LOL!'s Market Timing Newsletter

LOL! said:
I hope before the 2nd trade that
1. Bonds don't go up much more.
2. VTI goes up more.
3. VEU doesn't go down.
Click to expand...
VTI up, so sell shares. VSS down, so buy some shares.
Bonds up, so wait on buying them.
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Looks like I'm digging myself a little hole here. Ugh.
 
This market is amazingly resilient. It shook off the hurricane and Kim Jong-un like nothin'. One heck of a bull market.
 
Today the bond fund shares I sold are now trading at or below where I sold them earlier this week (taking into account prices adjusted for going ex-dividend today). I am starting to buy shares back today, but intend to keep some cash for buying shares after the holiday.

As far as the recent trades go, I have the same asset allocation to equities as I had before the trades although I have a higher allocation to foreign equities. The extra money I made in VSS is about the same amount that I didn't gain by selling VTI too soon.

In other words, all these trades didn't gain me anything so far. However, my wife will be happy because I bought the VSS in her account and sold the VTI in my account.
 
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When a bond fund goes up 0.5% or more in a day, my IPS says I must sell some shares, so I sold more BIV today. I may sell even more later today if BIV goes up even more.

The bad thing is that if I had used my cash to re-buy BIV last Friday, I would be a lot more happy about it.

I intend to buy something with all the cash I have in order to reduce my exposure to cash, but I don't know what. Anybody got any suggestions?
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In view of the reconstruction after the hurricanes, how about building material companies?

If one is so inclined, can go deeper than the retail stores and find out about the sources, meaning the producers and manufacturers.
 
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Thanks, that's a good suggestion. I like more broad-market ETFs though.

It seems like devastation is a good thing for many companies that are diversified geographically. For instance, maybe lots of cars will be replaced and the construction stuff you mentioned. Also home appliances and home electronics will be replaced. I think a big chunk of cars and appliances come from foreign places.

Maybe insurance companies will have to sell some of their investments in order to pay claims which might put pressure on bonds. Maybe the government will print cash to help pay for FEMA. But I have heard that insurance companies own stocks in the companies that benefit when they pay claims

I think maybe a rise in price of oil is a wash as the oil & gas companies will have to spend that money on fixing things and increased safety infrastructure. I don't think there is a pure play there either.

It is now looking like doing nothing might have been the way to go.
 
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Lumber and building materials will be in short supply. They are stretched now due to the Canadian issue with lumber tariffs. Roofing materials (shingles, tar paper, plywood, etc) will be tight. Just some thoughts.
 
In the world-wide construction boom of 2003-2007, I made good money on material stocks such as copper and iron miners, cement and lumber companies. As I did not know who would be the best, I bought some broad sector SPDRs (precursors of ETF). I also sprinkled money among several companies in particular sectors, kind of like making my own ETF.

And no, I did not put everything I had on these sectors. It was perhaps 1/4 of my stash.

When the housing bubble burst, I bailed out a bit late and gave up some gains. But overall, I was doing better than the market over that period.
 
OK, I've used up my cash. I sold the VSS (small-cap foreign) bought last week for a 1.5% or so gain, bought VTI after its little dip before lunch. Then when bond ETFs dropped a little bit, I bought AGG.

Perhaps of interest is that BIV and VSS were the 1-month best performers over the past month through yesterday. Everything else lost a little money in the past month.
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I used to w*rk with a guy who would play the Options Game using Home Depot during Hurricane Season. He swears he made money every year.

I'm looking at their recent chart.....I can see why.
 
Wow, the BIV bond ETF is up almost 0.5% this morning from yesterday which would mean I would have to sell more shares of it.

Also, international ETFs are up while US ETFs are down today. This is what I was expecting recently when I exchanged VTI into VEU. But I should not have sold VSS yesterday. However, I still have more international equities than domestic equities.

And US small-cap value ETFs such as VBR, IJS, and IWN are down a bit more than everything. This is confusing.

Because my 60/40 asset allocation is heavy on foreign now, I expect to gain on my 60/40 benchmarks today. I'm officially out of the hole I dug on 8/28.
805.
 
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With all the headlines about markets reaching highs, I checked my current asset allocation and once again I have hit a hard trigger limit on the top rebalancing band. So if equities go up today (and it is looking good), then I will sell some VTI (total US stock market) and maybe some VSS (small-cap foreign) to get back down to just below the trigger point.

My little 2-week foray of trading did increase the portfolio returns a little bit over doing nothing, but not by as much as I hoped. I would have gotten most of the gains regardless of what I did, but probably not enough to trigger rebalancing. It's a good sign then that a rebalancing point was triggered.
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Update: Sold some VTI (total US) and immediately bought BND (total bond), so I should now be just below my trigger point.
 
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I wanted to post my intentions for next week after I reviewed the last couple of weeks because making them public helps me to go through with them.

I have hit another rebalancing trigger, so I need to scale back equities again. This time I must sell some large-cap foreign which is what I bought back at the end of August. Since I would be hit with a short-term trading fee if I sold in the same account, I will sell in another account. But also since I don't want cash nor bonds in that other account, I will make a double trade in accounts Roth and Trad with net result VEU -> BND:
Roth: VEU -> VTI
Trad: VTI -> BND
I may make the trades on different days or stay in cash for a day or so just like in recent weeks. Cash helped me avoid some small drops in bond funds.

At the present time none of my benchmarks has a better YTD performance than my portfolio, so everything is still firing on all cylinders. That gives me some leeway to screw it up and still come out ahead.
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OK, the trades are done.

I sold VEU (large-cap foreign) and instead of buying VTI (total US), I bought VBR (US small-cap value) mostly since SCV has been doing poorly all year (except for last week) and I think it is time to rebalance into it. Also I noticed VBR was up less today than two other SCV ETFs IJS and IWN. I expect VBR to "catch up" in a day or so. It now looks like VEU is trading lower than my sale price, but VBR is trading lower than my buy price.

I also sold VTI and bought BND (total bond) to complete the other half of what I posted previously. BND had a nice dip at around 10:30 EST which made it a nice time so far today to buy it.

No commissions and no tax consequences for today's trades.

These trades dropped me back under my trigger point for rebalancing, so the next trades will probably just be re-investing some dividends that will be paid in the next few weeks. The FOMC meeting this week will likely be a non-event and the debt limit ceiling is already increased, so that's out of the picture, too.
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I feel much better about this morning's trades after worrying about pulling the trigger too early during the trading day. But the VTI and VEU that I sold ended up closing lower than my sell price and the VBR and BND ended up closing higher than my buy price. I don't think I've ever been 4-for-4 on the day I've made such a double trade before. This must mean that everything will reverse itself tomorrow, so you are forewarned, but at least I'll get one night of smug sleep.
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Several call option contracts expired in-the-money last Friday, causing me to have to let go of mucho shares of my hot stocks/ETFs at below market value. Darn!

If I did not sell the options, which I thought at the point of selling to be safely out-of-the-money, and sold them at market value, I would have had an additional $6K. The foregone $6K is not that big, but of course I still felt greedy. When you make good money, you want to make even more. Greed, greed, greed...

The stocks being converted to cash drove my stock AA down to 70%, which was what I wanted to do. Still have more contracts out expiring in October.

The problem with doing call options is that you may end up losing a lot of the hot stocks, and get to keep the lousy ones. But then, the other day someone brought up BTU (Peabody Coal). I wrote options on the shares and got them called away back in 2006 or 2007. Kicked myself for losing the shares which continued to climb, but then never bought them back. Then the Great Recession happened and I forgot about this company and never followed it again. It went down and down, and ended up in bankruptcy.
 
Quite a bit of cash from dividends have hit my cash sweep accounts this morning and the stock market has some interesting action going on, too, with the drop in foreign funds. So that's a small call to action.

I sold all the VCSH (short-term corporate bond index) in my HSA and bought VEA (large-cap developed). This was mostly because I had both ETFs in that account and I didn't mind simplifying to one single holding in that account.

I see that DGS (small-cap emerging markets) has dropped 2.5% at one point today to continue with its slide after a 5+% gain for the past 30 days. It is my best performing holding in 2017 (up more than 30% through yesterday). I have to find out if the price-drop is because of some unpublished ex-dividend thing or not, but I am considering buying some shares here with some of the dividend cash.

A post mortem of my trades earlier this month are looking great. I'm doing better than if I had done nothing.
572 <- Secret code number to wonder about.
 
I had submitted a limit order to buy some DGS after checking a few things. I see now that I got a partial fill this afternoon. If DGS goes up soon, then I will sell a similar number of shares of DGS in another account in order to restore my asset allocation and avoid early redemption fees. The money to buy DGS came from selling the BND shares that I bought last week.

And if DGS goes down, then I will just feel bad and buy some more shares of it.
 
FWIW, DGS went ex-dividend today, so I bought some more shares. The bond ETFs that I sold yesterday were trading about 0.1% lower, so that's a small plus.

The VEA I bought has dropped about 0.5%.

I sure wish I had bought some IJS (US small-cap value) which also went ex-dividend.
 
LOL! said:
The bond ETFs that I sold yesterday were trading about 0.1% lower, so that's a small plus.
Click to expand...

Markets have been open about 90 minutes and it is a strange day. Many US equities were up, but now they are down. Foreign ETFs were down and continue down.

Bond ETFs were down at the open a relatively large amount for bond ETFs, thus I received an alert of the price drop on my phone. I used all leftover cash from selling bond ETFs earlier this week to buy back bond ETFs. I saved myself about a 0.5% loss in those ETFs which just about covers my loss so far in buying DGS and VEA this week. That is, I'm no worse for trading.
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So it's the end of the quarter. The past week and the entire month was quite nice.

As readers know, I run a portfolio that is heavily tilted to small-cap and value equities. SCV has not been doing too well in 2016, but this month it was up between 6% and 8%. It still hasn't caught up to say the S&P500 or a large-cap index, but at least it is no longer sitting around a 0% return for the year.

The asset class that has done well YTD is foreign equities and particularly small-cap foreign and small-cap emerging markets. The portfolio actually has more than 50% of its equities in foreign index funds and this is driving outperformance versus benchmarks in 2017.

The new shares of DGS that I bought this week finally did something today, but not enough to outperform things like VBR and IJS (US small-cap value) for the week. Of course, I own lots more DGS purchased over the years, so most of my shares have achieved the full YTD return. The main thing with the trades of the past couple of weeks for me is that a post-mortem shows that at least through today, the portfolio is better off for having made those trades. If I had not made the trades, the portfolio would be lower in value today.

The portfolio gained on all the 60/40 benchmarks that I use for comparison including the small-cap and value-tilted benchmark that I use. It has also pulled away from a non-tilted benchmark such as the Vanguard LifeStrategy Moderate Growth fund.

So far 2017 is turning out to be a great year just as 2016 was. Just one more quarter to go, but more than enough time to screw it all up.
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Time to start unwinding the late September trades to buy equities since I've hit the rebalancing trigger again. Sold DGS (bought on 9/25) and bought bond funds AGG and VCSH. I expect (hope?) DGS to continue to go up, but I am satisfied with the gains that were made in the past week. I still own DGS in other accounts. With today's sale, I am no longer oveweight in this asset class.
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