Occasionally over the years I have made these sorts of projections and my track record with them does not suck but the same caveat always needs to go along with such a look forward which is that having opinions about what may happen can be useful but it is far more important to live in the moment with your portfolio.
Right now the SPX appears to be backing off from a one week 7% rally which was itself preceded by a very swift decline. The SPX is below its 200 DMA and the 200 DMA is sloping downward. Long before a big, even if short lived, lift comes in 2012 it will have to break above its 200 DMA so there is no need to abandon the discipline.
We are currently defensively positioned with a large cash position but no SDS. We have been less defensive than we were in 2008 and into 2009 because while I believe another scare has been plausible I have never thought a revisit of the March 2009 low was likely. If this current down move (if you even think it is a down move) takes another 50 or 60 points out of the SPX then I would buy one name to add to the portfolio and may buy the one name sooner than that but we still would have a lot of cash built up in case the timing of this next purchase turns out to be poor.
Tying in to thinking a big lift might be coming in 2012 the influence there might be buying two stocks (or ETFs) when SPX takes back its 200 DMA where I might normally just buy one on a retaking of the 200 DMA. I would describe that as giving the market the benefit of the doubt when the time comes.
In terms of cash levels we probably have room to buy a half dozens names, slowly, into a market that hopefully shows signs of healthy demand soon.
One last point about this type of prediction is that with what my job is, managing portfolios for people who simply hope to have enough when they need it, one part of this is trying to communicate with clients as to the possibility of an outcome that might be difficult to see from here and to convey the extent to which there might be a difficult purchase or two coming soon. If I turn out to be wrong then I think we are well positioned if we have more of the same.
Finally, an update on Pips (whose name was changed from Pep) the dog that Joellyn and I took up to University of Washington in March to go into a program that tracks animals by their scat which requires ball obsessive dogs.Pips is now working after months of training. Here is one link about Pips from the USGS and another one from the San Diego Union Tribune--Pips was down in San Diego county looking for badgers. This was a very cool thing to be apart of.
4 comments:
Morning, Roger. Are you allowed to give your readers any kind of general portfolio performance update? I know specifics are verboten.
Re Pips--there was an article in our local paper recently about a lab that could smell blood sugar levels, to give a teen diabetic advance warning of trouble. I recall the dog costing over $10K because of the extensive training involved.
Thanks for sharing your thinking.
very similar to the SPX YTD, the ride has been smoother, foreign's lag this year has been a drag on the portfolio. As far as specifics, apparently it is becomes advertising which creates a lot more work for everyone else at the firm versus just me choosing to write a blog post. My track record will be transparent on a daily basis soon enough (I hope).
Thanks, Roger. Agree with the drag of foreign and EM.
Why do you think there will be an unjustified lift in the SPX in 2012? Aren't valuations low from an historical perspective? Isn't the US economy humming along pretty well with solid GDP growth and a strengthening employment situation?
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