Market calls

[Montecfo]

To explain it properly, I’d have to walk you through my full model, which is proprietary and built in part on years of experience. If you’re interested, you can read more in my profile.
I’ve spent years explaining this approach, and most people simply weren’t paying attention.
Here’s a common strategy used by several, not me: Someone holds a 60/40 portfolio. After stocks drop 20%, they rebalance—using the 40% in bonds and cash to buy more equities. At the bottom, that portfolio may be down 12–15%.
But that also means the portfolio still absorbs a large share of market losses. If stocks fall 50%, the portfolio could easily decline 25%. That’s not acceptable to me in retirement.
Another approach is to allocate to alternative funds (ALT funds) that aim to outperform or hedge risk. The problem is that, over time, most of these strategies haven’t delivered consistently strong results.
At this stage of life, I’m not trying to maximize returns. I already have enough. My priority is limiting downside risk. In my view, the most reliable way to do that is to sell and protect capital.
As the article explains, avoiding the worst market days can make a significant difference in long-term outcomes.
(www.cambriainvestments.com/wp-content/uploads/2018/01/Where-the-Black-Swans-Hide-the-10-Best-Days-Myth.pdf)

Hey, I have read most of your posts, profile etc. It seems interesting and I appreciate what you have shared.

It is kind of financial burlesque.

 

[FD1000]

The VIX is over 20, and MOVE is low. I still don't see high risk, which means I'm invested.
SPY has been flat for about 4 months and for YTD.
For YTD: VTV=Value, VXUS=International, and PDI=CEF are better.

 

[FD1000]

The SP500 lost less than 1% in Feb. My ST+LT signal stay the course.
Value(VTV) looks better but didn't do much in the last 4 weeks.
International(VXUS) has been doing better than the above for 1-3-6 months.

March has been a good month for utilities (XLU). Below is 10 years of seasonality of XLU vs SPY. March is the best month for XLU.

PDI ST+LT indicator signaled a sell in February 20-23. The weekly MACD didn't signal a sell.

March has been the worst month for PDI in the last 10 years.

 

[dobig]

Not sure why utilities don't get more love. VPU and XLU have good dividends of around 2.5% and dividend growth that outpaces inflation. Returns average around 10% annually. For a good defensive sector with solid yearly returns it seems these are a great fit for any retirement portfolio.

Besides VPU I also hold UTG which is an utility cef. Slow but consistent growing dividends currently at around 5.5 - 6% and one of the few cefs that actually increases in value. I'm adding on any dips where yield gets to 6.5%.

 

[NW-Bound]

Not sure why utilities don't get more love. VPU and XLU have good dividends of around 2.5% and dividend growth that outpaces inflation. Returns average around 10% annually. For a good defensive sector with solid yearly returns it seems these are a great fit for any retirement portfolio...

What do you mean? Recently, these two ETFs have been loved to death. VPU up 11.3% YTD. XLY 11.81%. Makes me want to write covered OTM calls on them. Yes, covered OTM call is my middle name.

I have held VPU and XLU forever. For income and diversification from stocks, I like them better than bonds , of which I have little, other than I-bond and short-term treasuries.

 

[dobig]

What do you mean? Recently, these two ETFs have been loved to death. VPU up 11.3% YTD. XLY 11.81%. Makes me want to write OTM calls on them. Yes, OTM call is my middle name.

I have held VPU and XLU forever. For income and diversification from stocks, I like them better than bonds , of which I have little, other than I-bond and short-term treasuries.

lol

I hear you. The way I think of it, why would I buy a bond paying a fixed 4 - 5% when I can buy a utility etf or cef that will be almost as safe and is an appreciating asset with a growing dividend? Of course if 2022 hadn't happened I'd probably still be in a number of bonds and preferreds but after seeing they have just as much risk in certain environments (inflation) as anything else it made little sense to hold them going forward. The one caveat being if you hold a bond to maturity.

 

[NW-Bound]

... The one caveat being if you hold a bond to maturity.

By the time you hold a bond to maturity, how much has a utility stock appreciated? No bond for me, thanks.

 

[Montecfo]

lol

I hear you. The way I think of it, why would I buy a bond paying a fixed 4 - 5% when I can buy a utility etf or cef that will be almost as safe and is an appreciating asset with a growing dividend? Of course if 2022 hadn't happened I'd probably still be in a number of bonds and preferreds but after seeing they have just as much risk in certain environments (inflation) as anything else it made little sense to hold them going forward. The one caveat being if you hold a bond to maturity.

UTG is an interesting one I have looked at quite a few times but never bought. I think you are onto something as this is a pretty good environment for utilities.

 

[COcheesehead]

UTG has a standard deviation of 13 - 19, 1 year to 5 year. That puts it at almost S&P type volitity with less return. Not saying to not buy it, just know what you’re getting into. It’s not fixed income.

 

[dobig]

UTG has a standard deviation of 13 - 19, 1 year to 5 year. That puts it at almost S&P type volitity with less return. Not saying to not buy it, just know what you’re getting into. It’s not fixed income.

Hope I wasn't giving the impression this was like a fixed income asset. For myself I'm saying I'd rather have an investment like this that throws off a higher dividend then your standard bond or preferred while appreciating in both asset value and dividends unlike a fixed income product. And going into what looks like an Ai super cycle I like having more exposure tilted to utilities.

 

[FD1000]

UTG has a standard deviation of 13 - 19, 1 year to 5 year. That puts it at almost S&P type volitity with less return. Not saying to not buy it, just know what you’re getting into. It’s not fixed income.

+1

dobig: The way I think of it, why would I buy a bond paying a fixed 4 - 5% when I can buy a utility etf or cef that will be almost as safe and is an appreciating asset with a growing dividend?

I never believed in INCOME, and there is a low chance I would ever do so.
The only game is performance or risk-adjusted return.
While I get a lot of my performance from distributions, I'm at 99+% in bond funds;
There is no way I would ever disregard risk-adjusted returns.
High income doesn't guarantee better performance or better risk/SD.
PDI managed by the best team in the world and held by most CEF posters, is proof of that.
Last week PDI lost -3.4%
In 2020, PDI lost more than QQQ and SPY.

UTG chart for one year shows that at one point, UTG lost 13-14%.

Look at 2020 at PDI,SPY,QQQ

 

[COcheesehead]

Hope I wasn't giving the impression this was like a fixed income asset. For myself I'm saying I'd rather have an investment like this that throws off a higher dividend then your standard bond or preferred while appreciating in both asset value and dividends unlike a fixed income product. And going into what looks like an Ai super cycle I like having more exposure tilted to utilities.

You compared it to a bond, hence my reference to fixed income.

 

[dobig]

+1



I never believed in INCOME, and there is a low chance I would ever do so.
The only game is performance or risk-adjusted return.
While I get a lot of my performance from distributions, I'm at 99+% in bond funds;
There is no way I would ever disregard risk-adjusted returns.
High income doesn't guarantee better performance or better risk/SD.
PDI managed by the best team in the world and held by most CEF posters, is proof of that.
Last week PDI lost -3.4%
In 2020, PDI lost more than QQQ and SPY.

UTG chart for one year shows that at one point, UTG lost 13-14%.
View attachment 62076


Look at 2020 at PDI,SPY,QQQ

View attachment 62077

Obviously your approach is working for yourself but I take a different approach and one that works for us.

I bought a good chunk of UTG last Dec as I said in a previous post when it was at a 2% discount to Nav. Here's a previous post where I compared UTG to PDI.

I got a little curious about the performance of UTG vs PDI so I did a 10 year backtest. Pretty shocked to see UTG with it's 6.5% yield is handily beating PDI. For my situation it seems UTG may be a better long term hold. I'll give up some yield now but I should make up for that with a growing (slowly) dividend and price appreciation. If I were older PDI seems like it would make more sense as I would want the higher income now.

 

[FD1000]

dobig,
You are comparing apples to oranges, and you dismiss SD, risk, and risk-adjusted returns.

I have nothing against high income, but when you trade, the sky is the limit. If you are a great trader that doesn't care about volatility, why did you buy UTG and not WDC (Western Digital)?

If high income is the best style of investing, why not invest 100% in it?
Why are the best traders in the world, who made billions, not using it?
Why is high income so important? Total return trumps everything.

I know, you are going to come back and say DIVERSIFICATION. I never understood it. Buffett: "Diversification is protection against ignorance." He believes that for skilled investors, a concentrated portfolio produces better, less risky results. For the majority of investors, he said to invest in the SP500, not 10 funds, not trading, and not INCOME stocks.
BTW, this is why I own only 2-3 funds; it is based on Buffett.

 

[dobig]

Great trader?

lol, you have me confused with someone else. I wing it and rely on intuition, gut instinct and that giant horseshoe that's been permanently lodged up my backside.

But while I may be on the shorter bus of investors I'm smart enough to know that for myself a diversified portfolio made up of quality and income will get me to the finish line 99.99% of the time. You have a different method. All the more power to you.

Regardless, you're looking for a fight and I'm not willing to participate. You win. Total returns are all that matter.


....now get me some more UTG.

 

[dobig]

Your points are valid but I have a different take. It's your thread so I'll take a hike.

 

[Diogenes]

... The way I think of it, why would I buy a bond paying a fixed 4 - 5% when I can buy a utility etf or cef that will be almost as safe and is an appreciating asset with a growing dividend? ...

While lots of experienced and well-informed folks have their preferences for fixed-income (in its various forms), your observation really resonates with me, as I consider my own allocation. The case for bonds - for me - is not compelling. I regret my bond allocation. As you and others have wisely noted, 2022 really strained the case for how bonds are ostensibly low volatility. And... how vigorous has the recovery been, over the past 4 years? I have yet to see it, for intermediate-term bonds.

Then there's the tax situation. Most of my portfolio is in conventional taxable accounts. The difference between tax rate on dividends and long-term capital gains, vs. interest, isn't trivial.

 

[Montecfo]

Great trader?

lol, you have me confused with someone else. I wing it and rely on intuition, gut instinct and that giant horseshoe that's been permanently lodged up my backside.

But while I may be on the shorter bus of investors I'm smart enough to know that for myself a diversified portfolio made up of quality and income will get me to the finish line 99.99% of the time. You have a different method. All the more power to you.

Regardless, you're looking for a fight and I'm not willing to participate. You win. Total returns are all that matter.


....now get me some more UTG.

No worries.

"Diversification is for dummies. So instead invest in SP500".

Which is far more diversified than UTG...

Full disclosure: I love Buffett and he has some good thoughts investing-wise. I maintain a concentrated portfolio of about 50 positions.

 

[FD1000]

At retirement in 2018, our goals were
1) Make money every year
2) Must make 3% more than inflation annually
3) Never lose more than 3% from any last top. Capital preservation is my number 1 goal
4) Beat 50/50 using 90-95% bond OEFs.
5) Timing market is a must
The above should be enough for our portfolio to last to age 104.
I did much better, making 11.4% annually after all expenses, and never lost more than 1%.

After I doubled the portfolio, the game was over; selling to MM is faster.
Yesterday I sold everything. Why?

Big picture: Is the situation in the last several days unique?
I think it is. The war in Iraq is spreading to friendly countries, Arab states of the Persian Gulf, a missile landed in Cyprus in southern Europe. Saudi Arabia shut down one of the Middle East's largest. Oil is a mandatory resource for the world economy.
You need to educate yourself in the history of Iran.

Where are the signs? It must show in the market.
This is where I sell earlier without all the signs but
VIX is up rapidly
MOVE is still low, but bonds lost money. Interest rates are going up.
The dollar is strengthening. That have a direct relation to my portfolio. It is not a secret that since last April, for the first time in my life, my bond funds have invested mostly in international and EM.
This morning one of my proprietary signals hit a sell.

What do I have to lose?
Not much; I already locked over 4% for YTD, which is better than the usual for me.
I can be out for a week or more and watch markets and decide what to do.
For posters who are going to comment something like this: "I know someone that got out and stayed out for years" or "every time I traded, my portfolio performance suffered."
Please save it for another thread.

What should you do?
I don't have an idea. I have my goals and style. You have yours.

Am I going to post when I buy back?
Probably not.

Good luck to all.

 

[COcheesehead]

VIX up 24%
If it gets above 30….I might begin to take an interest in letting some bigger chunks of cash go.

 

[Montecfo]

Has come back down from 27.

 

[Montecfo]

At retirement in 2018, our goals were
1) Make money every year
2) Must make 3% more than inflation annually
3) Never lose more than 3% from any last top. Capital preservation is my number 1 goal
4) Beat 50/50 using 90-95% bond OEFs.
5) Timing market is a must
The above should be enough for our portfolio to last to age 104.
I did much better, making 11.4% annually after all expenses, and never lost more than 1%.

After I doubled the portfolio, the game was over; selling to MM is faster.
Yesterday I sold everything. Why?

Big picture: Is the situation in the last several days unique?
I think it is. The war in Iraq is spreading to friendly countries, Arab states of the Persian Gulf, a missile landed in Cyprus in southern Europe. Saudi Arabia shut down one of the Middle East's largest. Oil is a mandatory resource for the world economy.
You need to educate yourself in the history of Iran.

Where are the signs? It must show in the market.
This is where I sell earlier without all the signs but
VIX is up rapidly
MOVE is still low, but bonds lost money. Interest rates are going up.
The dollar is strengthening. That have a direct relation to my portfolio. It is not a secret that since last April, for the first time in my life, my bond funds have invested mostly in in

Am I going to post when I buybGood luck to all.

At retirement in 2018, our goals were
1) Make money every year
2) Must make 3% more than inflation annually
3) Never lose more than 3% from any last top. Capital preservation is my number 1 goal
4) Beat 50/50 using 90-95% bond OEFs.
5) Timing market is a must
The above should be enough for our portfolio to last to age 104.
I did much better, making 11.4% annually after all expenses, and never lost more than 1%.

After I doubled the portfolio, the game was over; selling to MM is faster.
Yesterday I sold everything. Why?

Big picture: Is the situation in the last several days unique?
I think it is. The war in Iraq is spreading to friendly countries, Arab states of the Persian Gulf, a missile landed in Cyprus in southern Europe. Saudi Arabia shut down one of the Middle East's largest. Oil is a mandatory resource for the world economy.
You need to educate yourself in the history of Iran.

Where are the signs? It must show in the market.
This is where I sell earlier without all the signs but
VIX is up rapidly
MOVE is still low, but bonds lost money. Interest rates are going up.
The dollar is strengthening. That have a direct relation to my portfolio. It is not a secret that since last April, for the first time in my life, my bond funds have invested mostly in international and EM.
This morning one of my proprietary signals hit a sell.

What do I have to lose?
Not much; I already locked over 4% for YTD, which is better than the usual for me.
I can be out for a week or more and watch markets and decide what to do.
For posters who are going to comment something like this: "I know someone that got out and stayed out for years" or "every time I traded, my portfolio performance suffered."
Please save it for another thread.

What should you do?
I don't have an idea. I have my goals and style. You have yours.

Am I going to post when I buy back?
Probably not.

Good luck to all.

But why all the secrecy? You have won the game right?
If you prize secrecy, why post about trading?

Just curious.

 

[MaydaMunny]

Some just like braggin bout what you should have done yesterday. Even if one is so wealthy that they don't need to trade, then why? Just to brag?

 

[FD1000]

But why all the secrecy? You have won the game right?
If you prize secrecy, why post about trading?

Just curious.

I’ve explained this several times before. I used to post about it regularly for years.
But every time I did, people nitpicked every small detail. They demanded that I post every single trade and the exact percentage in each fund, something no one actually does.
Whenever I shared something they didn’t like, I’d get flooded with comments saying I didn’t know what I was doing, that I was lying, and so on. Then I’d end up spending a lot of time defending my decisions and re-explaining my model.
The reality is, people don’t understand the model. Many forget what my actual goals are and instead argue in generic terms or compare it to what they personally would do. Some even claimed I’d never be able to retire or that I wouldn’t make it in retirement for years with nasty comments.
It all worked out exactly as I expected.
Eventually, I got tired of going in circles. I have a model that worked extremely well for me for decades and allowed me to retire after 23 years. I’m comfortable with it, and I don’t need validation from anyone else.
So now it’s simple:
I post general observations that aren’t tied to my model, and when I do reference it, I only discuss what’s relevant to my goals and strategy.
BTW, there are a couple of traders I speak with outside of this site where we discuss everything openly. They’re all strong, experienced traders.

 

[southpoint]

Yesterday I sold everything. Why?

Big picture: Is the situation in the last several days unique?
I think it is. The war in Iraq is spreading to friendly countries, Arab states of the Persian Gulf, a missile landed in Cyprus in southern Europe. Saudi Arabia shut down one of the Middle East's largest. Oil is a mandatory resource for the world economy.
You need to educate yourself in the history of Iran.

Where are the signs? It must show in the market.
This is where I sell earlier without all the signs but
VIX is up rapidly
MOVE is still low, but bonds lost money. Interest rates are going up.
The dollar is strengthening. That have a direct relation to my portfolio. It is not a secret that since last April, for the first time in my life, my bond funds have invested mostly in international and EM.
This morning one of my proprietary signals hit a sell.

What I like here is that FD shared what he considered to convince him to sell. A lot of investors admit to being flummoxed about when to sell, so he's laying out his thinking. This is in support of his #1 goal of capital preservation.