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Holy cow, look at those indexes go!
With the NYSE finally above our Must Hold line at 11,000 – it may be time to give up on our bearish positions and just "go with the flow" BUT we still have S&P 1,100 and Nasdaq 5,000 to punch through and THEN we can use them as stop lines for more bullish betting.
Not that we haven't made plenty of bullish bets. Our Long-Term Portfolio closed Friday up a whopping 31.4% with $156,886 in gains over the past 14 months. Of course our Long-Term Portfolio is ALL bullish – it's our Short-Term Portfolio that holds our hedges but, fortunately, we also make some nice short-term bullish bets in there as well and that portfolio is up 103.1% since 11/26/13 – a gain of $103,065 off our original $100,000 virtual investment.
We made some aggressive bearish adjustments to the STP on Friday as we anticipated a sell-off after the holidays but, so far – despite Greece being broken again this morning – we're still holding up in the Futures. We did, however, manage to scratch out some Egg McMuffin money this morning in our Live Member Chat Room, picking up oil shorts (/CL) early at $53.50. We just (7:35) exited a round at $52.75 for a $750 per contract gain to start our day.
Not that it's easy money, by the way: We initiated that trade at 4:57 am and it took two and a half hours to make that $750 (and we took entries and exits in between) so certainly this kind of labor isn't for everyone at $250/hr. We also laid out some nice index shorts for our Members, so hopefully we can give ourselves a raise over the course of the day.
Of course, Futures trading is just what we do for fun while we're waiting to see if our Long-Term trades work out. After all, it's taken 14 months to make 31.4% in our LTP – we have to find a hobby to keep us from over-trading our Long-Term positions, right?
As GMO noted in their White Paper this weekend, skill (as in investing skill) may be a dead art. Of course, as an active management firm, they end up coming down on the side of skill (as do I but you need REAL active skill, not just the active part!) but the opening of the paper does make a strong case against it:
As investment boards and committees gather to discuss performance for 2014, eyebrows will most certainly be raised as people review the performance of many of their equity managers. Depending on which database they are looking at, between 80% and 90% of active U.S. equity managers will have underperformed their benchmark this year, making it one of the worst years for active management in the recent past. Those particularly prone to hyperbole will use this as a clarion call to further embrace passive management and rid themselves of their active managers. After all, if only 1 in 10 active managers can actually generate alpha, why would investors bother with the time, headache, or cost of active managers?
At Philstockworld, we teach our Members active trading skills but we stress LONG-TERM investing and wealth-building techniques. Slow and steady does indeed win the race yet it amazes me how, even 2,600 years after Aesop, the majority of traders I run into still think fast and furious is the way to go.
That's why we didn't close our 2014 portfolios at the end of the year. 2015 is the year we stress "Getting Rich Slowly" and try to get people to understand the value of CONSISTENTLY making gains over the long-haul by putting our other trading strategies to good use. It's not that we aren't taking new positions (we took a dozen last month) – it's just that we're letting the profits accumulate for a change to help people understand the impact over time.
It's also important that we stress our Balanced Portfolio Approach to investing by using our hedges in the Short-Term Portfolio to protect our long-term gains – because you never know when these easy bullish gains will ceast to be available or even (gasp!) start to unwind.
For the last few years, the Fed and our Government have pumped $11Tn into our $17Tn GDP (20% a year over the last 4 years) through liquidity add-ons like QE and ZIRP as well as direct bail-outs. As Dave Fry notes in his morning post: "Naïve blue-eyed sailors fresh off the boat just don’t get it. The old ways of doing business on the street are rigged by central banks not to mention High Frequency Trading. Earnings this quarter are only okay due to a major reduction in float (stock supply) even while demand may remain the same (Earnings look better with fewer shares)."
As you can see from the chart, profits and sales are both performing very poorly on the S&P – UNLESS you divide them by a lower number of shares – then they LOOK great! As Fernando reminds us, it is alwasy better to look good than to feel good so let them markets look marvelous while they can but PLEASE – don't be the last one to head for the door when the music stops and the lights come back on – or you may find yourself holding some really ugly paper!
