20 minutes to spare and time to update our blog.

On February 3rd when the Dow was down 300 points we sold our short positions in the Emerging Markets (EDZ) and Russell 2000 (TZA) as well as closing out our position in the 20+ leveraged Treasury Bond ETF (TMF) for some nice short term gains.   Those gains covered losses in what remaining equities we had and actually resulted in a net positive day for us.

And to defy a client who in jest wondered if I was practicing “voodoo” in their accounts by having their net worth rise on a big down day (Being Irish automatically excludes any Voodoo ability) I went back to the TZA hoping for continued downside in US Markets, it didn’t happen and we incurred a 7% loss, so there.

What have we done lately?   We continue to hold on to our municipal and taxable bond funds which account for approximately 40% of our assets.   I still believe, lurking out there in the future is a market sell off in the 10% to 20% range.   Eventually the S&P 500 has to touch the 200 day moving average which it hasn’t done since 2012.  2013 is the exception to the rule when it comes to revisiting the 200 day moving average.

However, new Fed chair Janet Yellen provided positive testimony to Congress about the state of the US economy and that stopped the selling last week.

We will be entering a short but strong seasonal period that should last into April.   Hence we took some cash off the sideline and added to our minimal stock positions.  But at most we’re only 50% invested in equities and 40% in bond funds, the remaining 10% is in cash.

Emerging markets have stabilized and that is providing strength to US large/multinational stocks which do quite a bit of business overseas.   This large stock strength is coming at some expense to the type of small stocks we prefer causing a bit of lag in our accounts versus the indices.   This is likely a short term phenomena.

While a market sell off can occur at most any time, seasonality still points to a peak in US stock prices in March/April 2014 where we can expect an approximate 6 months of net weakness.   So caution is still advised.

There will a very good fat pitch coming to us in the September/October time frame and that’s the pitch we want to be ready for.


No positions