The US stock market has felt a little tired to me yet it keeps finding a way to keep going up. I mentioned in an interview last week that the momentum might last a few more weeks but I am less confident of that based on the last three trading days.
Global liquidity has been a huge catalyst for all markets all year and guessing when that peters out will be very difficult. I think it is very important to really think this out now while everything is okey dokey. I have been saying that I believe the market event of late February was about the threat of the liquidity spigot being turned off. That sort of threat coming again could be a trigger point for a correction that lasts more than two weeks.
Tom Lydon has a post up the delves into his process a bit that is a good read. He does things very differently than me so it was interesting read a little about what seems like a momentum strategy. There is a wide range of approaches about how to manage a portfolio and while I can't relate to his approach I am sure he cannot relate to mine either. One take away is Tom's pounding the table on sell discipline. I don't think he is saying "mine is the best," I take more as pick an exit strategy and stick to it. Needless to say this is very important.
I was very amused at how much coverage there was of the Dow Jones (DJ) news yesterday and probably coming today.
The Reserve Bank of Australia kept rates on hold last night at 6.25% as expected.
WisdomTree is moving along in the registration process for a few of the funds for which it has filed including an emerging markets fund that will be dividend weighted. The only broad-ishETF I use is the BLDRs 50 (ADRE). While I have to say that the new State Street EM ETF (ticker GMM) really is different under the hood than the usual suspects I expect the WisdomTree product to be very compelling and to make a swap shortly after it starts trading.
The idea of lower than normal returns for a while seems very realistic so the idea of adding another 50 basis points in yield to the overall portfolio could be very important into the next decade. Of course I don't want to go hog wild with this because if I am wrong too much weighted in dividends could really lag a huge move up. As is often the case a balance needs to be struck.
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8 comments:
Roger,
Read Lyndon's post. I have used a very similar approach in the past few years but left the reservation, so to speak from fear of a major mkt top. In a normal market, trailing stops, are a great safety net and after making double digit gains it feels fine to take a 8 percent trailing loss. There's always another horse to ride that will shortly have an uptrend. My fear, now, though, is that the day will come when the broker can't find a bid at 8, more like 25 or greater percent. I really really wish I was at the point that I could say "game is over." ps....for all my sophistication, can you tell me the difference between uses of the words, tactical and strategic?
The military uses the term "strategic" to describe the overall plan, such as for a campaign or war itself. "Tactical" refers to methods employed during a battle or within a campaign, or perhaps the war. One, then, is a long-term, overall view. The other is "Just how are we going to do it?"
1. I have sold a couple of names that are not making new highs.
2. squeezed a bit out of a small/mid cap blend fund Monday.
3. People should probably be off margin as we make new highs.
Roger, thanks for your kind comments and opinions. As you know, there is nothing magic about using a 200-day moving average and an 8 percent stop-loss. A 50-day average and a 7% stop-loss work too; just a little more trading and discipline required. Discussing sell strategies might be appropriate while complacency and euphoria seems to be creeping into the market. I continue to admire your work and your daily perspective on the markets! Best, Tom Lydon
Tom, thank you.
Larry I wish I had a clever heckle for you.
Based on most of what I've read and the talking heads on CNBC, there seems to me to be a consensus belief that it is "liquidity" that is driving this bull market.
If I had a $1 for everytime someone mentioned liquidity driving this market, I could probably retire, put my entire portfolio into CDs and call it a day.
Anyways, an alternative view on "liquidity"
http://www.hussman.net/wmc/wmc070312.htm (disclosure I am long the Hussman Strategic Growth Fund)
The “liquidity” trap
I'm similarly convinced that Wall Street has no idea what it's talking about when it uses the word “liquidity.” While using the phrase “global liquidity” lends a further element of worldly sophistication, Wall Street still hasn't the slightest idea what it's talking about. The phenomenon that's being called “liquidity” is nothing more than a combination of fiscal irresponsibility and risk blindness, and will ultimately prove itself to be the time-bomb that it is when investors begin to “re-price” that risk.
........
Roger,
I am a new and appreciative reader of your blog. I had also read with interest Tom Lydon's article. Can you refer me to a past post where you discuss your approach.
Bill
there are really too many about process to point you to one or two.
Blogger just started with labels a few months ago, search for any that say portfolio strategy
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