Trying To Keep It Simple &
Profitable
Jim Quinn (Student Investor)
December 6, 2014
DISCLAIMER
The content of this discussion is provided
as general information only and should
not be taken as investment advice. All
discussion content shall not be construed
as a recommendation to buy or sell any
security or financial product, or to
participate in any particular trading or
investment strategy.
DISCLAIMER (CONT)
The ideas expressed in this discussion are
solely the opinions of the author(s). The
author(s) may or may not have a position
in any security referenced herein. Any
action that you take as a result of
information or analysis provided in this
discussion is ultimately your responsibility.
Consult your investment adviser before
making any investment decisions.
My Philosophy
Preserve Capital
Earn Best risk-adjusted Return
Not a day trader, I am looking for weekly
systems or longer
I look for systems which meet these
requirements
Focus on ETFs and Mutual Funds rather
than stocks to reduce risk
My Philosophy (Cont) I Look for trends
Visuals (ie charts) are Very Important
I am not necessarily a Buy & Hold investor, but
would like to be
Am ALWAYS interested in New Approaches to
Investing
Questions/Comments: [email protected]
Todays Objectives
Section I – KISS Common Themes
Section II – Preparing for Armageddon
Section III – Misc. Items
Section IV – Market Status
Leave You With a Handout Which is the
Text of This Presentation
Section I – KISS Common Themes
1) Latest Richard Young Work
2) Dual Momentum Introduction
3) Frank Grossman SPY/TLT Rotation
4) Rotation ETFs
Section IA – Richard Young on SS
& Other Methods
Recently there have been a lot of Gyrations with
Sector Surfer (SS); not all public and not all positive
A Lot of Discussion about Forward Walk (FWPT)
Richard Young has been heavily Involved with these
SS actions / reactions and has done his usual through
Research and Testing with SS
This Section Summarizes the Most Recent of His
Results
BackGround Richard Presented His KISS Versions of SS
Portfolios up North a while ago and received some
“corrective” inputs as to his methodology
The Main area of Concern was his lack of use of the
FWPT SS Parameter which Scott Juds NOW
Advocates
After much discussion Scott threatened to remove
any Portfolios from the SS “Hall of Fame” which
did NOT use FWPT
You will notice that most of the HOF strategies now
seem to use FWPT
Recent RY SS Activities
RY has NOW Incorporated FWPT in his SS
Research & PortFolios
In Addition Richard has run a New Series of
Different KISS Portfolios Which are Summarized in
the Remaining Slides of this Section
The Next 4 Slides Show the Results of his MidCap
(VO) & Short Term Bond (VCSH) SS Portfolio
The SS Chart and History (in three Separate Slides)
Content are Shown
RY VIMSX & VFSTX SS Chart
RY VO & VCSH SS History Info
RY VO & VCSH SS History Info
RY VO & VCSH SS History Info
RY Trio Activity/Theory/ History
Three systems //strategies are shown –
ALL are very simplistic with 3 moving parts.
S&P 500 Index , EX-US Equity ACWI Index, &
Lehman Total Aggregate Bond Index
I used mutual funds to get a LONG back test.
ETF’s listed can be used going forward.
I use SS with the INFAMOUS FWPT (Forward
Walk Power Tuning)
The Next Slide Shows the Summary Results for
these 3 Strategies from 1997 Thru 2013
The strategy shown simple takes the three asset class
mutual funds at the end of each month and looks
back 3 months .
Selects the highest performance fund for the
following month.
RY Trio Results 1997 thru 2013
Including CAGRs
RY Trio 2014 YTD & Dec 2014
Picks SS FWPT +10.0% YTD
AGG/VBMFX Bond Fund ---Dec pick
Portfolio Visualizer +12.7% YTD
SPY/VFINX ------------------ Dec pick
G. Antonacci +13.9% YTD
SPY/VFINX ------------------Dec pick
BENCHMARK BUY & HOLD; YTD
VFINX/SPY +13.9%
VGTSX/VEU -0.6%
VBMFX/AGG +5.6%
RY Trio Theory & Thoughts I chose the ACWI world equity index as a bench
mark… The ETF index funds ACWI and VT
follow that index…
As you study the results you get a better
understanding perhaps regarding pluses and minuses
using the different schemes..
FWPT in SS kicked in 2003
The returns are pretty pedestrian ---
However I like the BORING nature of these models
as long as I side step the 2000 >>> 2002 &
2008 draw downs.
RY Dual Momentum Comments
Gary Antonacci ideas come from his BOOK Dual
Momentum Investing
Fred Magner referred this book to me.
The Global Momentum model results shown are
from his work.
His Method will be discussed in more Detail in the
following Section
RY Net-Net
In his Usual Manner RY Has done a Very Through
Study
He is NOW Focusing MORE on VERY SIMPLE
KISS Approaches Which Yield DECENT Returns
with MINIMAL DrawDowns
Section IB – Dual Momentum (DM)
A New VERY SIMPLE Momentum Method from
Gary Antonacci
Book is Very Well Reviewed
URL is:
http://www.optimalmomentum.com/index.html
This Section is a VERY Brief OverView
He Spends MOST of the Book on Theory
Topic Requires MUCH More Investigation
DM Theory DM Combines Relative Momentum & Absolute
Momentum
Relative Momentum between two Equity ETFs
(SPY & VEU) to Determine the Stronger of these
two and then Determine the Absolute Momentum of
the Stronger Equity ETF vs the BIL ETF
DM uses a 12 month LookBack
DM will Invest for the Next MONTH in the
Strongest of these 3 ETFs
This is his GEM (Global Equities Momentum)
Approach
Extended DM Theory
In Addition to his GEM, He Also has Global
Balanced Momentum (GBM) which is 70% Invested
in the GEM choice and also Selects an Absolute
Momentum Winner Between 4 OTHER Fixed
Income Choices
GBM then Invests 30% in the Strongest of These 4
Fixed Income Choices
The Performance Chart of GEM & GBM is Shown
in the Next Slide. The following 2 Slides show the
Monthly Performance of GEM & GBM for the Last
20+ Yrs and their annual Performance vs ACWI
DM Performance
GEM Monthly Performance vs
ACWI
GBM Monthly Performance vs
ACWI
GEM Drops Yel =Neg & Purp < -5%
GEM Statistics 1974-2013
Years Return S/D Sharpe Max DD
All 17.43% 12.64 0.87 -22.72%
1974-83 15.95% 11.77 0.54 -10.95%
1984-93 22.39% 14.60 0.97 -22.72%
1994-03 17.87% 12.21 1.02 -15.37%
2004-13 13.68% 11.83 0.96 -18.98%
Selecting the Next Month GEM
Option The next Slide shows How to Use StockCharts to
Select the Next Month’s Choice for GEM
Put SPY & VEU into a StockCharts PERF Chart
along with BIL
Select a LAST Year Perf Chart
Pick the Better Performing of SPY or VEU and
Then Compare The Winner Against BIL
Select AGG (if BIL is the winner) or the SPY/VEU
winner for the next month’s investment
The Selection for Dec. 2014 is SPY
GEM Selection Chart
More GBM Info Plus The Author does NOT spend a Lot of Time in the
Book on GBM
Further GBM Info will be Presented in the Future if
Possible
In Addition the Author ALSO Advocates a Dual
Momentum Sector Rotation (DMSR) which is Also
Discussed Very briefly in the Book
Further DMSR Info will ALSO be Presented in the
Future if I Can
DM Site
Section IC – Frank Grossman Another Richard Young Favorite; More Info to
follow in the Future
A simple and effective all weather SPY-TLT
strategy.
Variable SPY-TLT allocations adapted to the market
conditions.
18% annual return and a Sharpe ratio of 1.66 for the
last 5 years.
Url is http://seekingalpha.com/article/2714185-the-
spy-tlt-universal-investment-strategy?ifp=0
Section ID – Rotation ETFs
There are also several NEW ETFs which track
Rotation:
1) SCTO and
2) GMOM from Faber
(Both VERY Recently Released; Seem to about a
Month or Two Old)
Section II – Preparing for
Armageddon
A Series of Thoughts / Ideas/ Actions to PrePare you
for a COMING Market Drop
Which Might Occur After 1/1/15????
Section IIA – YOUR 2 MIP #s
In MY Opinion, Your Two MOST
IMPORTANT Numbers are:
1) Your FIXED Monthly Expenses =B and
2) Your TOTAL Assets =A
You Need to Know These to PROPERLY
PLAN
Section IIB – How are U going to
Invest Are u a Moment/Day Trader…..
Are u a B&H Investor; or somewhere in between
Do it ALL yourself or Have it Totally Managed or
somewhere in between
How much time and Effort do u want to spend
TRY it!!!!; Once u think u know
How much time do u have
You WILL have less time and Energy LATER!!
What are u REALLY comfortable with….
What Will U Invest In??
Stocks
Bonds
Mutual Funds
ETFs
Annuities
Etc
I Like ETFs and Funds; Stocks too Volatile
for Me; This is MY STOMACH
VERY IMPORTANT for U to Decide
HOW DID U FEEL RECENTLY ???
How did You Feel during the Recent DrawDown
That Was a Very Good Test Case of -10% Drop
Your Reaction should Guide Your Investing
Philosophy
Notice the Market Gyrations in the Next Chart from
Dr Don
Use Bonds, Contras etc to Ease Concerns
YOU MUST DECIDE YOUR INVESTING
APPROACH
One more thing …
Section IIC – Looking at Your
Positions
Many Things to be Considered if You Plan to Cull /
Sell
This Approach has Helped me Recently Make
Those Decisions
A Way to look at ALL Your
Brokerage Resources Brokerage Roth IRA Reg. IRA Taxable Total
VG 23K 38K 0 53K
Schwab 101K 73K 54K 228K
Fidelity 31K 27K 33K 91K
TD Amer 460K 0 0 460K
Other 0 0 37K 37K
Total 615K 138K 124K 877K
Section IID -Take Appropriate
Positions
As Pointed out to me by Patrick McCarroll, You
need to do some Legwork if you intend to Sell
Positions and Invest them in a Money Market Fund
(MMF)
In 2008 Many MMFs were Closed and Some were
Inappropriate
The Way to Get Around this is to do Research &
TAKE a POSITION in the Funds you want to be in
but do it NOW
Section IIE –DownTurn Planning
Info (A Review Again)
Relates to How U Felt RECENTLY in Market Drop
Market Stress Test
Summarized from WSJ Jason Zweig Intelligent
Investor Column Sat June 14, 2014
Time is NOW to Plan Actions if Market Dives
Based on ACTUAL Research
The PDF File of the article is on our Website under
6/28 talk notes in Gary Noreen”s ToolBox under
“Copy of Zweig’s Article…”
URL is :
http://www.aaiilosangeles.org/sumgrowth.htm
Investing Under Stress
Much more Sensitive to LOSSES
Impaired Short Term Memory
Indifferent to Small Gains
Much more LOSS AVERSE
Less Sensitivity to Reward
Focus More on Short Term Losses rather than Long
Term Gains
Therefore you tend to focus on how much you are
losing rather than what you could gain if you held
on
CAN & SHOULD PLAN AHEAD
Control Your Future Stress
Sell NOW to lock in profits
Focus on Total Value of Assets; NOT on Amount of
Latest Loss
Have info set up to be able to look at this type of
Total Account data
ReBalance NOW
Take Moderate Action NOW
Section IIF – A Recent Bond (and
Stock) Exercise
I Recently tried to Develop a List of Buyable Bond
Funds and ETFs for a Friend of mine
The Exercise Eventually went to Stock Mutual
Funds as Well
The Process Also Really Provides a Method to
Assess Your Portfolio Should You Wish to Cull/Sell
Your Holdings. It can Provide You with a PortFolio-
Wide Look at Your Holdings
Step 1 – Develop a List of any Kind
of Candidates
I got mine from a Series of Places: High Relative
Strength ETFs from Software; Bond Mutual Funds
from Magazines and NewsLetters; Personal
Recomendations; etc, etc
Eventually I also Looked at ALL my Present
Holdings; Which You May also want to do to give
Yourself a Plan as to What to Sell / Hold
Step 2 – Use StockCharts to
Generate Short and Long Term
Charts
Use Perf Charts with YTD and ALL Options
See Next Two Slides
Get TLT StockChart
StockChart Actions
Select Perf Chart, the Symbol to be Charted, “GO”
Then Right Mouse Click the 200 Day Window
Below the Chart and Select “Year to Date and All”
Respectively to get the next two Charts
With the Mouse You can read the Latest YTD and
ALL Percentages
TLT 2014 YTD Chart
TLT ALL Chart
Step 3 – MorningStar (MS) Actions
to Assess Their Opinions of My
Selections
Initial MS Info
More MS Info
Net-Net Results Using these Steps, I Developed a Table of Info for
EACH ETF / Fund which includes :
– SEC Rate of Return (MS)
– YTD Return (SC)
– LifeTime (StockChart ALL) Return
– MS Risk / Return Ratings
– MS Category
– Chart Rating (My Personal Opinion)
You Could Use Other Additional MS or StockChart
Capabilities if you Want to
Section IIG –Best Buys in 2008
DownTurn
From Feb 2014 M/F Issue (under Bear Market
Column)
Also from Aug 2014 ETF Issue (under Bear Market
Column)
AAII ETF Guide Example 8/14
Best Generic Bond Fund Bear
Types from 2008 Market
BEST BEAR BOND FUND RETURNS
Gov L/T +20.5%
Gov Int Term +10.8%
Gov Short Term +6.8%
Muni Short Term +4.7%
Muni Int. Term +4.1%
Mort, Backed +3.6%
Inflation Prot. + .1%
Best ETF Groups in 2008
Contra Stock Market 104.5%
Precious Metals 6.9%
Contra Foreign Stock 70.6%
Bond ETFs Returns are Similar to Bond M/F
Returns
Section III – Miscellaneous Items
Some VERY High Level Thoughts / Ideas
New Fidelity Annuity
Just for Your Info
MetLife / Fidelity Combo
“MetLife Growth & Guaranteed Income”
Low Commission Charges
Guaranteed Income
Insurance Also
CHECK IT OUT THROUGHLY BEFORE YOU
ACT
Retirement Presentation
I Recently gave a Retirement Presentation at the
AAII Retirement Meeting on 11/1/14
The PPT Presentation is on Don’s Site
Seeking Alpha Site
Excellent ETF Site
Daily Message via Email
I Get ”Todays Articles on ETFs & PortFolio
Strategy” via Daily Emails
Dual Momentum etc Came from Here
URL is: http://seekingalpha.com/
Section XI - The Market
Don’t Forget StormGuard
Remember that Sector Surfer (SS) always
contains the StormGuard Feature which
provides the SS Reading of the Market
The Present Reading is on the Upper
RightHand Corner of Any SS Chart
10/06/14 Mkt View vs 2008 Top
11/21/14 Mkt View vs 2008 Top
12/02/14 Mkt View vs 2008 Top
Markets Recent Results
S&P Results
- 5/13/14 188.06
– 6/02/14 192.90
– 7/25/14 197.72
– 8/1/14 192.5
– 10/06/14 196.29
– 11/21/14 206.68
– 12/02/14 207.09
NOTE: The Topping Signal is when the 30 & 40 week
Moving Averages come together and FLATTEN out
3/14 JIRM Group
JIRM Index 11/21/14
JIRM Index 12/02/14
JIRM Index Recent Results
JIRM Index Results
4/4/14 206.5
6/2/14 231.41
7/25/14 229.14
8/1/14 213.49
10/06/14 217.69
11/21/14 232.16
12/02/14 220.19
NOTE the JIRM Index results are Lower or Flat for
the last 6 months
SPY 300, 75 10/06/14 Chart Daily
SPY 300, 75 11/21/14 Chart Daily
SPY 300, 75 12/02/14 Chart Daily
300/75 Moving Average Results
Recent 300/75 Results
(Note that the TakeOut Signal Requires that they be
EQUAL; so this shows how far apart they are}
Date 300 75 Diff
6/2/14 174.20 187.00 12.8
7/25/14 178.94 192.13 13.19
8/1/14 179.43 192.91 13.48
10/06/14 184.43 197.36 12.93
11/21/14 187.89 198.19 10.30
12/02.14 188.61 199.20 10.59
Market Section Net-Net Summary
The TOTAL Market Summary based on the three
Items Mentioned in this Section is:
If Dr Don’s and My Moving Averages Trend UP;
Things Look Positive
At Present the Market Seems to be Continuing in a
Positive Run
Until Dr Don’s 300/75 EMAs and My 30 & 40
Week Moving Averages FLATTEN out; We
continue to be in Good Shape