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Trading Signal
For Stocks
We have moved our signal to yellow due to seasonal factors (summer), European election results, some economic data weakness, and markets trending on the low end of a trading range. |
Market Performance
As Of Friday May 11, 2012
S&P 500 Index
+3.07% 52-week
DJIA Index
12,820.60 as of 5/11/12
2,933.82 as of 5/11/12
+12.62% YTD
+3.12% 52-week
Performance For Proprietary Investment Models
CWM Income Bond Fund Model
+1.20% YTD 2012
+3.88% 2011
+7.79% 2010
+22.74% 2009
+1.24% 2008
+6.30% 2007
+3.75% 2006
-1.21% 2005
+5.54% 2004
+9.08% 2003
+6.64% 2002
-0.14% 2001
+1.97% 2000
CWM Global All Cap Dividend-Only
Stock Model
+6.35% YTD 2012 -0.36% 2011 +38.10% 2010 +95.31% 2009 -15.48% 2008 +22.94% 2007
+23.76% 2006
+17.92% 2005
+28.96% 2004
+76.62% 2003
-10.77% 2002
+25.24% 2001
+21.67% 2000
CWM Emerging Markets Stock Model
-1.487% YTD 2012 -14.56% 2011 +30.88% 2010 +104.83% 2009 -14.41% 2008 +53.77% 2007
+50.32% 2006
+7.83% 2005
+11.15% 2004
+94.42% 2003
+115.99% 2002
+15.79% 2001
+1.20% 2000
All fees are net of advisor fees. Past performance does not guarantee or imply future results.
Some results from a back test.
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5.5% Annual Income And 100% Liquid
 If you are interested in adding some real estate to your investment portfolio but do not want the hassle of having to finance the property and/or tie up your money for long term we have the perfect product for you.
Beginning in April we finished our due diligence on a new investment program and began offering this fund to our clients. The new product comes to us from one of the largest Real Estate Property Managers in the country. See the terms below.
HIGHLIGHTS - 5.5% Annual Interest Rate
- Invests In Commercial Real Estate Nationally
- 100% Liquidity
- Investors Must Be Accredited
If you are interested in this product, please give us a call today to learn more about this opportunity.
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Quote For The Month"An investment in knowledge always pays the best interest"
-Benjamin Franklin |
Don't Allow Your 401(K) Plan or Annuity To Be Unmanaged
Do you have a 401(K) plan and/or annuity sitting there doing nothing?
Are you confused as to which funds are the best to invest in at this time?
Now is not the time to Buy & Hold in the current market environment.
We Can Help!
Whether you are currently employed or retired, we have dozens of actively managed 401K and annuity models deployed and we can customize a model to fit your company's existing 401K plan as well.
Contact us for more details about our actively-managed programs to put your money back to work.
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Do you have multiple Financial Advisors managing your investments?
In this day and age it's common for many investors to have their investments spread across several financial advisory firms.
If you are one of those folks you should know that we provide a service, at no charge to you, that will summarize all of your investment holdings on one (1) simple report so that you can see how all your investments are doing.
If you're interested in participating in this free service give us a call or shoot us an email to get started today! |
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- Happy Mother's Day! Jim and I would like to thank our moms and wish all the moms we know a happy and fun Mother's Day!
- Another poor week for equities, particularly the blue chip names. The Dow Jones Industrials lost 1.5%, the S&P 500 lost 1.06%, and the Nasdaq lost 0.76%. Interestingly, mid cap stocks were nearly flat, only losing 0.04%.
- JPMorgan dropped a bomb this week, announcing they had lost $2 billion from credit derivative trades out of its chief investment office (proprietary trading). Ironically, JPMorgan had strongly objected to the "Volker Rule" which would prohibit banks from proprietary trading.
- Portfolio rebalancing starts this week. See below for details.
- We have five trades (sells) heading into week. Please refer to our "Trades For The Week" section below for more details.
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The Rebalancing Act
Every six months we go through the process of rebalancing clients' accounts, so expect to see a number of trades. Why? There are two main reasons:
1) Asset values drift out of balance. For example, consider what has happened to the equity and bond markets so far this year. The S&P500 is up 8.44% while the Barclays Aggregate Bond index is up only 1.74%. This implies we own too much of equities and not enough bonds, so we will sell out of some equity strategies and shore up the bonds.
2) We find new opportunities. We are constantly on the lookout for good performing, non-correlated assets. An example of a non-correlated asset we discussed in an earlier newsletter was managed futures. We happened to find one which we will be incorporating into portfolios.
Process-Driven
We follow a consistent process to determine the portfolios' allocations. We gather return data from all our different strategies and potential investments. We then use a program called G-Sphere to determine what assets not only have good return characteristics, but also are not well correlated. This is not your average Mean Variance Optimized portfolio - based on Modern Portfolio Theory! We all lived through the problems of that theory in 2008. This is a diversification optimized portfolio backed by a fair amount of research by S&P, the University of Denver, and others. It provides a three dimensional view of the portfolio, with long vectors representing good returns and a large area representing good diversification. Here is a screenshot of the output:
The volatility and return characteristics are some of the best we have ever seen.
Jim and I review the potential allocation to ensure no one strategy dominates the portfolio, make adjustments for volatility and return, and then re-run the program to create the final allocation. We take this target allocation and compare it to everyone's portfolio, taking into account each person's risk appetite, account constraints (like 401k investments), and goals. It then gets finalized for everyone's situation.
If you have any questions regarding the process or would like to learn more about what is going into the portfolios, feel free to give us a call at the number at the bottom of the newsletter.
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In The News...
Earnings Season
With 80% of the S&P 500 companies having reported first quarter earnings, results have been better than most analysts expected. According to the Wall Street Journal, 70% of companies that have reported thus far have beaten analyst estimates. This is well above the 20-year average of 58%. While beating estimates is a positive, many companies have beaten lowered expectations, as management teams have set a low bar for themselves when establishing guidance. Weak overseas results are causing management teams to rethink investment in capital spending and hiring.
European Elections
Voters in France and Greece went to the polls on the 6th and showed their displeasure with the current drive for austerity. Francois Hollande will be the first socialist to lead France in 17 years, and the Financial Times wrote that he has vowed to not ratify the EU's new fiscal discipline treaty unless new growth-promoting measures are added. In order for his growth initiatives to be passed, he will have to work with German Chancellor Angela Merkel, who demanded the current austerity measures.
In Greece, parties that are against the country's bailout program (both the far Right and Left) saw strong gains in parliamentary elections, which collapsed the current ruling coalition. If the Greek president cannot put together a coalition at tomorrow's meeting, they will be forced to call for elections again in as soon as two weeks. The vote underlines the challenges that politicians face with shrinking wages and pensions and a surge in unemployment since the previous election in 2009. The defeat of Sarkozy brings the total number of politicians in Europe to lose office since the debt crisis began to eight.
Executives Looking for Work
After only four months on the job, Yahoo CEO Scott Thompson has been fired after it was revealed he padded his resume with an embellished college degree.
The $2 billion trading loss at JPMorgan Chase will claim its first casualty among top officials at the bank as early as Monday, with chief executive Jamie Dimon set to accept the resignation of the executive who oversaw the trade, Ina R. Drew. Ms. Drew, a 55-year-old banker who has worked at the company for three decades and serves as chief investment officer, had repeatedly offered to resign since the scale of the loss became apparent in late April, but Mr. Dimon had held off until now on accepting it, several JPMorgan Chase executives said. (New York Times)
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Tale of the Tape
Equity indices degraded further last week with the SPX (S&P 500 Index) now trading below its 50 day moving average for the past six trading sessions and closing at 1353.39. Trading volumes in the overall marketplace also picked up substantially, pointing that there is some conviction in this drawdown. The Euro was pressured throughout the week, with FXE (CurrencyShares Euro) trading at its lowest levels versus the U.S. Dollar since mid January, reflective of the daily headline tensions that have surfaced in recent weeks surrounding the ongoing European debt crisis that seems far from resolution, apparently.
Options markets activity has been cautious for weeks consisting of broad-based hedging activity via puts in products including SPY (S&P 500 ETF), IWM (Russell 2000 ETF, or small caps), and EEM (emerging markets ETF). Institutions are leaning towards caution, with significant inflows occurring in conservative short and medium duration fixed income ETFs and outflows in higher beta segments of the market such as technology (QQQ) and small caps (IWM).
This past week, we saw additional evidence that institutions are concerned about potentially going into the summer overexposed to equities as the leaders in fund outflows were SPY ($-2.3 billion via redemption activity) and EEM (iShares MSCI Emerging Markets) which lost $1.2 billion last week. A related ETF, VWO (Vanguard Emerging Markets) also lost approximately $200 million. The Emerging Markets ETF space, which reeled in more than $8 billion collectively in new assets via creation activity in the first months of the year, seem to be finally cracking and this week the selling pressure was evident. When the equity market looked like it was in unabated bull rally mode back in January and February of this year, conceptually it made sense that Emerging Markets funds such as EEM and VWO would attract significant asset flows given the relative under-performance to U.S. equities in the trailing one year period, and the higher beta nature of these markets. In the trailing one year period, EEM for instance has lost 17.17% versus the S&P 500 up 1.01% during this same time frame. China is the single largest country weighting in EEM, at nearly 18%, and the country's equity market has notably under-performed other segments of the market, with FXI (iShares China) for instance losing 19.30% in the trailing one year period. After weeks of witnessing protective activity in EEM via put spreads and outright put buying, it was not completely surprising to see some institutions fold their hands at least for now in emerging markets equities, and allocate to other asset classes.
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Trades For The Week
There are five trades this week in all of our proprietary investment models. See
below for details.
Global All-Cap Dividend-Only (GACDO) Stock Model
One sell. We remain Long in only (3) of the (13) eligible stocks in this model.
The model remains up +6.35% YTD.
Income Model (Bond Funds)
One sell this week. The model is up +1.20% YTD. Emerging Markets Stock Model We've received three sell signals in the model. After making the sell, we'll be long in (5) of the eligible (20) stocks in this model. The model is down 1.49% YTD. Commodities There are no new trades for next week. Shorts There are no new short trades nor do we own any shorts at this time.
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