO. To paraphrase the character George Hearst, perhaps Mr. Lowell is having a conversation we cannot hear.
He explains it all here:
Beta-Weighted Seasonality is a seasonality graph that is beta-weighted and index-adjusted, meaning that we consider a manager's beta relative to an appropriate benchmark (e.g., the S&P 500 Growth index).
What could be clearer then that?
My feeling is that if a manager can't at least match the index, he or she isn't worth the risk. Alpha is everything in fund management and if the manager isn't adding any value, why would you pay him or her any commissions or bonuses?
I do like megacap, IOO or DGT. Leadership is showing there if you are into relative strength. Without looking at the site, yeah RS traders do the kind of trades mentioned. May stay in a certain cap group but pick the best one with RS. At 8$ a trade, not much damage but the megacap trade is the only one that would appeal to me. It's what comes out of the meat grinder that counts. You're watching sausage made and the process is 180 Roger's investment process style. Of course, only prudent for a nontaxable account. What's his YTD return? ps I will miss George Hearst. An actor who has negative appeal for me was superb.
I agree that Lowell's model portfolio trades are more amusing than worthy of consideration. One thought on the "double-short" to "short" trade and why it may make some sense.
A double short position really only works if one has a time-frame of the expected sell-off in close range. The cost of being double-short versus just short is quite high, as in a neutral market you can expect to give up returns through time decay.
My guess is that Lowell has become a bit less confident in his ability to call the market top and thus chose to scale back.
Still it's kind of laughable to see the essentially index-weighting in small and mid-caps. Buy the Russell 3000 (or a mix of that and the Russell 200 for an overweight on largecaps) and be done with it already!
Is this a cave of group think? When a little too sure of yourself my grandmother warned me about the "evil eye."....website seems to not be working properly...7 comments when only "3" tallied.
i'm sorry i don;t understand the 3:58 comment
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