Revisions, revisions – REVISIONS!
We get our first revision of our Q1 GDP at 8:30 this morning (was 0.1%, probably lower now), but the big revision has already came last year and, as I predicted at the time, people have already completely forgotten about it.
Last July the Commerce Department decided to include the "knowledge economy" – investments in research and development and entertainment and the arts. Previously, that spending was included as intermediate components during the production of other goods or services, but now they will be measured as fixed assets and reflect their ongoing contributions.
That allowed R&D and, more significantly, entertainment to be counted as fixed assets and boosted the GDP last year by $471Bn or 3%. That's right, we added 3% to our GDP last year (essentially ALL of our "growth" by changing the rules). Another change is how the BEA calculates pension contributions. The agency will now consider compensation to reflect the value of the pension promises made by the employer, rather than the employer’s cash contributions to the pension fund. The new method better reflects the retirement benefits a worker earns, BEA said. As a result, the personal savings rate averaged 4.7%, an upward revision of one percentage point, for the period between 2002 and 2012.
This year, the change didn't go away but the artificial boost it gave us has and our Q1 GDP was barely positive at 0.1%. Yet, just this week, our own Mainstream Media has THE NERVE to make fun of Italy for revising their own GDP to include illegal drug sales, prostitution and illegal arms trafficing, adding just 1.3% to their own growth this year.
Seriously, can not one single reporter in the media remember that we diddled with our own GDP not even 12 months ago? Did you remember? "Gosh honey, look how quickly our children have grown – now that we're measuring them in centimeters!"
In fact, aren't we legalizing marijuana and moving that onto the economic books going forward? Let he who is without spin cast the first stone, right? Of course we're all ameteurs compared to Japan, who are actively pushing women into playing the stock market and are FORCIBLY moving $200Bn from the national pension fund into the Nikkei, doubling their level of exposure to Japanese equities in order to keep the Nikkei bubble inflated for another quarter or so.
Anticipation for a portfolio shakeup has mounted as GPIF awaits the health-ministry review and implements several of the government panel’s recommendations, including investing in infrastructure, adopting the JPX-Nikkei Index 400 (JPNK400) as a benchmark for domestic stocks and removing a salary cap to enable hiring of in-house investment experts.
It's just TOO MUCH NONESENSE and we decied yesterday to CASH OUT our Long-Term Porfolio ($500K) as it's already up over $70,000 for the year (14%) and outperforming the S&P by a mile. In anticipation of today's miss, which will catch the Economorons completely by surprise (because they already forgot about the BS revisions too), we decided to sell into yesterday's record high, leaving us with our much smaller Short-Term Portfolio ($100K), which is generally bearish and usually a hedge for our LTP but now just a bearish portfolio at the moment.
8:30 Update – GDP DOWN 1%! Wow, worse than I thought. Of course we like shorting all our indexes in the Futures off that news – we have Dow (/YM) 16,650, S&P (/ES) 1,910, Nasdaq (/NQ) 3,720 and Russell (/TF) 1,137.5 – essentially, we like to short the laggard (the last one to cross below the line) but both Dow and S&P can be played off those lines with tight stops. Oil is also a short at $102.75 but will be tricky with what should be bullish inventories at 11 – likely we'll short into that pop.
So we've now cashed out two of our five virtual portfolios, our $500,000 Income Portfolio went to cash at the end of March, after we popped 8% in the first quarter (and our goal for the year is just 10% in that conservative portfolio) and now we've cashed out our more aggressive $500,000 Long-Term Portfolio, taking 14% off the table on that one. That leaves us with the $100,000 Income Portfolio (flat for the year) and our market-neutral $100,000 Butterfly Portfolio (up 24% so far) and our self-explanatory $25,000 Portfolio (up 11.6%).
That means, essentially, we've moved 80% to cash and leaned 75% bearish with the remaining $225,000. We have been adding back positions to the Income Portfolio from our Buy List (our 3rd set of picks was discussed in yesterday's live Webinar) and we're still opportunistically trading in our Short-Term Portfolio, which is what we teach people to do at www.Philstockworld.com every day. In fact, one of our Members, IHS, had the following to say in yesterday's chat:
Phil/ Cashing out of my LT holdings have been going on for over two weeks. However, I have elected not to cash all of the holdings including my AAPL, Jan 16 Short Puts at $470 and $480. Plus, I am being opportunistic in selectively putting on those positions for beat down stocks by selling 2016 Puts.That said, YTD harvested profits now stand at $135k on a current account balance of $683K or a 19.81% YTD return. Thanks for your expertise in teaching me how to be patient, be the banker, but also not being greedy, cashing out and harvesting profits.
We sold in May (how cliche'd) but we're not going away, not when we have 20 stocks we like on our Buy List and another 20 we just cashed in from our Long-Term Portfolio that we'd love to buy again on a pullback. CASH is a wonderful thing to have – but you can't just sit on it – we'll be looking for SMART ways to put it to work.
