Update for Thursday, April 5th -- Moving to Cash

With the close of markets on Wednesday, April 4th, my intermediate-termed timer has transitioned to CASH.  I am moving 100% of my monies to G-Fund, effective with the close of markets Thursday.

Conservative Allocation:  G-Fund:  100%

Although the long-term timer is still LONG, and unless we get a complete collapse of the markets over the next week, it most likely will remain long through this bump.  If you are aggressive you can remain long with this latest signal to move to cash, but it could get painful.

Regards,

pgd

Update for April 2nd

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Since our allocation change on 3/14 we've been mostly horizontal in price movement:

G-Fund:  Up +0.043%  (@ 60% allocation)
F-Fund:  Up  +0.009% (@ 3% allocation)
C-Fund:  Up +0.115% (@ 15% allocation)
S-Fund:  Down -0.008% (@ 11% allocation)
I-Fund:  Up +0.008% (@ 11% allocation)

This is poor performance in the markets in general and is not indicative of the allocation amounts.  I generally think that the mix is correct -- bond yields (F-Fund) are on the rise, so we should see bond prices fall.  Rallies are typically led by small caps (S-Fund) so the fact that they are lagging here is indicative of a tired market, hence the lower allocation than the larger C-Fund (S&P500).  We need some international exposure (I-Fund) and in general, the I-Fund goes as the C-Fund and S-Fund, especially as of late, so I continue to keep my eye on this correlation.

Noting that we are at 40% exposure (60% in G-Fund, which is "cash"), I do not see any compelling reason to re-allocate at the present time.  Furthermore, in terms of local cycle, it is quite possible we could be heading downward, as this bull leg is getting quite tired, or alternatively, we could be heading higher through May.  As an example of thinking of this latter point, refer to this chart from Mike Turner, which was forwarded to me by one of our GGT members:

Of course, your crystal ball is as good as mine, and perhaps just as good as Mr. Turner's.  Caveat emptor.

Stay the course until it changes.

Regards,

pgd

Update for Wednesday, March 14th

With yesterday's action, all my models have signaled "buy" on the long side.

There is one crack in the ice though:

One indicator that I watch is indicating a possible short-covering rally, meaning that people were lulled into the "bear trap" last week, effectively shorting stocks. Now that the market has taken off, they are experiencing a great deal of pain and are having to "cover" their short positions.  This inflow of money is significant, as it drives demand up and with a constant supply, and it means that they are buying at higher prices.  When the shorts have covered (and it appears we are in day-three of this three-to-five day sequence), the bulls must step in and continue the run higher or we'll pull back again.  Given that this is options expiration week (OPX), rising volatility is expected and the chance of dropping is increased.

Given this situation, I am giving two scenarios:

1) Aggressive.

If your time horizon is longer you can afford to take more risk.  Your allocations are:

F-Fund:  8%
C-Fund:  38%
I-Fund:  28%
S-Fund: 26%

2) Conservative.

If your time horizons are shorter (~5-10 years), you should take less risk.  This is the model I follow for my wife's portfolio, which is up 3.65% over the past rolling 12 months:


F-Fund:  3%
C-Fund:  15%
I-Fund:  11%
S-Fund: 11%

G-Fund:  60%


I have made the changes to my wife's TSP account effective at the close of markets today.

Adjust the numbers to whatever level you are comfortable with, but I would keep the ratios.  Remember, you are responsible for your own decisions, and I am not.  Please take ownership for your actions.

Regards,

pgd

TSP Change Effective February 10th

A number of indicators I follow have moved to cash, so I’m moving some funds around within TSP.  Note that the long-term trend is up, as is the intermediate-term trend.

My contributions will remain on the long (invested) side, with the following allocations:

F-Fund:  +5%

C-Fund:  21%

I-Fund:  34%

S-Fund: 39%

My allocations will change to

G-Fund:  95%

F-Fund:  5%

I’m anticipating that we’ll be adjusting these again in the next week or two, but for now, I want to protect these gains.

Update for Friday, December 30th

All,

Effective today, I'm going with the following allocations:

C-Fund: 0%
F-Fund:  14%
G-Fund: 76%
I-Fund: 0%
S-Fund: 10%

I will make the change prior to lunch today so that it is effective at the end of the day.

Regards,

pgd

TSP Change Effective November 30th

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All,

I’m updating my TSP allocation to the following:

G-Fund:  59%

F-Fund: 18%

C-Fund: 11%

S-Fund: 10%

I-Fund: 2%

If you make your changes by noon EDT they will be effective today.  If you wait a day, no issues in the big picture, except the exchange will count against the two you have available in December.

The rationale for the change today is partly based on numbers and partly based on seasonality.  The numbers part is due to a number of my short-term timers indicating that we have been oversold and that we need to participate in the present climate.  The move over the last few days has been quite weak though, and I expect more of the same, hence why 59% is in cash.

The seasonality component typically says that the period between Thanksgiving and Christmas has been up more than it has been down.  We have had no exposure to equities, hence the move into the C-Fund (11%), S-Fund (10%), and I-Fund (2%).  Our risk is quite controlled here and if this signal reverses (very possible), we'll move back into cash/bonds.

Regards,

pgd

Allocation Change for Monday, October 17

Effective immediately, I’m changing TSP allocations:

G-Fund:  94%

F-Fund:  6%

My short-term risk model has signaled overbought conditions and stalling, which is where we are not advancing yet we are exposed in terms of risk.  Even with the significant strength in the I-Fund and C-Funds, I’m anticipating a short-term pullback which will reveal itself to be either shallow (a buying opportunity) or worse-than-previous (“thank gosh we  moved to cash and bonds”).  I expect to be making another allocation change within the next few weeks, depending upon the anticipated pullback.  If we continue higher with no pullback, risk dominates from here and upside is quite limited compared to how far we can fall.

If you make the change prior to 12:00 EDT the change will be effective today.

As a reference point, since our allocation on 8/31/11, we are nearly EVEN on the market, specifically, down only -0.087%.  No gain in this time frame and some exposure is not a good situation, hence the need for the reallocation.  

In reality, for the period 8/31/11 to 10/14/11, the previous allocations have resulted in the following gains and (unrealized) drawdowns:

G-Fund:  +0.149% gain, no drawdown 

F-Fund:  -0.011% gain, -0.028% maximum drawdown

C-Fund: +0.041% gain, -0.545% MDD

S-Fund: -0.128% gain, -0.959% MDD

I-Fund: -0.138% gain, -0.727% MDD

Totals:  -0.087% gain, -1.927% MDD

For the past 12 month rolling period, we are up 6.94% with -3.325% realized drawdown (May 24th).  This is a 2:1 reward : risk ratio and is our minimum goal.

Cash is king, at least for the next week or two.

Regards,

pgd