Weekend Update for May 20

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In a nutshell, no changes.

Had we done equal-weighting into the TSP funds on this last allocation (equal weight assigns equal portions to the available funds and is recommended by many financial advisors for "diversification"), we would have experienced the following changes in the specific funds:

F-Fund:  +0.796%
C-Fund:  -1.971%
I-Fund: -5.833%
S-Fund:  -2.59%

Ouch.

As it turns out, we're getting beat up, but here's our realized performance since the signal on 5/2:

F-Fund:  +0.008%

C-Fund:  -1.912%

I-Fund: 0%

S-Fund:  -0.052%

I chose this allocation simply because of the desire to reduce volatility in the present market, and because I was anticipating a growth in volatility, which makes everybody nervous.

Note that the timer has the I-Fund in CASH.  You absolutely should NOT be in the I-Fund at this time.

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Staying the Course

I'm getting asked about why we're in the market right now if we're down 2%?

Well:

1. The adaptive timers have only fired the I-Fund as CASH, all the others are still LONG.
2. 2% drop in equity is not a great deal of drop.  Historically, my timer system has dropped me nearly 10% in this portfolio.  If this gives you heartburn then you should simply increase your ratio into the G-Fund
3. Volatility, while increasing, isn't indicating a terrible breakdown in the markets.  We should continue to march along nicely here.

As evidence of 3) take a look at the following chart:

I've presented this chart in previous write-ups so you can look back and read about it.  Bottom line, anticipated longer-term volatility (as measured by the ETF VXZ) compared to the next 30d anticipated short-term volatility (as measured by VXX) is still well above the 7w trend line, and although the trend line is falling, we're still above it, and this is still indicative of a bullish market.

Stay the course.

Current plans are to reallocate on May 31st if we don't get moved to cash prior to that date.

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Remember, you are responsible for your own investment decisions, and I am not.  Please do your diligence, take ownership for your actions, and understand that nobody can predict the future.

Regards,

pgd