Ocean Portfolio - my investment blog

December dividend income

2011-12-22T06:35:00.000-05:00

My December total dividend income in the IRA account is $2,968. The month of March, June, September and December which I will receive the most dividend payout from my stock holding and the rest of the months will be relatively smaller.

My goal for 2012 is to position my mid 6-digit figure IRA portfolio for a 3-5% growth and at the same time to collect 4-4.5% dividend income and it would be equal to $20,000+ for the year.

Here are my current core holding:

ABT
BND
CVX
ED
JPM
KO
MCD
MSFT
PFF
PM

I also added one mutual fund to collect 4+ % dividend. I think it should be it for the time being in preparing the year of 2012.

Wishing you all a Happy Holiday Season and a Happy New Year.

Ocean

Buy SPY at the market close today

2011-12-02T12:20:00.001-05:00

I initiated the buy signal on SPY at the close of the market today. I hope it will continue to catch the up trend at least for the rest of this year.

Ocean Signal on 12/02/211 at market close: Buy SPY with the hypothetical initial investment of $10,000.

Note: Information given here are for entertainment purpose. No financial recommendation is meant to be given here and you should conduct your own analysis before investing.

Ocean Signal Calls

2011-12-01T21:24:00.001-05:00

Two years ago I wrote an article in this blog talking aboutthe beating the performance of Decision Moose using weekly simple movingaverages. Of course my result from back testing couldn’t beat his published results.For those of you don’t know who is the person behinds Decision Moose, you canvisit William Dirlam’s web site at http://www.decisionmoose.com.

Just for fun, I decided to make my signal calls using availabletechnical indicators to track these calls going forward. I will concentrate onETF funds only and the funds will include SPY, IWM, EFA, DIA, QQQ, EEM, TLT,IEF, AGG etc. Similar to Decision Moose, I will choose one fund at a time andswitch to other fund when signal changes. The signal calls will be more frequent comparedto Decision Moose because I will be using charts with shorter time frames. Iwill make the first signal call in the next few days and will see how theresult will be at the end of next year.

Markets rebounded at the end of November

2011-12-01T16:28:00.001-05:00

The markets ended with an incredible huge rebound at the end of November and I will take it anytime.

My November total dividend income in the IRA account is $1044 and the portfolio is up 2.8% since mid Oct.

Sold call options expiring on Dec 17 are:

1. CVX
2. KO
3. JPM
4. MCD
5. MO
6. MSFT
7. PM

Hope to accumulate more shares with dividend reinvested and will see how it goes.

Hanging in there

2011-11-21T18:16:00.001-05:00

As the markets continue to drop, my IRA account balance is approaching to my mid October entry level. Have to say that I had a good run and I will continue to hold. I will wait for the bounce back and dividend payout going forward.

Rollover options to next month

2011-11-17T16:33:00.000-05:00

My IRA portfolio is doing ok despite the recent market volatility. I have collected about $1000 dividend payout since mid October and the dividend was reinvested back into the stocks without commission.I have closed all the covered options expiring tomorrow and roll it over to next month to collect more premium. So far it works as planned.New covered options expiring next month are:

1. MSFT
2. MCD
3. CVX
4. PM
5. MO
6. JPM

Added JPM in my portfolio

2011-11-01T18:53:00.001-04:00

The markets dropped big the last two days and I took an opportunity to buy some JPM shares and wrote a covered call option. I just missed the dividend payout last month so I have to wait for 2 more months then.

2011-10-30T08:18:00.000-04:00

October is about to end and it's has been the best October for the stock markets since 4 decades ago and I am glad that I am fully invested in my IRA account at this point. Every indicator shows that the market is on the way up from this point (S&P closed above 200 MA, VIX closed below 25 etc). Come Nov 1 after my ETF bonds such as IEF, AGG and TIP Ex-dividend date, I will reallocate most of it with stocks like MCD, KO and CVX to anticipate the year-end rally into 2012. At the same time, I will write some covered calls with these stocks which I already own to earn some extra income along with average of 3% dividend.

Sold covered call with MSFT

2011-10-15T10:23:00.001-04:00

Yesterday I sold 20 covered call of MSFT with strike price at $28 expires on Nov 19 for $.52 and collected $1040 before commission. My average purchase price for MSFT was $27 so I have some room to spare. MSFT will have ex-dividend on Nov 15 and I will collect $400 quarterly dividend. If it hits above $28 on Nov 18 and my call option gets taken out, I still make some nice profits from it. If it does not hit $28, I will write another call option for December.

Fully invested in my IRA account

2011-10-15T09:44:00.000-04:00

The rollover to my IRA account has completed and now I can purchase my favorite stocks for dividend income purpose. I just purchased 32 stocks as my entire portfolio and here is the core 12 stocks: ABT, AGG, COP, CVX, ED, IEF, JNJ, KO, MCD, MO, MSFT, and NLY. The entire portfolio will generate combined returns of about 4.5% annually and all dividends will be reinvested.Also, I will write some call options to generate extra income from stocks such as MSFT. One good thing about MSFT is that it has weekly options so I can keep writing out-of-money (OTM) calls every week if it falls in the right price range. If MSFT drops below my purchase price, I just sit there and collect my 3% dividend annually.

Two high tech companies with steady dividends

2011-09-20T07:05:00.000-04:00

These two high tech stocks which you may be interested. Both Microsoft and Intel are DOW components and these two companies have been paying dividends and continue to increase their dividends over the years.

Microsoft current yields is about 2.4% and P/E is 10. Although the stock has been trading in a tight range over the last 10 years (closed at $27.21 as of 9/20), the steady growth of dividend made the stock stand out comparing with IBM and HPQ. IBM pays 1.7% dividend and P/E is 14, and HPQ pays 2.0% with P/E of 5.38.

Intel is one of the leader in the Semiconductor industry. The chipmaker may not have future surge consumer demand for its CPUs like it was back in the 80s and 90s. The near term demand could still be rough but it continues to lead the CPU market over AMD in PCs and laptops. Currently, Intel is paying 3.8% dividend with P/E of 10 and the new expected Microsoft Windows 8 release may spark some attention to this giant chipmaker. Intel closed at $21.53 on 9/20.

Established Bull Put Credit Spreads

2011-09-16T16:36:00.000-04:00

Established paper trade with a pair of put credit spreads:

1. IWM at $71.80
    Sell put IWM 64 @ .18 expires on 9/23
    Buy put IWM 63 @ .09 expires on 9/23

    Credit: $.09
ROI before commission: .09/1 = 9%

2. SPY at $121.09
    Sell put SPY 110 @ .19 expires on 9/23
    Buy put SPY 108 @ .13 expires on 9/23

Credit: $ .06
ROI before commission: .06/2 = 3%

NFLX bull put spreads options got hammered yesterday

2011-09-16T07:53:00.002-04:00

Recently I came across with an option trading strategy named "Vertical Bull and Bear Credit Spreads". The credit spreads would look like this.: I would start with a position in buying and selling the same underline equity options with two different strike prices and same expiration date. By doing this, I created the spread positions. The positions would be either Call or Put but both would be on the same side. If the price I receive on the sell option is more than the cost that I pay for the buy option, I immediately receive credit in my account. I would profit from this credit if both options expire after the expiration date. This is one of the method I just learned in using options to generate steady income.

I picked up a few stocks such as AMZN, APPL, IBM and NFLX last Friday and paper traded with the Bull Put Spreads hoping the general markets would go up this week. (Bull Put Spreads: Sell a put with near closing striking price and buy a put with lower striking price and receive credits from the difference in prices from these two options).

Everything was going well towards the market open yesterday. Howerver, the positions I established on 9/9 for NFLX was to Sell 10 Puts NFLX 175 at $.66 expires on 9/16, then I bought 10 Puts NFLX 170 at .45 expires on the same date. The stock was trading at $208.53 at the time and I received a credit of $0.21 which was equivalent of $210 ($0.21 x 1000 shares) before commission. I had about 16% cushion on this (208 - 175)/208 = 16% and I thought I would be fine with 1 week left that it will expire on 9/16 (today). Sure enough NFLX was down about $33 before the market open with "bad bad news" yesterday and continued trading in that range during the day and closed at $169.25. So basically I would lose the $5 delta per share in this spreads position if the closing price of NFLX remained under $170 today. It would translate to a $5000 lost ($5 x 10000) . By trying to make $210 and lose $5000 - $210 = $4790, this is a risky business. Well, fortunately this was still a paper trade and I will continue to study more in this area.

Core holding in portfolio

2011-09-14T13:01:00.000-04:00

The following stocks and ETFs will be part of my portfolio for dividend income and the combined average yields would be 4.0% as of today.

1. ABT - 3.8% (annual dividend)
2. AGG - 3.30%
3. CVX - 3.30%
4. ED - 4.3%
5. HYG - 8.06%
6. IEF - 2.77%
7. JNJ - 3.6%
8. KO - 2.7%
9. MCD - 2.8%
10. MO - 6.20%

Stay in cash since last post

2011-09-13T08:52:00.000-04:00

The major markets have not been doing well entering the 2nd half of July and continued performing poorly except commodities. The simulated Ocean ETF portfolio is still in cash.

I am retiring as systems engineer this Thursday (September 15) after 30 years of working in this field. I am looking forward to do something else and at the same enjoy my retirement. From this point on, I will spend my time in managing my own portfolio by following the stock markets and spend more time with my family.

In managing my own portfolio, I will divide it in the following areas.

1. Dividend income generated from stocks and ETFs from my IRA account.
2. Position, Swing and/or Intra-day trades from my regular account.
3. Options play for added income purpose.

I think it will keep me busy.

Nice gains for the last 5 days in a row

2011-06-30T17:31:00.000-04:00

The markets regained the upward momentum the last 5 days and my portfolios were bounced back from the loss column. I decided to close all positions at today close and re-examine the strategy for the rest of this year.

In order to make it easier for me to run this blog, I decided to eliminate all the other portfolios but just to keep the Ocean Portfolio for simplicity. I will apply mixed strategies for entry and exit points. These strategies still are based on technical indicators which are available on any of the financial and charting sites such as Yahoo, Stockcharts etc.

The Ocean Portfolio was up about 1.8% as of today. It lagged the major indexes but it's all fine with me as an experiment. The rest of the eliminated portfolios were also doing fine and all achieved some small gains.

The Ocean Portfolio is all cash now and will see how the 2nd half of the year will do.

Out all positions before the close today

2011-06-30T12:45:00.000-04:00

I have not updated the blog for a while and let the positions sit there. The markets have been swinging up and down lately and there is no clear direction where the market is heading. Today is the end of first half of 2011 and I will close out all the positions by taking the advantage of the recent market run up. I will evaluate and determine what my next move will be.

Ready to take the long position again

2011-02-25T06:39:00.000-05:00

I have been waiting for the markets to pullback since the end of January and now seems this is the time to get back in after a nice pullback the last few days. The overall markets in my opinion is still in good shape at least for the next few months. I will place the long position of selected ETFs in the portfolios at the market close today.

ETFs that I am looking at for Long position included: SPY, IWM, EFA, EEM, ILF, GLD, SSO. For pair trading I will close out the current position and go Long with TLT and hedge with PST (inverse) as I think the interest rate will be kept at the current level for a while.

Initiated TBT and IEF bond pair

2011-01-27T07:32:00.000-05:00

Re-enter the TBT and IEF bond pair with half of the portfolio size as the technical indicators for TBT showed sign of improvement. The RSI and Williams %R crossed above the mid point line which indicated there is a potential upward momentum for TBT. TBT is the 2X inverse of TLT.

Expand Bond pair trading to ETF Pair Trading

2011-01-22T10:43:00.000-05:00

On the Bond Pairs Trading Portfolio, I realized that I may miss out some other ETF potential trades if I just wait for the bond pairs signal. Therefore, I expand it to other ETF pairs in order to create more opportunity. ETF pairs that I am looking at are TNA, TZA, FAS, FAZ, SSO, SDS, SPY, SH and others. The portfolio will include 1x, 2x, and 3x leverage pairs and it is now named ETF Pair Trading. Let see how it plays out.

Cash out on TBT and IEF pair

2011-01-20T21:16:00.000-05:00

Closed the position on TBT and IEF pair with some profits. Will wait for the next entry signal.

Took profits with first sign of pulling back

2011-01-19T18:57:00.000-05:00

S&P 500 may hit some resistance when it reaches to the 1300 level and can cause some short term pullback. I took profits on three portfolios except the bond pair. I will wait for the next signal to enter the new positions.

Continue to hold SSO

2011-01-17T22:41:00.000-05:00

Major markets continued to be strong last week but we may be in the over bought territory and pull back is way over due. Should there be any sign of weakness, it may be time to lock in some profits. Until then, enjoy the ride.

Added SPY shares as momentum picked up

2011-01-12T08:20:00.000-05:00

Added SPY shares on Ocean Portfolio and TSP Portfolio as momentum picked up again

Initiated the Bond Pair with TBT and IEF

2011-01-12T08:06:00.001-05:00

The TBT and IEF pair looked pretty good as interest rate may go up in the future. The inverse 2X TBT can be benefited from it where the IEF just to hedge its position.

Sold ETF losers

2011-01-10T19:46:00.000-05:00

Sold EEM, EWZ and VWO at the close today to cut the loss small.

Click here for:

Ocean Portfolio Performance

Took some profits off the Bond Pairs

2011-01-09T08:44:00.000-05:00

Took profits from the ProShares UltraShort Lehman 20+ Year Treasury (TBT) and the iShare Barclays 7-10 Year Treasury Bond (IEF). I will wait for the next signal to get back in.

Click here for the Bond Pair performance spreadsheet:

Bond Pair Performance

IWM and EFA looked weak on the TSP portfolio, took small loss and liquidated it.

Click here for the TSP portfolio performance spreadsheet

TSP Portfolio Performance

Happy New Year and Happy Trading in 2011

2011-01-01T12:56:00.000-05:00

I started two portfolios in this blog with one focuses on a 2 times leverage of SSO and SDS and the other focuses on the bond pairs trading. These ETF bonds are TLT vs PST (2x inverse) and TBT (2x inverse) vs IEF. The reason that I choose reverse is that it can be traded in a retirement account where short trade is prohibited in this type of accounts.

The pairs trading will be traded with a long and short pair in the interest rate ETF bonds. I only chose the TLT (iShares Barclays 20 year treasury) vs PST (ProShares Ultra Short Lehman 7 - 10 year bond) and the TBT (ProShares Ultra Short Lehman 20 Year treasury) vs IEF (iShares Lehman 7 - 10 year treasury). The reason I chose the inverse ETF instead of short is that it can be traded in a non-margin retirement account and not paying dividend on the shorts. The pair will be traded in a non-correlated fashion comparing with the equity markets but the pair itself is highly correlated. This is to be less risky because of the nature of the correlated long and short pair in theory will go from convergence to divergence, and to convergence again from time to time as it is referred to "reverse-to-mean". The profits will be made when the pair reverses to its normal spread. For detail information on pair trading, reader can google pair trading and there are tremendous info related to pair trading or pairs trading on the internet.

As of 12/31/2010, all portfolios are fully invested based on my observation that the overall market will continue to trend up in a near term. The NYSE Advance and Decline issues indicated that this is the case at the moment. See chart below, as long as the $NYAD index stays above the 20 and 50 EMAs, the portfolios will remain the current positions.

Below is the chart on NYSE Advance and Decline Issues which indicated that the upward momentum is still strong.

New start for the New Year

2010-12-18T10:12:00.000-05:00

In order to tailor to the new format using $100,000 as an initial investment portfolio, I deleted the 2010 portfolios and started 2 new one. Needless to say the portfolios in 2010 resulted a loss and that's what the experiment was about - learn from the mistakes, march forward and not to repeat the same mistake again. The mistake was not following the stops loss strategy properly and led to the bigger loss in certain positions. On top of that I had an error with the calculation on the trailing stop loss formula on the spreadsheet.

The 2011 portfolio will start with $100,000 each on the Ocean Portfolio and TSP Portfolio. Daily moving averages cross-over will be the primary indicators as the entry point. (refer to the strategy listed on the lower right-hand side of the page). Stop loss trigger will be using a combination of ATR, RSI, ADX and Moving Averages indicators.

There were small positions in both portfolios to start off the new setup.

Happy trading and have a wonderful New Year.

Ocean

SPY looks good - up trend

2010-12-16T22:19:00.000-05:00

20 EMA is above 50 EMA, the trend is up

Year 2010 is coming to the end

2010-12-16T21:55:00.000-05:00

December is half gone and the year of 2010 will soon be over. The overall stock market is considered to be good following last year's huge gain. The SPY of ETF index fund which is equivalent to S&P 500 posted a gain of 7.8% year-to-date. Meanwhile my first year Ocean Portfolio using ETFs as the investment portfolio has been disappointed due to my improper used of stops and subsequently let the loss accumulated.

In coming year, I will continue to use moving averages with cross-over as the lead indicator for trend following. I will use daily average instead of weekly and I will apply the ATR, RSI, ADX indicators as extra filters for profits and stops as opposed to the fixed percentage that I used this year.

In general, my method is as follow: the daily moving averages (DMAs) for trending following will be 20 and 50 days, when DMA-20 crosses above DMA-50, the trend is up. When DMA-20 crossed below DMA-50, the trend is down. I will start off with $100,000 each as the hypothetical portfolio for two portfolios I am tracking. (1) Ocean Portfolio and (2) TSP portfolio - the government retirement system for federal employees. I hope these two portfolios will achieve better results in 2011 than this year.

New positions established as of Oct 1 market closed

2010-10-02T08:34:00.000-04:00

The general markets began to show sign of strength indicated from the moving averages and momentum indicators such as RSI. By following the market trends, new positions are established as follow:

Ocean Portfolio:
1. Long: EEM 20%
2. Long: EWZ 20%
3. Long: EFA 20%
4. Long: VWO 20%
5. Long: TUR 20%

TSP Portfolio:
1. Long: IWM 50%
2. Long: EFA 50%

(out AGG 100%)

Trader's Pick:
1. EEM 50%
2. TUR 50%

Ocean Port and Trader Pick port go cash

2010-08-29T22:11:00.000-04:00

Sold all inverse ETFs in Ocean portfolio and Trader Pick portfolio. YTD returns on both portfolios are negative. I will wait for a clear setup to re-enter.

Still holding the same positions for all simulated portfolios

2010-08-14T09:37:00.000-04:00

It's been a while for me to add new posts here. Currently the three portfolios are still holding the same short positions except the TSP port is in AGG ETF bond. My short experiment in this blog is frustrated and the results showed that it is difficult to go long and reverse to short using the weekly chart by following the trend with crossover moving averages unless the trend exists for a rather long period of time. It doesn't feel good no matter when it is either long or short but the markets go against the holding positions either way.

To play it more conservative in the Ocean Portfolio, I may try using the ETF bonds such as AGG, TLT or SHY when the trend is down and get back into long ETFs when the trend is up. As for now, I am betting the market is trending down for now and so I am holding the shorts until the next signal shows.

A reader had asked me if the EFZ in the Ocean Port hit the stop yet. It did but I was holding it because I used the other 50% of ETF (SH) for gauging the 12% stops which the entire port did not hit the 12% yet.

I had been looking at the pairs trading strategy which I will try it using the Trader's Pick portfolio as an experiment. Basically "Pairs trading" is buying long and selling short with a pair of equities at the same time where they are highly correlated. You get in the position when they are diverged away from each other and you close out all positions when this pair "Return to mean". By doing that, you can profit the difference in gain and loss from the pair. Pair trading sometimes is referred as "Market neutral" with the principle of hedging. If you want more info or definition about Pair Trading or Market Neutral, please google it and it will give you much more information on this subject. It is profitable and stable than other trading strategies. So they say ...

Ocean

Added remaining 50% on EFZ (inverse)

2010-06-06T19:42:00.000-04:00

S&P 500 index closed below its major signal of 50 weekly moving average as closed of June 4. It indicated to me that the market may still be going down more. I added the remaining 50% capital into the inverse EFZ in the simulated Ocean Portfolio.

Buy 50% Inverse ETF at closing today

2010-05-28T12:39:00.000-04:00

Position 50% inverse ETF in the Ocean portfolio at the close of the market today

Market ended with late day rally on Friday but it is not enough ..

2010-05-23T08:45:00.000-04:00

The market came back in the black on late Friday but the damage had been done for all 3 simulated portfolios. YTD returns of these portfolios are in the negative territory now.

The overall markets seemed to be heading downward according to the moving average indicators. The S&P 500 Index closed below its 39 weekly moving average (WMA). The Ocean Portfolio will initiate some inverse ETFs buy once the 4 WMA crosses below the 39 WMA. The TSP portfolio is now sitting on the AGG bond index and the Trader's Pick portfolio is holding the PSQ (inverse) as of end of 5/21.

No position now except AGG in TSP portfolio

2010-05-20T08:10:00.000-04:00

I will update the portfolios over the weekend.

Major markets continue to slide

2010-05-19T06:06:00.001-04:00

The market trends began to switch downward. I will liquidate all long positions in 3 simulated portfolios today and look for the short entry in the Ocean and Trader's portfolios. As in TSP portfolio, I will initiate a AGG buy.

Trailing stop-loss triggered

2010-05-09T22:28:00.000-04:00

The week of May 3 was tough for the markets. Some of the holdings in three simulated portfolios had been triggered and resulted in an unpleasant loss.

hit trailing stops

2010-05-06T23:20:00.000-04:00

Most positions hit the trailing stops today. Will get out the these positions at the Friday closed tomorrow.

Continue to hold

2010-05-03T07:18:00.000-04:00

Despite the recent drop of the markets, I continue to hold the current position of all three simulated portfolios.

Markets regained its upward momentum

2010-04-24T06:18:00.001-04:00

After a slight pulled back, the markets regained its strength and continued to move upward. All 3 simulated portfolios are now fully invested.

Long IWM in Trader's Pick portfolio

2010-04-20T22:12:00.000-04:00

Long 50% IWM in Trader's Pick portfolio

Just took some short term profits

2010-04-17T07:24:00.000-04:00

I decided to take some short term profits anticipating the short term pull back. Will go long again in a few days or so.

Will take some profits at the close of the markets today

2010-04-16T12:18:00.001-04:00

Will sell all holding of the 3 simulated portfolios at the close of the markets today

Markets finished strong last week

2010-04-04T22:31:00.000-04:00

The trend is still up and the month of April is historically good for stocks. All 3 simulated portfolios are still long.

Continue to hold the current position

2010-03-28T20:01:00.001-04:00

Holding the long position for all 3 simulated portfolios. The general markets seemed to have room to move upward.

Long EWW on Ocean Portfolio

2010-03-11T19:05:00.002-05:00

Sold FCX and KOL with some profits and replaced it with EWW. I believe EWW will trend upward faster than FCX and KOL.

The general markets regained its momentum to move upward. All three simulated portfolios are fully invested now and will see how it plays out.

(click image to enlarge)

Long EWZ on Trader's Pick Portfolio

2010-03-11T18:24:00.000-05:00

Took profits on IYR and replaced with EWZ. I think IYR is still good but EWZ may move faster than IYR in a near term.

Long EFA and IWM on TSP portfolio

2010-03-06T17:11:00.001-05:00

The moving averages showed upward trends on both the daily and weekly charts. Sold all AGG and replaced with EFA and IWM with 50% each.

Long ILF in Trader's Pick portfolio

2010-03-04T18:59:00.001-05:00

Sold USO for a small profit and replaced with ILF.

Mark Mobius' view on good investing

2010-02-28T07:59:00.001-05:00

Mark Mobius is known as a legend in the emerging markets investment and he has spent over 30 years in Asia continued seeking every opportunity in investing in this area. I recently found that he has an active blog and it is worth to mention for those of you are interested. The link is http://mobius.blog.franklintempleton.com/

One of his blog stated that he believed it needed to be optimistic in investing in the emerging markets and the personal qualities are the building for good investing.

"In emerging markets investment, I believe it is necessary to be optimistic. While one can certainly learn numerous technical skills that help in making investments or managing a portfolio, a large percentage of investing is still psychological. Both buyers and sellers act on a combination of instinct, information and logic. The development of certain personal characteristics could play a key role in contributing to your investment success."

Click here for the full story Personal Qualities

Long on IYR in Trader's Pick Portfolio

2010-02-27T06:51:00.001-05:00

Established a long position on IYR as the daily chart triggered a buy signal.

(click image to enlarge)

Long on USO in Trader's Pick Portfolio

2010-02-26T07:39:00.001-05:00

Initiated a long position on USO with 50% of the Trader's Pick portfolio. The moving averages on the daily chart triggered the buy signal. The holding period may be just a few days or so since this portfolio is to be designed as swing trade.

(click image to enlarge)

New Long Postion Established

2010-02-19T20:10:00.002-05:00

The weekly moving average cross-over had triggered a buy (long) signal on the Ocean Portfolio. Here are the new positions for 4 ETFs at the market closed today:

1. EWZ
2. ILF
3. FCX
4. KOL

I am watching the EFA chart for its entry on the government TSP (401K equivalent) retirement system. When it triggers, I will replace the AGG with EFA.

The inverse SH on the Trader's Pick portfolio was sold with a loss as I anticipated the market may move higher from this point. The desired ETFs that I am watching have not been triggered yet. The watch list included:

1. EFA
2. EWZ
3. ILF
4. FXI
5. TUR
6. EWY
7. ECH
8. EEM

(click image to enlarge)

Do Top Endowments follow Ivy Portfolio strategy ?

2010-02-14T23:18:00.002-05:00

I am a great fan of Mebane Faber's research paper titled "A Quantitative Approach to Tactical Asset Allocation" using monthly moving averages to enter and exit an underline stock position. It was first published in the Spring of 2007 and his research was so brilliant that it attracted a lot of followers including myself. I didn't know about his paper until late last year and I wish that I could find out about it earlier so I could avoid the "Crash of 2008".

Faber's Ivy Portfolio book was published in early 2009 which he further described the detailed technique and asset allocation using ETFs with different sectors and how to invest like the Top Ivy League Endowments. The technique is definitely a winner disregard what the Ivy Leagues' investment approach will be.

For curiosity, I looked at one of the Ivy League endowment's EDGAR Report filed by Yale University Investment managed by David Swensen. As of Dec 31, 2009, the endowment's stock portfolio contained 10 equities as follow:

1) BIOD, 2) EFA, 3) GRIF, 4) INFN, 5) OEF, 6) OPEN, 7) SPY 8) TDI, 9) WWW and 10) XTXI

The portfolio contained 3 ETFs, 3 stocks with price under $10 and 1 stock that was issued in mid 2009. It seemed that not all equities managed by Swensen following Faber's Ivy Portfolio using 10-month moving average for either entering or exiting of a position. But it really doesn't matter, I am sure David Swensen knew what he is doing with his investment disregard it was an Ivy Portfolio strategy or not. Again, the Ivy Portfolio by itself already has great merit and one should not ignore as stock investor.

Set trailing stops from 10% to 12%

2010-02-14T10:06:00.001-05:00

I realized that most of the ETFs that I am tracking are pretty volatile in terms of price movement. I've been experimenting with different trailing stop setups and found the 12% stops resulted a better outcome than the 10% with fewer transactions. So I re-adjust it to a 12% trailing stop and will see how it plays out.

Potential buy for these ETFs from the weekly charts

2010-02-14T09:57:00.000-05:00

The major indexes had some gains this week as the DOW rose 0.9%, the NASDAQ rose 2% and the S&P 500 made 0.9%. The gains were not much but at least it stopped the prices from falling as it was in the last few weeks.

I looked at the weekly charts and found that there are few ETFs which may be a potential buy as a long position in the Ocean Portfolio. These are EWZ, ILF and EFA.

EWZ and ILF are closed above the weekly moving average MA-39 with the MA-4 is above MA-39 and the EFA is also approaching it. To determine the right time to re-enter as the long position, I basically use MACD, RSI and other filters to confirm my entry point. As for now, these three ETFs will be on the close watch list.

(Click image to enlarge)

Ocean Portfolio is in cash as of Friday closed

2010-02-05T18:45:00.000-05:00

It's been a pretty tough 2 weeks for the Ocean, TSP and Traders Pick Portfolios. All selected ETFs finally hit the protective stop loss targets and were sold out. The Ocean Portfolio is in 100% cash now but after a total loss of 9.14% when I began tracking on 12/11/2009. The other two portfolios were not doing that well either. But with stop loss already established, the damage could be control in a reasonable manner.

Well, I will wait for the next entry point to get back in. It really doesn't matter either its a Long or Short as long as the trend is established noticeably with the moving averages. Have a nice weekend.

Markets continue to drop

2010-02-05T05:48:00.000-05:00

DOW dropped 286 points and S&P 500 lost another 34 points on Thursday. TUR has been stopped out on the Traders Pick portfolio based on the daily closing price dropped below the MA-39 moving average. I initiated an inverse SH (Short S&P500 ProShares) purchase with 50% of the portfolio and tried to catch the near term down trend market.

Set trailing stops to 10%

2010-02-02T18:29:00.000-05:00

With some of the more volatile ETFs such as EWZ, ILF that tend to have deeper price fluctuation, it may need to increase the trailing stops higher to avoid the whipsaw condition. I changed the trailing stops from the current 8% to 10% to see how well it will adjust to this situation.

EFA weekly chart

2010-01-30T18:28:00.000-05:00

The EFA weekly chart showed MA-4 crossed below MA-18 and the closing price is near the MA-39. The candle bars from the last two weeks looked pretty nasty. However if this position was entered in May 2009, there should be some healthy gains even it got stopped out this week.

(click image to enlarge)

Markets retracement is occuring

2010-01-30T17:40:00.001-05:00

Both Emerging Markets and International ETFs got hit pretty hard and hit its 8% stop loss from its entry. The EFA weekly moving average MA-4 crossed below MA-18 and is approaching MA-39. EWY MA-4 is approaching its MA-18. As of Jan 29, both ETFs were stopped out based on the 8% trailing stop.

Currently only TUR with 20% of the Ocean Portfolio is still on hold and 80% is in cash. I will continue to observe these moving average charts to determine what my next move will be.

The TSP portfolio suffered the same way that EFA is stopped out and I replaced it with 100% AGG.

Traders Pick still holds 100% TUR as of now.

EFA and EWY hit the daily stops

2010-01-28T19:07:00.002-05:00

The DOW dropped another 116 points and S&P 500 lost 13 points. Both EFA and EWY hit the 8% stops at the market closed on the Ocean Portfolio. Normally the stop applies to the weekly chart which follows the market closed of the week (Friday closed). I will wait until tomorrow market closed to take action if appropriate. At this point, it doesn't look good but I just stick to my rule.

What a week for the markets

2010-01-24T10:38:00.001-05:00

This week had been tough for the major markets. S&P 500 dropped more than 44 points from 1136.03 to 1091.76 with a 3.9% loss this week. The emerging markets dropped even more. Some of the ETFs in the Ocean Portfolio had been stopped out with a 8% stop.

Normally the Ocean Portfolio will take the signal at the end of the week with the weekly chart but I took the stops with the daily signal seeing that the downward momentum on these ETFs were stronger such as EWZ. EFA is also near the trailing stop price and will see how it plays out.

(click image to enlarge)

Stopped out on EWZ and ILF

2010-01-21T18:15:00.000-05:00

Both EWZ and ILF hit the 8% stop loss today from its entry and both ETFs were out at the market closed. Keep the cash on the sideline for now and rebalanced the portfolio with proportional ratio of 20% each for easy calculation. Will continue to monitor the market trend.

Add TUR in Ocean Portfolio

2010-01-20T19:26:00.000-05:00

Sold FXI and added TUR with 20% in the Ocean Portfolio at the market closed today. Close price of TUR was $58.89. FXI resulted with a small loss of 1.12%

Sell FXI at the close today

2010-01-20T07:00:00.000-05:00

In my simulated Ocean Portfolio, I will sell all FXI at the close of the market today which is equal to 20% of the portfolio. FXI is near the 8% trailing stops since the acquisition on 12/11/2009.

Sold FCX in Traders Pick Portfolio

2010-01-19T21:20:00.000-05:00

Sold FCX for a 3.42% gain and started a new position with TUR on 1/19/2010

Moving Average Crossover Index - MACI

2010-01-18T12:14:00.002-05:00

What is Moving Average Crossover Index (MACI) ? You may say that you'd never heard of it. You are correct that the MACI term does not exist even I tried to google it. I guess I just made it up and created a new acronym.

My definition of MACI is the as follow:

MACI = (FastMA - SlowMA) / SlowMA * 100

Example:

Let's use FCX with the daily chart and identify the numbers of the simple moving averages at the closed of Jan 15, 2009 using MA-4 (4 days) and MA-39 (39 days).

The numbers are: MA-4 = 85.08, and MA-39 = 83.34.

Then use these numbers and plug in the follow MACI equation I created it (I am sure other people have been using this method and nothing is new)

MACI = (MA4 - MA39) / MA39 * 100

maci = (85.08 - 82.15) / 82.15 * 100
maci = 3.56

During the trending market, the higher the number of MACI, the trendier the underline equity will be (in theory and nothing is guaranteed). If I can only select one equity over the other, I would pick the one with higher MACI and continue to monitor its trend.

There are two ETFs currently with its MACI is much higher than FCX. These are TUR and ECH and its MACI are 10.81 and 9.53 respectively. On my simulated Traders Pick portfolio, I will replace FCX with either one of these two ETFs tomorrow (Jan 19, 2010) at the market closed and see how it will play out.

SPY daily moving average and performance

2010-01-16T10:44:00.000-05:00

SPY does not work so well using the daily moving average of MA-4, MA-18 and MA-39.

(click image to enlarge)

FCX daily moving average and performance

2010-01-16T10:38:00.000-05:00

FCX works well using these daily indicators. Chart showed the result of FCX from its inception.

(click image to enlarge)

SPY weekly chart as of Jan 15, 2010

2010-01-16T10:27:00.001-05:00

SPY weekly chart indicated that the one day drop of 12.43 points should not be worried since it is still trending upward.

(Click chart to enlarge)

DOW dropped more than 100 points. So what shoud we do ?

2010-01-16T10:17:00.001-05:00

DOW had one day dropped of 100.90 points and S&P500 gave up 12.43 points on Jan 15. Given the DOW had reached the highest level since Oct 2008, its momentum is still trending upward and it is not a big factor at the point we should worry yet as it showed on the weekly moving average charts.

As for my simulated Traders Pick portfolio, the daily chart for FCX showed sign of weakness but it did not reach the selling point yet (as showed in the chart). Once the MA-4 touches the MA-18, I will sell it and look for another opportunity to get back in.

I found some of the ETFs can be traded using daily charts with MA-4, MA-18 and MA-39 moving averages and crossover signals. These ETFs tend to stay in one direction longer. Using these moving averages and crossover signals really work well for these selected ETFs, but there are some ETFs, actually more ETFs don't work well by using these daily signals.

ETFs that I found which work well from the TradeStation platform back-testing are:

1. EWY
2. EWZ
3. FCX
4. ILF

Signals will not work for ETFs are:
1. SPY
2. QQQQ
3. GLD
4. XLK

I will show some results of the back-testing in the next few threads.

Fundamental Analysis in Emerging Markets

2010-01-10T07:16:00.007-05:00

Although my Ocean Portfolio is based on the technical analysis, occasionally I do look at how the fundamentalists think about the stock markets. Apparently there are still opportunities in the Emerging Markets. Here is an article published (Jan 10, 2010) in SeekingAlpha.com by Hao Jin who is a Chartered Financial Analyst (CFA) and Certified Management Account (CMA).

"Forbes’s Fundamental Opportunity Index is based on the idea of value investing: buying underpriced, fundamentally sound stocks. Many people believe that emerging markets, which were up more than 70% in 2009, are likely to pull back, or at least take a breather in 2010. Nonetheless, there are still opportunities in those markets.

The most popular ETF to provide emerging markets diversification is iShares MSCI Emerging Markets Index Fund (EEM), which provides investment results that correspond to publicly traded securities in emerging markets.

Top 5 Countries within EEM

Country ETFs are another great way to find undervalued opportunities. Following are the top 5 countries and their ETFs within EEM:

Fund (Symbol)	Assets	P/E
MSCI Brazil Index Fund (EWZ)	$11.4B	25.3
MSCI South Korea Index Fund (EWY)	$3.1B	18.2
FTSE/Xinhua China 25 Index (FXI)	$10.3B	24.8
MSCI Taiwan Index Fund (EWT)	$3.7B	27.8
MSCI South Africa Index Fund (EZA)	$0.5B	17.5

Over the past decade China has spent massively on roads, bridges, ports and other infrastructure. Even though China's infrastructure is already superior to that of many other developing economies, it still continues to expand: now it focuses on high speed railroads and subway.

However, investors (especially people near retirement) face two main financial concerns – longevity risk and inflation. In order to boost your overall returns, emerging markets should remain 10%-20% of your long term portfolio."

For a full story of the article, click this link.

Interest Rate Policy: Outlook for 2010

2010-01-06T06:47:00.002-05:00

Will interest rate remain the current level which is considered to be very low now? It is under pressure as Christine Birkner of FuturesMag.com had written in this article:

Christine Birkner (published 1/1/2010):

"Whether 2010 will be a year when the economic recovery begins to take root could depend on what happens in the Treasury complex and the outlook for interest rates. The global economic crisis kept interest rates frozen near zero throughout 2009. In a November speech before the Economic Club of New York, Federal Reserve Chairman Ben Bernanke reiterated the Fed’s stance that economic conditions would warrant low levels of the Fed funds rate “for an extended period.” The Fed’s actions likely will weigh on the dollar and the economy at large in 2010."

Analysts expect Treasury yields, which are relatively low, to climb a bit in 2010. “I can’t imagine [Treasury yields] moving much lower. Until the Federal Reserve implements policy action, these rates will be reflective of supply and demand for safe assets,” says Mike Kimbarovsky, principal, Advocate Asset Management. “[Three-month Libor] would be the first to react to any uncertainty or volatility [in the market]. It will maintain a low level until there’s uncertainty, and then it’ll spike.”

For a full story of this article, click here.

Ivy League Schools Invest Heavily in ETFs

2010-01-01T12:14:00.005-05:00

Wish you all a Happy, Prosperous, Successful and Healthy New Year.

Starting off a new year 2010 this morning and having a fresh cup of coffee after a late night New Year Eve party, I am sitting in front of my computer and wondering how many of those top endoments invested in ETFs. It comes to my mine that there are two sites 1) Alphaclone.com and 2) StockPickr.com that I know published these information which these sources are publicly available.

After some searches, here are my finding: The trend of the top Ivy League schools are heavily invested in ETFs and carrying the similar position into 2010. According to their track records, these school all had their fantastic performances in the past except 2008. In 2009, schools with top endowments such as Yale University, Harvard University, MIT, University of Texas and Standford University which they had more than 20, 30, 40, 50 and even 60% returns on their portfolios. Harvard University took the lead and resulted with 65% returns in 2009.

You may wonder what investments they had invested in 2009 and the answer is ETF. Not only they invested in ETFs but they focused in the selective markets such as Emerging Market, International Market, Country specific and Major Market Index fund.

Here are some of the most popular ETFs that are still being held by the top endowment management.

1. EFA
2. VWO
3. EEM
4. EWZ
5. FXI
6. EWY
7. SPY
8. OEF

To my surprise, my simulated Ocean Portfolio contains 4 out 5 of these ETFs that I am tracking. Let's see how these ETFs will play out in 2010.

Can I Beat Decision Moose's Performance

2009-12-29T19:44:00.003-05:00

My simple answer is "probably not". Decision Moose is a proprietary asset allocation and market timing signal provided for free (will soon be a small monthly fee) by William Dirlam. I recently came across his web site and were amazed with his calls and his performance which published on his site. He uses technical analysis to time the ETF index funds with the objective of consistently outperforming the financial market averages and minimizing the risk.

From his transaction history page for the period between 5/7/2000 and 12/29/2009, he turned an initial investment of $100,000 into $957,796 within 10 years. It was an incredible number. For my curiosity, I did a back-testing using my favorite weekly moving average with added filters and see I could at least match his result. I used his preferred ILF index fund with data only available from late 2001. My first buy signal alert happened on 4/4/2003. It generated 3 buys and 2 sells with one remaining open position. With an initial hypothetical investment of $100,000, the realized profit is $482,331 and unrealized profit is $229,545. It resulted with a total profit of $711,876.

As most people know that back-testing or past performance is no guarantee of future results. But I am glad that I can use a simple moving average technique and other technical analysis filters as one of the tools for my investments.

(click the chart to enlarge)

Swing Trade (simulated) created

2009-12-28T22:45:00.002-05:00

Created a "Traders Pick" simulated swing trade position. This portfolio will consist one or more picks and can be a long or short position. Sideline or no trade will be in Cash. Holding period can be days or weeks. Trailing stop is 10%, however other stops will be considered such as moving average crossover to other the other direction and it may trigger the selling of the position before the 10% trailing stop.

10 Best & 10 Worst ETFs for the year of 2009

2009-12-28T20:12:00.000-05:00

Richard Shaw, a managing principal of QVM Group has summarized the 10 Best & 10 Worst ETFs in 2009 via SeekingAlapha. The top 9 Best ETFs were up over 100% as of 12/24.

Here is the list:

"Excluding short funds and leveraged funds, what long funds had the highest total returns and lowest total returns in 2009 through December 24 (3 trading days remaining)?
Top Ten: (source: Morningstar)

KOL: 144.19% (coal companies)
RSX: 140.19% (Russia)
PKOL: 136.22% (coal companies)
JJC: 130.39% (copper ETN)
LD: 123.79% (lead ETN)
EWZ: 118.99% (Brazil)
SLX: 112.22% (steel companies)
INP: 102.24% (India ETN)
GML: 100.50% (emerging Latin America)
XSD: 98.75% (semi-conductors)

Bottom Ten: (sources: WSJ, Morningstar, Schwab)
We found some difficulty precisely identifying the worst losers. Not all were included in each database, and the databases did not agree on the YTD return. Therefore, we won’t provide the percent loss per fund, but will say that the losses ranged from over 55% (the gas funds) to over the low teens. In approximate order of worst to least worst, the ten top losers are:

UNG (natural gas)
GAZ (natural gas ETN)
BBH (biotechnology)
EDV (extended duration Treasuries)
TLT (20+ yr Treasuries)
PJB (banks)
KRE (regional banks)
GRN (carbon credits ETN)
COW (livestock ETN)
GRN (grain ETN)"

(click here for details)

ETF Winners Could Repeat In 2010

2009-12-26T12:45:00.003-05:00

If the market trend continues heading the same direction, most of the ETF winners this year could repeat in 2010.

Here is an article by John Spence of MarketWatch - Dec 14, 2009

"BOSTON (MarketWatch) -- Exchange-traded fund buyers plowed money into ETFs tracking bonds and international stocks this year, and the pattern looks set to continue in 2010 as investors diversify portfolios, protect against losses and chase the hot performance of emerging markets.

This past year was a record for bond ETFs, with investors flocking to a growing number of fixed-income offerings. Through the end of November, taxable-bond ETFs had net inflows of more than $32 billion, the most among the major asset classes, according to investment researcher Morningstar Inc.
As the year draws to a close, here's a list of trends to watch in the ETF business for 2010:

1. Bonds -- Fixed-income ETFs came late to the party relative to stock funds, but they've been making up for lost time. As of Nov. 30, there were 802 ETFs in the U.S. overseen by 30 managers and a record $739 billion in total industry assets, according to State Street Global Advisors. Of these, 79 were fixed-income ETFs but they held almost $100 billion in assets. After the credit crunch, more investors are playing defense with bonds. Vanguard and Pimco are launching more bond ETFs, which should only increase the visibility of the fixed-income side of the business in 2010.

2. BlackRock, Vanguard rising -- BlackRock Inc. BLK is the largest ETF manager after its acquisition this year of Barclays Global Investors, followed by State Street Corp. STT . Meanwhile, Vanguard Group has been growing rapidly. Its ETF inflows topped $26 billion for the year through November to take total assets to almost $90 billion. Vanguard is the third-largest ETF provider. BlacRock's integration of BGI and its ETFs is another story to watch next year.

3. Consolidation - Despite the ETF business' continued impressive growth, assets remain concentrated at the largest funds and providers. Many smaller funds are struggling to attract assets and trading volume, and more may be forced to close next year. Almost 100 ETFs have been liquidated since the end of 2007, according to Morgan Stanley. "The challenging market environment has limited flows into many of the newer ETFs, particularly those with a narrow focus based on less well-known indexes," it said.

4. Emerging markets - ETF investors had a clear preference for international stocks over U.S. companies in 2009. In particular, they shoveled money at emerging markets ETFs such as Vanguard MSCI Emerging Markets ETF VWO and iShares MSCI Emerging Markets Index EEM Fund. Yet the recent debt scare in Dubai is a clear warning of the risks and volatility of emerging markets."
(for more details, click here)

Merry Christmas

2009-12-24T05:39:00.000-05:00

Wishing you a Merry Christmas and have a happy holiday season

S&P 500 Signal still holds

2009-12-21T07:02:00.000-05:00

According to the weekly chart, the signal indicated that it is still trending above the MA-18 and MA-39 lines, the current position is still the same - Long.

(click the to enlarge)

Mark Mobius' view on Emerging Markets in 2010

2009-12-19T23:12:00.001-05:00

Mark Mobius was interviewed by Frederik Balfour of Hong Kong-based correspondent of Business Week by phone on questions about his view on Emerging Markets in 2010.

"Mark Mobius is a legend among emerging-market investors. For more than 30 years, the 73-year-old fund manager, who oversees $33 billion spread across 35 Franklin Templeton funds, has scouted for investment opportunities in unlikely places. His U.S.-listed Templeton Emerging Markets Fund (NYSE:EMF - News)had a 109% return as of Dec. 14, compared with 73% for the MSCI Emerging Markets Index. Hong Kong-based correspondent Frederik Balfour caught up with Mobius by phone as the fund manager was visiting Doha, Qatar -- one stop on an itinerary that included Dubai, Lebanon, Saudi Arabia, and Libya.

Q: How do you expect emerging markets to perform in 2010?

A: You cannot expect the same kind of percentage increases, but that doesn't mean you can't have a very good return. We are not in the mode of selling massively or getting into cash, that's for sure. That's probably the consensus opinion, which is usually dangerous. But we are finding companies with good dividend yields, companies that are growing.

Q: What was behind the huge runup in emerging markets in 2009?

A: With the subprime shock, everybody was looking for safety. And for some strange reason, they thought the U.S. dollar was safe and went into money market funds until January or February of 2009. Then people began to wake up to a few things. One was that the supply of currency would at some time outpace demand, so value would decrease. In China there was 21% growth of money supply, and in the U.S. 18% to 20%. That created this incredible liquidity looking for a home as people woke up (to the fact) that they should think about inflation coming down the pike. They weren't getting any yield on dollar deposits, so equities were the obvious answer.

Q: Have emerging markets moved too far too fast?

A: The percentage increases are a bit misleading because you are coming from a low base. We are only halfway toward the previous high of 1997. Have we gone too far? The only measure we have is valuations, and probably the best single measure is price-to-book value ratio. (Book value is a measure analysts use to estimate what a share of stock would be worth if all the company's tangible assets -- factories, real estate, and so on -- were liquidated.) If you look at the average price-to-book ratio based on the stocks in the MSCI Emerging Markets Index, we are only halfway to the 1997 high. The absolute high was three times book, the low was one times book, and now we are at two times book, roughly."
(click this link from Yahoo finance for detailed info)

Why don't they have a regulation to stop it

2009-12-17T22:54:00.009-05:00

Apparently the interest rate on most of the credit cards are going higher and higher these days even though you pay in full each month. Have you heard about the 79.9% interest rate on credit card? Here is the story from USA Today by Candice Choi, Associated Press. 12-17-2009:

"NEW YORK — It's no mistake. This credit card's interest rate is 79.9%.

The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It's a strategy other subprime card issuers could start adopting to get around the new rules.

Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25% of a card's credit line.

In a recent mailing for a preapproved card, First Premier lowers fees to just that limit — $75 in the first year for a credit line of $300. But the new law doesn't set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9%.

"It's the highest on the market. It's the highest we've ever seen," said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.

The terms are eyebrow raising, but First Premier targets people with bad credit who likely can't get approved for cards elsewhere. It's a group that tends to lean heavily on credit too, meaning they'll likely incur steep financing charges. So for a $300 balance, a cardholder would pay $20 a month in interest."

(click here for more details)

Risky Business for Buy and Hold Investors

2009-12-16T20:20:00.005-05:00

Long-term investors would have some recent painful experiences both in early 2000, 2008 and early 2009. One would argue that it still is a good strategy in a long run. It may be true, however if there are certain simple strategies that could avoid some of the ugly down turns, why not exploit it and use it.

ETF guru Tom Lydon of ETF Trends said the following (12-16-2009):

"If you’re a long-term investor, you may have lost a good chunk of your wealth in the market’s crash. It’s because of this that the buy-and-hold mantra is softening to a whisper, and another strategy to use in conjunction with exchange traded funds (ETFs) is supplanting it. The S&P 500 has declined about 25% since January 2000 (11% when dividends are factored in). The Barclays Capital Index of Treasury bonds has delivered 85%, including capital gains and interest, and an index monitoring 30-year Treasuries produced a total return of 116% in the past 10 years, writes Michael Mackenzie for The Financial Times.

Analysts believe this “lost decade” for equities came after the bull market of the 1990s. Alan Ruskin, strategist at RBS Securities, sees that the “sheer volatility was very hard for buy-and-hold investors to stomach.” Stocks weren’t able to meet the overly optimistic profit expectations that ended in early 2000, which lead to reduced interest rates. [Why buy-and-hold is dead.]

The interest rate cuts and easing of inflationary fears bolstered government bonds. The current 10-year Treasury yields is around 3.5% is quite low as compared to the February 2000 10-year note with 6.5%. Ruskin thinks that bonds, which are at relatively low yields, may not beat out equities unless a round of deflation emerges.

The buy-and-hold method has worked in the past, but many investors have learned a painful lesson after the last two recessions: hanging on for dear life can result not only in lost money, but lost time. Is the answer found in hiding from equities? Not necessarily. There are lots of uptrends out there – it’s just a matter of learning to spot them and, most importantly, act on them.

If investors can follow a simple discipline that has a higher probability of success, they’ll be motivated to do it. That’s why we use the 200-day moving average strategy. It’s easy to implement and simple to track. For a more detailed explanation of the strategy and to learn more, take a look at our book: The ETF Trend Following Playbook." (click here for more details)

South Korea's ETF looks good

2009-12-16T07:35:00.002-05:00

The Korea iShares EWY tracks the Morgan Stanley Capital International Index of the South Korean stock market. The EWY contains 18% of the Samsung Electronics. For sector holding, it has over 22% in industrial materials, over 21% in hardware and over 18% in financial services according to the Yahoo Finance portal.

Tom Lydon of ETFTrend.com (12-16-2009) stated that there are 7 reasons to feel good about South Korea's ETF.

"After the devastation brought on by the financial crisis, the South Korean economy, along with its related exchange traded fund (ETF), has been strengthening on fiscal stimulus and the government’s expansionary policies. The South Korean economy was able to climb out of its recession, expanding for three consecutive quarters, reports Kim Yoon-mi for The Korea Herald. Other reasons to like what South Korea is doing right now include:

The Ministry of Strategy and Finance revised up its growth forecast for the year to 0.25% and increased next year’s growth outlook to 5%. (Ways to get in on South Korea’s expansion).
Since April, the South Korean won has been steadily appreciating, gaining strength on the rising current account surpluses and the increase in overseas investors.
The nation’s external debts and short-term overseas borrowings have both decreased from an year earlier.
The surge in foreign investors has brought a swift recovery to the local stock market, with overseas investors net-buying $24 billion worth of stocks in the first 11 months of 2009 after suffering from a net-sale of $30 billion worth of stocks in 2008, according to financial industry data."
(click here for more detials)

ETF Investing Based on Popluation Trends

2009-12-15T07:25:00.002-05:00

Trang Ho of Yahoo Finance has written an article (Dec 14, 2009) :

"Consumer spending makes up 70% of the U.S. economy. So studying people and where they are in their lives can provide a crystal ball for what's going to happen in the economy years ahead of time, according to HS Dent, a financial research firm founded by economist Harry Dent.

Rodney Johnson, president of HS Dent, applies the theory behind the Dent Method to actively manage Dent Tactical ETF's (NYSEArca:DENT - News) portfolio of other ETFs.

Since it started trading Sept. 16, the fledgling ETF has lost 4% while the S&P 500 has gained 4%. An older portfolio following the same strategy but offered through variable annuities shows more promise: It's down 5% since May 1, 2008, vs. the S&P 500's 21% fall."
(click here for more details)

How does it look with the Ivy Portfolio strategy

2009-12-13T22:42:00.005-05:00

Mebane Faber and Eric Richardson had published a book named "The Ivy Portfolio: How to invest like the top endowments and avoid bear markets". Even though the endowments of some top Ivy League schools were not doing so well in 2008, the strategy of using moving average described in the book has its merit and the strategy has been widely followed by others.

The strategy utilizes a 10-month Simple Moving Average or a 10-month Exponential Moving Average to determine if the underline equity a buy or a sell. At the end of each month, if the closing price of the selected equity is above the 10-M SMA or 10-M EMA, then this equity is a buy. Otherwise, if the price closes below these moving averages, it is a sell. It's that simple.

I ran a back-testing using TradeStation. Here were the setup and the result:

Setup:
1. Ticker: $INX - S&P 500
2. 10-M SMA
3. Duration: 1979 to Nov 2009 (30 years)
4. Position size: 200 shares

Result from TradeStation back-testing:
1. Total trades: 15
2. Number of winning trades: 10
3. Number of losing trades: 5
4. Percent Profitable: 66.67%
5. Total net profit: $261,800

This strategy works very well in my opinion if discipline can be enforced and not to worry about the daily and weekly price movement. It is worth for further investigation for you all.

(click the chart to enlarge)

EFA - International Index Fund still looks good

2009-12-12T18:41:00.001-05:00

As EFA closed at 55.47 on 12-11-2009, the MA-4 still stays above the MA-18 line. Both Ocean and TSP portfolios continue to be long on EFA.

(click the chart to enlarge)

Experiment with the Portfolio Spreadsheet

2009-12-12T07:49:00.007-05:00

Experimental Portfolio Spreadsheet

I re-created 2 Portfolios. One port is Ocean Portfolio and the other is TSP Portfolio using Google Spreadsheet. It works quite well for me and I think I can monitor my simulated portfolios without being forced to use Facebook by KaChing. If I find something better online for portfolio tracking and it's free, then I will make the switch. As of now, it serves my needs.

Both portfolios will have $100,000 as an initial simulated cash investment. Ocean Portfolio will continue to be trend trading using ETF in either direction (Long or Inverse). TSP Portfolio will trade the government TSP equivalent index funds such as SPY(C), EFA(I), AGG(F) and IWM(S). IWM is Russell 2000 Index fund and it is not really the S Fund equivalent but I chose IWM because of its high trading volume. TSP portfolio will be traded in Long position because of its restriction.

I initiated both portfolios at the close of 12-11-2009 and these are 100% invested based on the 39-week moving average charts.

Ocean Portfolio at KaChing will be deleted

2009-12-11T20:29:00.007-05:00

I will delete the Ocean Portfolio, TSP Portfolio and Trader Portfolio accounts from KaChing as a result of being forced to move to Facebook.

KaChing moved my portfolio to Facebook

2009-12-11T20:01:00.008-05:00

I got the message from Kaching.com which they indicated that I can't no longer use their site to track my portfolio but instead they redirected me to Facebook. Personally I would not use Facebook for my portfolio tracking. I will figure how to track my portfolio in the next few days without KaChing. From their blog, I already saw a lot of unhappy users expressing their discontent comments.

Here is the message from KaChing:

"We are migrating your virtual portfolio to our Investing IQ App on Facebook.
In case you were not aware, kaChing has evolved into a marketplace where you can find great investors to emulate by mirroring their trades in your own kaChing brokerage account.
In order to avoid confusion between the marketplace and our virtual investing environment, we have decided to dedicate kaching.com solely to the marketplace and our Facebook app (now called the Investing IQ App) to virtual portfolios.
If you would like to continue to manage your virtual portfolio, then please click on the link below, which will migrate your virtual portfolio from kaching.com to Facebook.

Don't have a Facebook account yet? No problem. This link will allow you to create a Facebook account and immediately access your existing virtual portfolio.
Please email us at support@kaching.com if you have any questions.
Thanks,
The kaChing Team"

The Beauty of Weekly Charts

2009-12-09T08:30:00.002-05:00

The beauty of using weekly chart is to eliminate the frustration of a single day or a few consecutive days of market volatile price movement. As the Dow dropped 104 points and S&P500 dropped more than 11 points yesterday, the weekly chart did not react as bad as it sounds. I would worry if it continued to drop in a few consecutive weeks as it did in early 2008. But until then, I would not do anything yet. As the chart shows below, the blue dots located at the top the price bars representing the 52-week closing high. There are more blue-dot bars than the non blue-dot bars in the last 4 months. So I will let the trend run until it shows sign of reversing before I consider doing some adjustment of the portfolio.

(click the chart to enlarge)

SPY weekly chart still shows sign of strength

2009-12-06T07:39:00.004-05:00

A friend of mine who follows my blog and concerned about the markets may be pulling back in the near future. My answer to him was that if it happened then I will get out but I will not do anything until the charts tell me. I found that it is important to have a strategy on any investments and even more important to have a confidence to stick with the strategy and let the strategy aid your decision.

The SPY (S&P500 Index) weekly closed at 111.26 as of 12/04/2009. Its MA-4 is 109.88, MA-18 is 105.74 and MA-39 is 96.79. From observation, the general market still has strength to stay its course.

(click here to enlarge)

ETF Assests Hit A New Record in November

2009-12-04T06:51:00.002-05:00

More cash from the sidelines had been poured back into the markets and ETF assets hit a new record in November. Here is the ETF Flows Report written by Matt Hougan of IndexUniverse

"Written by Matt Hougan - December 03, 2009 16:11 PM
November ETF Assests Hit Record Levels

Related ETFs: EEM/IWM /LQD/SPY/SSO/TIP/UNG/UUP/VB/VWO

Investors poured $17.5 billion in new cash into exchange-traded funds and exchange-traded notes in November, according to new data released from the National Stock Exchange, pushing total assets under management in the U.S. to a new record of $752 billion.

Year-to-date, investors have poured $89.7 billion in new cash into various exchange-traded products; down from $132 billion for the first 11 months of 2008, but a strong showing nonetheless.
Most of the inflows were into ETFs, which gathered $17.1 billion, and now have $743 billion in assets under management. ETNs gained $354 million in new flows; combined with market returns, that brought their total AUM to $8.2 billion.

Interestingly, Vanguard led all ETF issuers for inflows in November, pulling down $5.4 billion in new assets. BlackRock Global Investors was second, with $4.2 billion in assets, followed by State Street Global Advisors, at $3.7 billion.

Inflows By Asset Class: Long-Only ETFs
Inflows were seen in all major long-only asset classes save real estate in November. International equities led the way with $5 billion in inflows, followed by fixed income with $4.8 billion.

Year-to-date,fixed income leads all comers, with $39.4 billion in inflows, followed by international equities and commodities at $29.3 billion and $28.8 billion, respectively. U.S. equity ETFs gained $3.6 billion in inflows in November, but have suffered a net $26.5 billion in net outflows so far this year."
Click here for more details.

ETF profits may result in higher taxes

2009-12-01T17:52:00.002-05:00

Some ETF funds are taxed as an ordinary income-tax rates even if you hold it as a long-term investment. (more than 1 year and 1 day). Here is an interesting article:

By John Waggoner, USA TODAY (12/1/2009)

Investors in some exchange traded funds might be getting a little something extra this year: a bigger tax bill.

Profits from the vast majority of mutual funds get taxed at capital gains rates, just as profits from stocks and bonds. Long-term capital gains are taxed at a maximum 15%.

But long-term profits from funds that invest in gold or silver bullion are taxed at the same rate as gains from gold bars and other collectibles: 28%.

Stocks, mutual funds and collectibles must be held for a year or more to qualify for long-term rates. Otherwise, they're taxed as income at the same rate as wages – a maximum 35%.

The logic: Fund profits get taxed at the same rate as the underlying investment.

Just as gains from stock funds are treated the same as profits from the stocks themselves, profits from exotic ETFs are taxed the same as their investments.

Other tax surprises from ETFs: Click this link for more details

ETF dividends may confuse you at tax time

2009-12-01T17:40:00.002-05:00

When it comes to tax time, you may wonder how ETF dividends will be filed. Here is an article from Matt Karntz of USA Today which it may give you some clearer answer.

"By Matt Krantz, USA TODAY (2/18/2009)

Q: Are the dividends from exchange-traded (ETF) funds like DIA or SPY considered to be "qualified dividends" for tax purposes?

A: There are two main types of dividends. And that difference becomes very important at tax time.

I'm oversimplifying things. But essentially, dividends paid out of earnings by U.S. corporations are considered so-called qualified dividends. These dividends are eligible for, or qualify for, a lower tax rate that matches your long-term capital gains tax. The maximum tax rate on qualified dividends is 15%, as you can read here.

If dividends aren't qualified, then they may be taxed at your ordinary income tax rate. That's generally higher than 15%, sometimes by a considerable amount. Click this link for more details"

Become Your Own Portfolio Manager

2009-11-28T13:38:00.005-05:00

There may be a good reason for people who want to be their own portfolio managers. Here is an article that may guide you to the right step.

"Ron DeLegge, Editor (Nov 25, 2009)

SAN DIEGO (ETFguide.com) - Everyday more and more people are making a choice they never thought they would make: To become the manager of their own investments.

Among the top reasons for self-directing one's investments are greater control and flexibility. But there's one other very good reason for becoming your own portfolio manager: The potential for better performance.

Many academic studies show that during both good and bad times the vast majority of Wall Street's portfolio managers consistently underperform versus corresponding benchmark indexes. However, making the decision to supervise your own investments won't necessarily guarantee better results. To avoid the same type of market underperformance that characterizes most of Wall Street, you'll need to build your investments on the right foundation. Click here for more details."