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Old_Skeet's Market Barometer ... Spring & Summer Reporting ... and, My Positioning
BCE, BIP/BIPC, BTI, EPD, D, SO are a few paying 'safe' 4%+. I have some, like CSCO and SYY that pay 3%-ish as well. Also owned big T/VZ positions for decades ... though with T I am cognizant of its humongous debt load and while I like the business sector and dividend, I don't consider T a 'bond-equivalent' holding. As you can probably tell, I skew towards companies that offer what I consider to be a decent defensive 'moat' for various reasons.
If the stock doesn't pay a 3%+ dividend, it's got to appeal to me from a business perspective (ie, CNI) or be in a field i'm well-familiar with (ie I know tech) so I'm inclined to own some div-free tech stocks.
Hi guys: With the 4% gain the S&P 500 Index had this week moving from 3009 to 3130 Old_Skeet's stock market barometer scores the Index (near term) as extremely overbought with a reading of 125. I have the Index off it's 52 week high by 7.5% and up off it's 52 week low by 39.9%. All of my buy steps that I made during the recent stock market swoon are all now positive with the package as a whole returning about 32%.
My late father use to say when the yield gets thin it's time to trim. Currently, I'm finding that the yield on the Index (currently 1.9%) is as low as it has been since 2-21-20 (weekly close) when it was at 1.79% with a reading of 3338. For me, I have already been there and done that.
Hi Skeeter, Yeah I think, too, things are a bit expensive. Have done some selling this week...... PRDGX: it's a tracker; FXIAX: is cheaper; GLFOX: too much Italy and England for me anymore. I don't see infrastructure money coming. FAMEX has only 32 holdings and has not recovered from its fall. Time to move on. Old news: Bought BFTHX, FBGRX. Sold value and bought these. Also bought FDFAX. Will hold 'til we get a vaccine. Also ECOLX is one I've been watching for a while. TEFQX had 31% cash, so I'm in. God bless the Pudd
p.s., In The Economist this week, a most excellent read called, "Like a Ton of Bricks." Also, happy 4th!
As I sold all funds to cash in February before I retired I was in all cash when the pandemic started. Moved monies to Schwab and have been slowly adding funds. Bought EGFFX, RPHYX, CPOAX, JENSX, PTIAX, SWAGX, GGSOX for a start. Still have 65% in cash for now.
Hi Art, Lucky you, Big Guy! This longneck is for you! Like your growth funds. Not in bonds right now. Don't be in a rush to invest the cash. We're early in the recovery. Methinks you'll get shots at it as time goes on. God bless the Pudd
I should explain a little about the yield metric. Years back investors did not have all the fancy dancy ways to measure the market. One metric that my late father used was he followed the yield on the stocks he owned. When the yields got thin it was usually that the stocks he owned were at, or towards, their 52 weeks highs ... if not setting new highs. With this, he would trim the position and await a pullback where the yield would again rise as the stock price fell usually through a seasonal trend pattern.
In looking back through my data that I keep on the S&P 500 Index the recent high yield on the Index took place on (week ending) March 20th at 2.53% with a reading of 2305 and the recent low on February 21st at 1.79% with a reading of 3338. With this week's close the yield on the Index is at 1.9% with a reading of 3130. With this, and from a yield perspective, the Index is becoming pricey. In addition, TTM earnings are reported to be falling ... not rising. Based upon the blended earnings approach that the barometer uses puts the P/E Ratio for the Index at around 24. With this, This the earnings yield computes to about 4.16%. In comparing the 4.16% earnings yield to the yield of some of my multi sector bond funds ... Well, the advantage is now with some of the multi sector income funds from this yield perspective. Take the widely held PONAX (Pimco Income) is producing an income yield of 5.67%. With this, the yield advantage now goes to some bond funds ... from, my perspective.
Should the Index reach a near term yield of 1.8% Old_Skeet will most likely trim his equity allocation back to it's baseline allocation of 40% equity from the current 45% equity. Not long ago, I trimmed from around 50% equity back to 45%. Remember, I bought the downdraft and when the updraft came this put me equity heavy from the upward price movement as the rebound progressed.
Take care ... and, again ... thanks for stopping by and making comment.
Are you, @Old_Skeet, telling me you made a 32% profit from your step buys during the most recent correction. Hats off to you & your good fortune ! As for me, a 10% gain is all I can claim, & I'm still waiting for VTINX to get back to break even. The other 3 buys are on the plus side. Did you increase your buy % as the market sunk. Example $1000 first buy , $2000 second buy , $3000 third buy ? Stay safe & Enjoy the 4/th, Derf
Hi @Derf, Thanks for your question. Yes, as the market continued to decline each buy step was greater than the previous with dollars invested. Why, you might ask? Time for a geometry lesson. Picture a pyramid. From the top the deeper one goes towards the base the greater the base area becomes. The same applies to the step buy approach in a falling stock market swoon. The deeper the pull back the greater the rebound opportunity. When a pull back begins one does not know how deep it will go; but, to make the better money each buy step has to become greater as the pull back goes deeper. Generally, I plan for six to eight buy steps with the first one coming somewhere after at least a five percent dip has taken place. And, as the pull back deepens there becomes less risk with each buy step that is made according to the metrics of my market barometer. Thus, for me, this warrants a larger amount being invested into each buy step based upon the reduced risk theory. This has now become a geometric buying approach. I take my pool of money that I am willing to put to work and I plan out how much I'm willing to put to work at each planned buy step Then as the market declines every eight percentage points of separation (or thereabouts sometimes I may use five or six percentage points on the buy step separations) in the downdraft I put money to work. When the market bottoms and turns back upwards I have buy steps planned as well during the updraft until I have reached my average buy in percentage. At this point I stop buying, perhaps before then if I have exhausted my pool of money.
Although, this is not the only investment strategy that is found in my tool kit it is generally how I play market declines. This is one of the reasons that I carry a sizeable cash allocation within my overall asset allocation. My baseline asset allocation that I operate from is 20% cash, 40% income and 40% equity. Currently, I am positioned at about 10% cash, 45% income and 45% equity and will adjust accordingly as I feel warranted.
As noted above in my above post(s) I'm now seeing some fixed income investments starting to look attractive when compared to the earnings yield of stocks. In addition, one may want to compare the stock earnings yield to the five year total return of these funds as well. In doing this I'm finding that the five year total return for Pimco Income (PONAX) is about 4.3% and for Lord Abbett Bond Debenture (LBNDX) it is about 4.51%.
What does all this mean? For me, it means that stock valuations have become stretched relative to their earnings. Should the stock earnings yield continue to decline then, from my perspective, my multi sector income funds become even more attractive for near term opportunity and stocks less so.
Old_Skeet, your method is good but has lots of moving parts. Just an observation, not criticism
A typical rebalance achieves similar results when stock prices go down and you keep switching from bonds to stocks to keep the same asset allocation. That is a good way until a black swan shows up and every time you buy more stocks on the way down you keep losing more.
The question of timing occupied my brain for many years. I always want to be fully invested as long as I can. In the last 10-11 years, I was in cash for about 12 weeks, which means I was fully invested 98% of the time. Until 2008-9, when I was younger with a much smaller portfolio. I just stayed the course because my fund managers (SGENX,OAKBX,FAIRX) played it right. After I lost 25% in 2008 I decided that the only way not to lose is to set up a simple selling %. From 2009 and for the next several years, I would sell any stock fund I owned if it lost more than 6% and bought a bond fund. I would sell any bond fund that lost over 3% and searched for another more conservative fund. If I could not find any bond fund then I would go to cash. When stocks bottomed and rebounded, I only increased stocks using a pyramid up. That means that every time I buy more stock mutual fund the price must be higher than the previous one,
In 2018 at retirement, I made my selling criteria stricter. I only trade stocks short term (hours to days) using charts. I used bond funds most times. Any bond fund I own that loses more than 1% I sell and then I look for a better bond fund, if I can't find any I go to cash.
BTW, the above is probably too complicated. Stay fully invested and buy and hold is a good way for most investors
While my system might seem complicated ... but, when looking at the three main feeds of the barometer and understaning them ... it really is not complicated at all. The barometer spins off of a blended earnings feed which is comprised of both TTM earnings and forward estimates. This gives credit for what stocks have done and what they are anticipated to do. This feed is used to compute a blended P/E Ratio and from there an earnings yield. The second feed is a breadth feed which looks at the percent number of stocks that are trading above their 50 & 200 day moving averages. Following this feed gives me some insight as to how much upside might be left or are we topping out? Perhaps, starting to head downward? And, the third major feed is money flow feed. I find it important to know which way money is flowing (in or out) and by how much. All of the three feeds are scaled and when combined produce a barometer reading which is also scaled with readings ranging from extremely overbought to extremely oversold with fair value being in the middle.
With this, it is really quite simple when one gets down to understanding the nuts and bolts of the barometer of how it works ... and, the information that it generates has been quite useful to me. This information is then used to aid me in making calls that adjust my baseline asset allocation of 20% cash, 40% income and 40% equity with about 10% of the cash which can be moved around to overweight when felt warranted. Currently, as I write, I am overweight the income and equity areas of my portfolio by +5% each. I'm thinking, that this will soon change as I'm looking to trim equities back by 5% to their normal asset allocation of 40%. This is due to my belief that equity valuations are now streached relative to their current and nearterm earning's projection although money flow coming into the Index is presently good; but, short volumes are high.
Thanks again for the comment ... and, coming from you ... (for me) it speaks volumes.
I believe the barometer has a good value in accessing short term market movement which is difficult to achieve. Good work In the last several years I find Tony Dwyer to be pretty good at forecasting short term market movements. Yesterday has said the following (link)
In looking back though the thread I see where the last report was made on July 4th with a reading of 125 indicating that the S&P 500 Index was extremely overbought. Since then, not much has changed with the barometer reading; and, as of Friday July 17th it scores the Index with a reading of 121 reflecting that the Index remains extremely overbought.
Recently, Jim Cramer made a call based upon some charting that he believes we might be in for a pullback towards the end of July. We will see if this comes to be. For me, I'm also thinking that there is some near term downside coming.
Since last report ... I have reduced my equity allocation from about 45% equity to 40% equity and raised cash by a like amount. This now puts my asset allocation at about 15% cash, 45% income and 40% equity. From here I do not have any buy or sell activity planned; and, I await the next stock market pull back building cash from my portfolio's income generation. Most likely, I'll do a little equity buying should we get into a stock market pull back which would be a decline, for the Index, of -5% (3065) to -10% (2900) from its near term high of 3225. Currently, the Index is off it's 52 week closing high of 3386 by about -5% and is up off it's 52 week closing low of 2237 by just short of +45%. That is a strong run upwards, form the 52 week low, without a major pull back.
For me, a dip is a decline of up to -5%, a pull back is a decline from -5% to -10%, a correction is a decline of -10% to -15%, a downdraft is a decline of -15% to -20%, and a bear market is a decline greater than -20%.
Generally, stocks go soft during the summer ... so be cautious. I know, I am.
Hey @Old_Skeet. thanks very much updating us. Do you ever take a look at international stocks in your barometer? Its going to be really interesting to watch Europe and Asia as their economies are rebounding and getting back to work much quicker than the U.S. is because they have much better control over the virus. A lot of strategists are rebalancing towards Europe in particular for the 2nd half of the year.
Thank you for your question about how I follow the markets.
The barometer is not geared to follow the foreign markets as it follows the S&P 500 Index. However, the way I have my portfolio organized is by sleeves. I have three sleeves that are global in nature. Two are in the growth & income area of my portfolio and one in the growth area. All of the sleeves within the portfolio are set up in M* Portfolio Manager and are followed for performance as well as the funds contained in each sleeve. With this, I can tell what is moving and what is not by sleeve and by fund as well.
My three best performing sleeves ... One Month Leaders ... are my global growth sleeve +5.83%, domestic growth large mid cap sleeve +5.52% and my global growth & income sleeve +3.85%. The global hybrid sleeve is the laggard (of the global sleeves) at +1.82%; but, it is an income generating sleeve with a yield of 3.9%.
In comparison, my portfolio, as a whole (which includes my allocation to cash) has gained 2.14% over the past month and produces a yield of about 3.4%.
In addition, I have a compass that tracks a number of equity and bond etf's, domestic, global and foreign.
For my global compass the one month leaders are EEM +7.17% ... GSP +6.18% ... and, CWB +5.94%.
For my domestic compass the one month leaders are XLB +9.21% ... XLV +6.20% ... and, XLK +4.52%.
I'm thinking that any investor that wishes to actively engage the markets needs a way to follow the asset classes they wish to invest in. To do this I use my compass and my portfolio sleeve system as it provides data as to what is moving within my portfolio and what is not.
Generally, any equity ballast (or spiff position) that I might position into centers around the S&P 500 Index which the barometer follows.
Again, thank you for your question. I hope my answer has been helpful.
With this past Friday's market close on July 24th Old_Skeet's stock market barometer, which follows the S&P 500 Index, produced a reading of 129 which indicated, by the barometer's scale, an overbought reading for the Index. The last reported reading of 121 on July 17th reflected that the Index was extremely overbought. A higher barometer reading indicates that there is more investment value in the Index over a lower reading.
Generally, I will not open an equity spiff position until the barometer has reached a reading of around 160 or better; and, I start stepping out of a spiff postion with a barometer reading of 140, or lower. With this, we still have a ways to go before the Index becomes a buy for me.
My current asset allocation is about 15% cash, 45% income and 40% equity. I am overweight the income area by +5% because of low cash yields. My normal asset allocation is 20/40/40.
As of Friday market close July 31st not much has changed in the barometer's reading as the barometer produced a reading of 128 indicating that the Index is overbought. In checking some of the barometer's data feeds ... I thought I'd share some of the inputs that might be of interest for the S&P 500 Index. The dividend yield is listed at 1.82%, the earnings yield is found to be 3.45%, earnings for the Index (TTM) are listed at $115.55 and the (TTM) P/E Ratio is listed at 28.12. However and interestingly, I'm finding that the dividend growth rate is listed at 6.43%.
Because of the fairly strong dividend growth rate Old_Skeet has been repositioning on the equity side of his portfolio and increasing his exposure to good dividend paying mutual funds and decreasing his exposure in some growth areas. Remember, I am retired and my focus is to grow my income stream since I am in the distribution phase of investing while at the same time, as a secondary objective, continue to grow my principal to offset the effects of inflation.
With this, Old_Skeet is wanting to see better meterics before he becomes a buyer of equity ballast. And, with this, I am keeping on ... keeping on ... with my current asset allocation of 15% cash, 45% income and 40% equity. My normal asset allocation is 20/40/40. As you can see I am +5% heavy on the income side of my portfolio due to low cash yields and overvalued equities. On the equity side I'm 25% in the growth and income area and 15% in the growth area. In addition, my portfolio has an income yield of about 3.4% with a distribution yield (which includes capital gain distributions) of about 5%.
Funds that I benchmark against (all with dividend yield's in the 3.4% to 3.5% range) are Income Fund of America (AMECX), Capital Income Builder (CAIBX), and American Funds Conserative G&I Allocation Fund (INPAX). A fund that I'm seeing some interest in is Cloumbia Flexible Capital Income, CFIAX. CFIAX has performed inline with my benchmark funds and with a higher yield at 4.8%. It just might soon become my 12th fund in my hybrid income sleeve.
My three best performing funds for the month of July were SPECX +7.70% ... ANWPX +7.18% ... and, DWGAX +6.70%.
Have a grand weekend ... and, I wish all ... "Good Investing."
“My normal asset allocation is 20/40/40. As you can see I am +5% heavy on the income side of my portfolio...”
Thanks Skeet, Since you and I are in similar boats age-wise, risk-wise, I’ll share the allocation model I’ve used for the past 2 years now. Like yours, it’s a “sleep well” fairly conservative allocation. I won’t detail individual holdings, with the exception of the alternatives, as it’s a fairly ambiguous area.
25% Balanced funds 25% Global Income funds 25% Alternatives * 15% Cash / Speculative holdings ** 10% Real Asset funds
* Within the alternative sleeve in order of magnitude (largest to smallest): PRPFX, TMSRX, ABRZX
** With regard to the cash / speculative sleeve, my nominal position would be 100% cash. But currently about 30% of it is devoted to a couple speculative holdings: PIEQX and PRLAX. I’m accepting this added risk to help compensate for the extraordinarily low current interest rates and to take advantage of buying opportunities presented during the March-April meltdown. PRLAX, for instance, was down 50% YTD at the time of purchase. Currently off only about 25%.
NOT investment advice. Disclaimer follows:
“Persons attempting to find a motive in this narrative will be prosecuted; persons attempting to find a moral in it will be banished; persons attempting to find a plot in it will be shot. BY ORDER OF THE AUTHOR. Per G.G.,Chief of Ordnance” - Mark Twain
Thanks for posting your allocation and writing about how you portfolio is constructed. I'm going to study your alternative sleeve and see how this sleeve Xrays using a 50/30/20 weighting. Perhaps you would be willing to comment some more about it?
In looking at PRPFX it looks like it would be a good fit for my niche sleeve. It had the better downside and upsside performance over my current funds in the sleeve during the recent market swoon and the better returns out through 5 years after that the other funds have the advantage.
With this, I've now have placed it on my buy pending list awaiting better buying conditions as I just, for the most part, don't buy funds while they are at their 52 week highs.
I’m loath to say much more about PRPFX as I don’t want to appear to be promoting any particular fund or type of investment. Here’s a link that should bring up their allocation model with target weightings. LINK ... It’s those diverse weightings and emphasis in non-dollar assets that I think add to my overall portfolio’s stability over time. I once included the fund within my balanced sleeve rather than its current placement in the alternative sleeve. A case can be made either way.
Some reasons why you shouldn’t own it.
- The manager’s stock picking ability has been demonstrated over time to be inferior in comparison with many other fund managers.
- The fees appear excessive for a static allocation fund requiring minimal research, trading or managerial input. The assets held by the fund could be purchased at a lower cost individually and held to perpetuity.
- The fund seems to be jerked around by its investments in the precious metals. This leads to outsized fluctuations in NAV and erratic performance as investors tend to rush in when metals are rising and flee the fund when the price of metals tumbles.
The 39% YTD return for long duration zero coupon bonds is eye-catching. In seeking to enhance my cash allocation with some speculative plays last March I attempted to seek out the best risk / return possibilities in my judgment ... Sorry - But capital appreciation from long-dated “zeros” or other bonds isn’t something that comes to mind when I attempt to sort out relative risk-reward scenarios in the current financial environment. Not back in March. Not today. Others may arrive at different conclusions. -
PS - Thanks @Catch22 for linking the chart. You’re my #1 bond guy and chart guy here. I hope you were able to pocket some of those great returns from bonds the past few months!
@hank, as my CDs have matured and yield on CDs and MMs have gone to virtually nothing, I've also been changing "cash" into other holdings. But I've been keeping those other holdings on the conservative side. Nothing too speculative. Not reaching for yield since all my retirement money is in IRA and 401k. I'm just interested in steady, conservative, total return for this substitute for cash... with the understanding I'm also adding risk.
I've invested quite a bit of "cash" into 2 places, short term treasuries by an ETF, ISTB (Ishares 1-5 year duration) and put a substantial amount into a conservative alternative fund, MNWAX.
I used to own PRPFX years ago. As you probably remember it was one of the darlings of the board during and after the 2008 recession. By memory, I think the stocks it holds are geared towards energy which hasn't been in favor for quite a while. Always thought of it as a conservative play on gold.
Hi Skeeter, I know I've said this before but I'll say it again: I wonder why no VWINX in your portfolio? Surely I would think there would be a stall in the barn for this one. The yield not as good, maybe, but overall better, no? Also, with SPECX, I would also look at BFTHX, FBGRX, and my favorite, FIFNX. Again, a bit more aggressive, but they produce. I will now stop picking on you.....lol. By the way, the Dukester says, "woof!" Means, "Hi!"....lol. I was going to post something earlier, then changed my mind, so getting to that. Am looking at AMFFX right now and PRBLX again. Saw something in The Economist that made me think: which would cause more inflation? Borrowing at low rates or just printing money to cover debts? I wonder.....never thought about that. Also am going to start to sell tech.... I think starting with ROGSX, the loser that it is. New managers gave them a chance.....old school. I just think we're one vaccine away from a huge rotation. When..... is the question....and getting it right is big bucks, really. Also looking at ANZAX. Want to start moving elsewhere this fall.....not in a hurry.....willing to hold cash if I must. Too many bankruptcies coming corporate and private. I feel could get bad. No rush. Also this is why I own no small caps now. God bless the Pudd
Thanks @MikeM for the comment. I was aware of your past experience with PRPFX. I slowly established a position during 2014 and 2015 after most of the euphoria with gold had subsided. January 4, 2016 I converted it to a Roth (and discussed that here). Oil was in the dumps back than (bottoming at $26 later in January). I’m satisfied with the fund’s performance post-conversion. IMHO the fund requires a very long-term perspective and a certain personal philosophical leaning regarding money, risk, value - and markets as well. So it is definitely not for everyone.
Today it represents 11.6% of invested assets. It is the only fund I’ve chosen not to rebalance or take any distributions from in retirement. That’s intentional, as it will grow to a larger and larger portion of total investments over time. Umm ... I don’t know how large a % I’m willing to allow the fund to become. As I grow older and more conservative it may replace some riskier assets in the allocation model - particularly in the “real assets” & “balanced” sleeves room exists. I’d think 35% of total portfolio might work.
Yup - it has appeal as a lower volatility substitute for gold. That’s to the chagrin of us longer term investors who hold it through thick and thin.
Thanks for making comment and for your question(s).
For me to hold no load funds through my current broker I'd have to open another account which would have a wrap fee associated with it. Thus, I stick with what I can buy at nav and/or reduced sales charges. Thus, I hold no Vanguard funds.
With respect to SPECX. It is one of my longterm holdings and due to its organic growth it now has a sizeable unrealized capital gain associated with it; and, should I sell it I'd owe the tax man. In addition, I have it paired with another Alger fund AOFAX which is closed to new investors. Both of these funds have been good long term performers for me.
American Mutual (AMFFX) is a quality fund and one that I have owned, in the past. Years back, I did a nav transfer out of it into ANCFX and no longer hold American Mutual A share, AMRMX.
Although, I do not own ANZAX I own another convertible securities fund FISCX and at one time had a whole sleeve of convetible funds. I hold FISCX in my hybrid income sleeve. It has been a good performer for me through the years. A fund that I own that has about 1/3 of its assets in convertibles is AZNAX which pays out 7 cents a share per month. That equates to about a 7.3% distribution yield based upon current valuation.
I have six small mid cap funds. They are AOFAX, FKASX, KAUAX, LPEFX, PMDAX & SMCWX. I have no plans to eliminate any of them and may add to SMCWX and KAUAX in the future.
I always enjoy reading your comments and perspectives. This is what makes the MFO board so great by the many investment ideas presented where investors are finding success. One of the things that I find of great interest in investing is that there is no one right way for finding success.
Since, I have no long necks Bud Lights ... in the fridge ... I'll have to toast you with a Bud Light ... from the can.
Keep up the good work ... and, remember me to DUKE!. Smart dog.
As of market close today ... Old_Skeet's market barometer which follows the S&P 500 Index has experienced a softening in some of its feeds over the past few days. Enough for me to make this post. If you are short of cash within your portfolio and wish to position for a possible market dip of pull back then ... I'm thinking ... now might be a good time to raise some cash. No gurantees; but, I see the possibilty of a storm brewing. How big it might become is a guess.
For me, I'm about 15/45/40 (cash, bonds, stocks) so I'm sitting tight and not doing anything since I'm already position with enough cash to open an equity spiff if felt warranted.
Thx... We picked up GM, bought fordbonds ytm 7.07% rated bb+ never bankruptcybefore, added more to vanguard wellington and vang2045, also got new commodities-silver bars...
For mama portfolio - bought more fidelity2020 and fbnd bnd pci...she is complaining making too much from portfolio last yr and paying more to uncle Sam this yr lol...I guess something is heading right directions. I told her If something drastic happens to 2021 election may not be a rosey pictures in terms of capital gains /stocks bonds performance/and taxations changes 2021
It can't all go up in a straight line. Domestic Indices were up--- apart from R2000. My PRWCX special sauce was not so special today, though. My biggest holding: oversized, at almost 31% of portf.
Comments
We do have vanguard div etf, LSBRX, JNK, PGF preferred ETF, and O, Duke realty, several other small ones
spy has a small div
thankyou
kind regards.
If the stock doesn't pay a 3%+ dividend, it's got to appeal to me from a business perspective (ie, CNI) or be in a field i'm well-familiar with (ie I know tech) so I'm inclined to own some div-free tech stocks.
My late father use to say when the yield gets thin it's time to trim. Currently, I'm finding that the yield on the Index (currently 1.9%) is as low as it has been since 2-21-20 (weekly close) when it was at 1.79% with a reading of 3338. For me, I have already been there and done that.
I wish all ... "Good Investing."
Enjoy your 4th of July Holiday!
Old_Skeet
Yeah I think, too, things are a bit expensive. Have done some selling this week......
PRDGX: it's a tracker; FXIAX: is cheaper; GLFOX: too much Italy and England for me anymore. I don't see infrastructure money coming. FAMEX has only 32 holdings and has not recovered from its fall. Time to move on.
Old news:
Bought BFTHX, FBGRX. Sold value and bought these. Also bought FDFAX. Will hold 'til we get a vaccine. Also ECOLX is one I've been watching for a while. TEFQX had 31% cash, so I'm in.
God bless
the Pudd
p.s., In The Economist this week, a most excellent read called, "Like a Ton of Bricks." Also, happy 4th!
As I sold all funds to cash in February before I retired I was in all cash when the pandemic started. Moved monies to Schwab and have been slowly adding funds. Bought EGFFX, RPHYX, CPOAX, JENSX, PTIAX, SWAGX, GGSOX for a start. Still have 65% in cash for now.
Art
Lucky you, Big Guy! This longneck is for you! Like your growth funds. Not in bonds right now. Don't be in a rush to invest the cash. We're early in the recovery. Methinks you'll get shots at it as time goes on.
God bless
the Pudd
Thanks for stopping by and making comment.
I should explain a little about the yield metric. Years back investors did not have all the fancy dancy ways to measure the market. One metric that my late father used was he followed the yield on the stocks he owned. When the yields got thin it was usually that the stocks he owned were at, or towards, their 52 weeks highs ... if not setting new highs. With this, he would trim the position and await a pullback where the yield would again rise as the stock price fell usually through a seasonal trend pattern.
In looking back through my data that I keep on the S&P 500 Index the recent high yield on the Index took place on (week ending) March 20th at 2.53% with a reading of 2305 and the recent low on February 21st at 1.79% with a reading of 3338. With this week's close the yield on the Index is at 1.9% with a reading of 3130. With this, and from a yield perspective, the Index is becoming pricey. In addition, TTM earnings are reported to be falling ... not rising. Based upon the blended earnings approach that the barometer uses puts the P/E Ratio for the Index at around 24. With this, This the earnings yield computes to about 4.16%. In comparing the 4.16% earnings yield to the yield of some of my multi sector bond funds ... Well, the advantage is now with some of the multi sector income funds from this yield perspective. Take the widely held PONAX (Pimco Income) is producing an income yield of 5.67%. With this, the yield advantage now goes to some bond funds ... from, my perspective.
Should the Index reach a near term yield of 1.8% Old_Skeet will most likely trim his equity allocation back to it's baseline allocation of 40% equity from the current 45% equity. Not long ago, I trimmed from around 50% equity back to 45%. Remember, I bought the downdraft and when the updraft came this put me equity heavy from the upward price movement as the rebound progressed.
Take care ... and, again ... thanks for stopping by and making comment.
As for me, a 10% gain is all I can claim, & I'm still waiting for VTINX to get back to break even. The other 3 buys are on the plus side.
Did you increase your buy % as the market sunk. Example $1000 first buy , $2000 second buy , $3000 third buy ?
Stay safe & Enjoy the 4/th, Derf
Although, this is not the only investment strategy that is found in my tool kit it is generally how I play market declines. This is one of the reasons that I carry a sizeable cash allocation within my overall asset allocation. My baseline asset allocation that I operate from is 20% cash, 40% income and 40% equity. Currently, I am positioned at about 10% cash, 45% income and 45% equity and will adjust accordingly as I feel warranted.
As noted above in my above post(s) I'm now seeing some fixed income investments starting to look attractive when compared to the earnings yield of stocks. In addition, one may want to compare the stock earnings yield to the five year total return of these funds as well. In doing this I'm finding that the five year total return for Pimco Income (PONAX) is about 4.3% and for Lord Abbett Bond Debenture (LBNDX) it is about 4.51%.
What does all this mean? For me, it means that stock valuations have become stretched relative to their earnings. Should the stock earnings yield continue to decline then, from my perspective, my multi sector income funds become even more attractive for near term opportunity and stocks less so.
Stay Safe, Derf
A typical rebalance achieves similar results when stock prices go down and you keep switching from bonds to stocks to keep the same asset allocation. That is a good way until a black swan shows up and every time you buy more stocks on the way down you keep losing more.
The question of timing occupied my brain for many years.
I always want to be fully invested as long as I can. In the last 10-11 years, I was in cash for about 12 weeks, which means I was fully invested 98% of the time.
Until 2008-9, when I was younger with a much smaller portfolio. I just stayed the course because my fund managers (SGENX,OAKBX,FAIRX) played it right. After I lost 25% in 2008 I decided that the only way not to lose is to set up a simple selling %.
From 2009 and for the next several years, I would sell any stock fund I owned if it lost more than 6% and bought a bond fund. I would sell any bond fund that lost over 3% and searched for another more conservative fund. If I could not find any bond fund then I would go to cash.
When stocks bottomed and rebounded, I only increased stocks using a pyramid up. That means that every time I buy more stock mutual fund the price must be higher than the previous one,
In 2018 at retirement, I made my selling criteria stricter. I only trade stocks short term (hours to days) using charts. I used bond funds most times. Any bond fund I own that loses more than 1% I sell and then I look for a better bond fund, if I can't find any I go to cash.
BTW, the above is probably too complicated. Stay fully invested and buy and hold is a good way for most investors
Thanks for making comment.
While my system might seem complicated ... but, when looking at the three main feeds of the barometer and understaning them ... it really is not complicated at all. The barometer spins off of a blended earnings feed which is comprised of both TTM earnings and forward estimates. This gives credit for what stocks have done and what they are anticipated to do. This feed is used to compute a blended P/E Ratio and from there an earnings yield. The second feed is a breadth feed which looks at the percent number of stocks that are trading above their 50 & 200 day moving averages. Following this feed gives me some insight as to how much upside might be left or are we topping out? Perhaps, starting to head downward? And, the third major feed is money flow feed. I find it important to know which way money is flowing (in or out) and by how much. All of the three feeds are scaled and when combined produce a barometer reading which is also scaled with readings ranging from extremely overbought to extremely oversold with fair value being in the middle.
With this, it is really quite simple when one gets down to understanding the nuts and bolts of the barometer of how it works ... and, the information that it generates has been quite useful to me. This information is then used to aid me in making calls that adjust my baseline asset allocation of 20% cash, 40% income and 40% equity with about 10% of the cash which can be moved around to overweight when felt warranted. Currently, as I write, I am overweight the income and equity areas of my portfolio by +5% each. I'm thinking, that this will soon change as I'm looking to trim equities back by 5% to their normal asset allocation of 40%. This is due to my belief that equity valuations are now streached relative to their current and nearterm earning's projection although money flow coming into the Index is presently good; but, short volumes are high.
Thanks again for the comment ... and, coming from you ... (for me) it speaks volumes.
Cordially,
Old_Skeet
In the last several years I find Tony Dwyer to be pretty good at forecasting short term market movements. Yesterday has said the following (link)
In looking back though the thread I see where the last report was made on July 4th with a reading of 125 indicating that the S&P 500 Index was extremely overbought. Since then, not much has changed with the barometer reading; and, as of Friday July 17th it scores the Index with a reading of 121 reflecting that the Index remains extremely overbought.
Recently, Jim Cramer made a call based upon some charting that he believes we might be in for a pullback towards the end of July. We will see if this comes to be. For me, I'm also thinking that there is some near term downside coming.
Here is the link to Mr. Cramer's call https://www.marketwatch.com/story/cnbc-mad-money-host-jim-cramer-uses-this-chart-to-predict-the-exact-date-the-stock-market-could-hit-the-skids-2020-07-15
Since last report ... I have reduced my equity allocation from about 45% equity to 40% equity and raised cash by a like amount. This now puts my asset allocation at about 15% cash, 45% income and 40% equity. From here I do not have any buy or sell activity planned; and, I await the next stock market pull back building cash from my portfolio's income generation. Most likely, I'll do a little equity buying should we get into a stock market pull back which would be a decline, for the Index, of -5% (3065) to -10% (2900) from its near term high of 3225. Currently, the Index is off it's 52 week closing high of 3386 by about -5% and is up off it's 52 week closing low of 2237 by just short of +45%. That is a strong run upwards, form the 52 week low, without a major pull back.
For me, a dip is a decline of up to -5%, a pull back is a decline from -5% to -10%, a correction is a decline of -10% to -15%, a downdraft is a decline of -15% to -20%, and a bear market is a decline greater than -20%.
Generally, stocks go soft during the summer ... so be cautious. I know, I am.
Take care ... and, be safe.
Old_Skeet
Thank you for your question about how I follow the markets.
The barometer is not geared to follow the foreign markets as it follows the S&P 500 Index. However, the way I have my portfolio organized is by sleeves. I have three sleeves that are global in nature. Two are in the growth & income area of my portfolio and one in the growth area. All of the sleeves within the portfolio are set up in M* Portfolio Manager and are followed for performance as well as the funds contained in each sleeve. With this, I can tell what is moving and what is not by sleeve and by fund as well.
My three best performing sleeves ... One Month Leaders ... are my global growth sleeve +5.83%, domestic growth large mid cap sleeve +5.52% and my global growth & income sleeve +3.85%. The global hybrid sleeve is the laggard (of the global sleeves) at +1.82%; but, it is an income generating sleeve with a yield of 3.9%.
In comparison, my portfolio, as a whole (which includes my allocation to cash) has gained 2.14% over the past month and produces a yield of about 3.4%.
In addition, I have a compass that tracks a number of equity and bond etf's, domestic, global and foreign.
For my global compass the one month leaders are EEM +7.17% ... GSP +6.18% ... and, CWB +5.94%.
For my domestic compass the one month leaders are XLB +9.21% ... XLV +6.20% ... and, XLK +4.52%.
I'm thinking that any investor that wishes to actively engage the markets needs a way to follow the asset classes they wish to invest in. To do this I use my compass and my portfolio sleeve system as it provides data as to what is moving within my portfolio and what is not.
Generally, any equity ballast (or spiff position) that I might position into centers around the S&P 500 Index which the barometer follows.
Again, thank you for your question. I hope my answer has been helpful.
Old_Skeet
With this past Friday's market close on July 24th Old_Skeet's stock market barometer, which follows the S&P 500 Index, produced a reading of 129 which indicated, by the barometer's scale, an overbought reading for the Index. The last reported reading of 121 on July 17th reflected that the Index was extremely overbought. A higher barometer reading indicates that there is more investment value in the Index over a lower reading.
Generally, I will not open an equity spiff position until the barometer has reached a reading of around 160 or better; and, I start stepping out of a spiff postion with a barometer reading of 140, or lower. With this, we still have a ways to go before the Index becomes a buy for me.
My current asset allocation is about 15% cash, 45% income and 40% equity. I am overweight the income area by +5% because of low cash yields. My normal asset allocation is 20/40/40.
Thanks for stopping by and reading.
I wish all ... "Good Investing."
Old_Skeet
As of Friday market close July 31st not much has changed in the barometer's reading as the barometer produced a reading of 128 indicating that the Index is overbought. In checking some of the barometer's data feeds ... I thought I'd share some of the inputs that might be of interest for the S&P 500 Index. The dividend yield is listed at 1.82%, the earnings yield is found to be 3.45%, earnings for the Index (TTM) are listed at $115.55 and the (TTM) P/E Ratio is listed at 28.12. However and interestingly, I'm finding that the dividend growth rate is listed at 6.43%.
Because of the fairly strong dividend growth rate Old_Skeet has been repositioning on the equity side of his portfolio and increasing his exposure to good dividend paying mutual funds and decreasing his exposure in some growth areas. Remember, I am retired and my focus is to grow my income stream since I am in the distribution phase of investing while at the same time, as a secondary objective, continue to grow my principal to offset the effects of inflation.
With this, Old_Skeet is wanting to see better meterics before he becomes a buyer of equity ballast. And, with this, I am keeping on ... keeping on ... with my current asset allocation of 15% cash, 45% income and 40% equity. My normal asset allocation is 20/40/40. As you can see I am +5% heavy on the income side of my portfolio due to low cash yields and overvalued equities. On the equity side I'm 25% in the growth and income area and 15% in the growth area. In addition, my portfolio has an income yield of about 3.4% with a distribution yield (which includes capital gain distributions) of about 5%.
Funds that I benchmark against (all with dividend yield's in the 3.4% to 3.5% range) are Income Fund of America (AMECX), Capital Income Builder (CAIBX), and American Funds Conserative G&I Allocation Fund (INPAX). A fund that I'm seeing some interest in is Cloumbia Flexible Capital Income, CFIAX. CFIAX has performed inline with my benchmark funds and with a higher yield at 4.8%. It just might soon become my 12th fund in my hybrid income sleeve.
My three best performing funds for the month of July were SPECX +7.70% ... ANWPX +7.18% ... and, DWGAX +6.70%.
Have a grand weekend ... and, I wish all ... "Good Investing."
Thanks for stopping by and reading.
I am ... Old_Skeet
Thanks Skeet, Since you and I are in similar boats age-wise, risk-wise, I’ll share the allocation model I’ve used for the past 2 years now. Like yours, it’s a “sleep well” fairly conservative allocation. I won’t detail individual holdings, with the exception of the alternatives, as it’s a fairly ambiguous area.
25% Balanced funds
25% Global Income funds
25% Alternatives *
15% Cash / Speculative holdings **
10% Real Asset funds
* Within the alternative sleeve in order of magnitude (largest to smallest): PRPFX, TMSRX, ABRZX
** With regard to the cash / speculative sleeve, my nominal position would be 100% cash. But currently about 30% of it is devoted to a couple speculative holdings: PIEQX and PRLAX. I’m accepting this added risk to help compensate for the extraordinarily low current interest rates and to take advantage of buying opportunities presented during the March-April meltdown. PRLAX, for instance, was down 50% YTD at the time of purchase. Currently off only about 25%.
NOT investment advice. Disclaimer follows:
“Persons attempting to find a motive in this narrative will be prosecuted; persons attempting to find a moral in it will be banished; persons attempting to find a plot in it will be shot. BY ORDER OF THE AUTHOR. Per G.G.,Chief of Ordnance” - Mark Twain
Thanks for posting your allocation and writing about how you portfolio is constructed. I'm going to study your alternative sleeve and see how this sleeve Xrays using a 50/30/20 weighting. Perhaps you would be willing to comment some more about it?
In looking at PRPFX it looks like it would be a good fit for my niche sleeve. It had the better downside and upsside performance over my current funds in the sleeve during the recent market swoon and the better returns out through 5 years after that the other funds have the advantage.
With this, I've now have placed it on my buy pending list awaiting better buying conditions as I just, for the most part, don't buy funds while they are at their 52 week highs.
Old_Skeet
YTD.......
--- MINT = +1.15% (Pimco Enhanced short maturity, AAA-BBB quality)
--- SHY = +3.04% (UST 1-3 yr bills)
--- IEI = +7.35% (UST 3-7 yr notes/bonds)
--- IEF = +12.2% (UST 7-10 yr bonds)
--- TIP = +8.5% (UST Tips, 3-10 yrs duration, some 20+ yr duration)
--- LTPZ = + 24.1% (UST, long duration TIPs bonds
--- TLT = +27.3% (20+ Yr UST Bond
--- EDV = +36.4% (UST Vanguard extended duration bonds)
--- ZROZ = +39.2% (UST., AAA, long duration zero coupon bonds)
***Other, for reference, not AAA rated:
--- HYG = -.3% (high yield bonds, proxy ETF)
--- LQD = +9.8% (corp. bonds, various quality)
Balanced funds with properly positioned bond holdings have had great benefit to date to offset many equity positions which continue to struggle YTD.
Regards,
Catch
I’m loath to say much more about PRPFX as I don’t want to appear to be promoting any particular fund or type of investment. Here’s a link that should bring up their allocation model with target weightings. LINK ... It’s those diverse weightings and emphasis in non-dollar assets that I think add to my overall portfolio’s stability over time. I once included the fund within my balanced sleeve rather than its current placement in the alternative sleeve. A case can be made either way.
Some reasons why you shouldn’t own it.
- The manager’s stock picking ability has been demonstrated over time to be inferior in comparison with many other fund managers.
- The fees appear excessive for a static allocation fund requiring minimal research, trading or managerial input. The assets held by the fund could be purchased at a lower cost individually and held to perpetuity.
- The fund seems to be jerked around by its investments in the precious metals. This leads to outsized fluctuations in NAV and erratic performance as investors tend to rush in when metals are rising and flee the fund when the price of metals tumbles.
The 39% YTD return for long duration zero coupon bonds is eye-catching. In seeking to enhance my cash allocation with some speculative plays last March I attempted to seek out the best risk / return possibilities in my judgment ... Sorry - But capital appreciation from long-dated “zeros” or other bonds isn’t something that comes to mind when I attempt to sort out relative risk-reward scenarios in the current financial environment. Not back in March. Not today. Others may arrive at different conclusions.
-
PS - Thanks @Catch22 for linking the chart. You’re my #1 bond guy and chart guy here. I hope you were able to pocket some of those great returns from bonds the past few months!
I've invested quite a bit of "cash" into 2 places, short term treasuries by an ETF, ISTB (Ishares 1-5 year duration) and put a substantial amount into a conservative alternative fund, MNWAX.
I used to own PRPFX years ago. As you probably remember it was one of the darlings of the board during and after the 2008 recession. By memory, I think the stocks it holds are geared towards energy which hasn't been in favor for quite a while. Always thought of it as a conservative play on gold.
I know I've said this before but I'll say it again: I wonder why no VWINX in your portfolio? Surely I would think there would be a stall in the barn for this one. The yield not as good, maybe, but overall better, no? Also, with SPECX, I would also look at BFTHX, FBGRX, and my favorite, FIFNX. Again, a bit more aggressive, but they produce. I will now stop picking on you.....lol.
By the way, the Dukester says, "woof!" Means, "Hi!"....lol.
I was going to post something earlier, then changed my mind, so getting to that. Am looking at AMFFX right now and PRBLX again. Saw something in The Economist that made me think: which would cause more inflation? Borrowing at low rates or just printing money to cover debts? I wonder.....never thought about that.
Also am going to start to sell tech.... I think starting with ROGSX, the loser that it is. New managers gave them a chance.....old school. I just think we're one vaccine away from a huge rotation. When..... is the question....and getting it right is big bucks, really. Also looking at ANZAX. Want to start moving elsewhere this fall.....not in a hurry.....willing to hold cash if I must. Too many bankruptcies coming corporate and private. I feel could get bad. No rush. Also this is why I own no small caps now.
God bless
the Pudd
Today it represents 11.6% of invested assets. It is the only fund I’ve chosen not to rebalance or take any distributions from in retirement. That’s intentional, as it will grow to a larger and larger portion of total investments over time. Umm ... I don’t know how large a % I’m willing to allow the fund to become. As I grow older and more conservative it may replace some riskier assets in the allocation model - particularly in the “real assets” & “balanced” sleeves room exists. I’d think 35% of total portfolio might work.
Yup - it has appeal as a lower volatility substitute for gold. That’s to the chagrin of us longer term investors who hold it through thick and thin.
Thanks for making comment and for your question(s).
For me to hold no load funds through my current broker I'd have to open another account which would have a wrap fee associated with it. Thus, I stick with what I can buy at nav and/or reduced sales charges. Thus, I hold no Vanguard funds.
With respect to SPECX. It is one of my longterm holdings and due to its organic growth it now has a sizeable unrealized capital gain associated with it; and, should I sell it I'd owe the tax man. In addition, I have it paired with another Alger fund AOFAX which is closed to new investors. Both of these funds have been good long term performers for me.
American Mutual (AMFFX) is a quality fund and one that I have owned, in the past. Years back, I did a nav transfer out of it into ANCFX and no longer hold American Mutual A share, AMRMX.
Although, I do not own ANZAX I own another convertible securities fund FISCX and at one time had a whole sleeve of convetible funds. I hold FISCX in my hybrid income sleeve. It has been a good performer for me through the years. A fund that I own that has about 1/3 of its assets in convertibles is AZNAX which pays out 7 cents a share per month. That equates to about a 7.3% distribution yield based upon current valuation.
I have six small mid cap funds. They are AOFAX, FKASX, KAUAX, LPEFX, PMDAX & SMCWX. I have no plans to eliminate any of them and may add to SMCWX and KAUAX in the future.
I always enjoy reading your comments and perspectives. This is what makes the MFO board so great by the many investment ideas presented where investors are finding success. One of the things that I find of great interest in investing is that there is no one right way for finding success.
Since, I have no long necks Bud Lights ... in the fridge ... I'll have to toast you with a Bud Light ... from the can.
Keep up the good work ... and, remember me to DUKE!. Smart dog.
Take care ... Old_Skeet
Politics aside.
As of market close today ... Old_Skeet's market barometer which follows the S&P 500 Index has experienced a softening in some of its feeds over the past few days. Enough for me to make this post. If you are short of cash within your portfolio and wish to position for a possible market dip of pull back then ... I'm thinking ... now might be a good time to raise some cash. No gurantees; but, I see the possibilty of a storm brewing. How big it might become is a guess.
For me, I'm about 15/45/40 (cash, bonds, stocks) so I'm sitting tight and not doing anything since I'm already position with enough cash to open an equity spiff if felt warranted.
Have a good evening.
We picked up GM, bought fordbonds ytm 7.07% rated bb+ never bankruptcybefore, added more to vanguard wellington and vang2045, also got new commodities-silver bars...
For mama portfolio - bought more fidelity2020 and fbnd bnd pci...she is complaining making too much from portfolio last yr and paying more to uncle Sam this yr lol...I guess something is heading right directions. I told her If something drastic happens to 2021 election may not be a rosey pictures in terms of capital gains /stocks bonds performance/and taxations changes 2021