September, 2003

Arnold to the Rescue

Actor Arnold Schwarzenegger is shown in a scene from the 1970 film 'Hercules in New York,' his feature film debut, in an undated publicity photograph. Arnold Stang, the co-star of Schwarzenegger's first film, said August 25, 2003 the bodybuilder's acting was so limited and his accent so thick that he never foresaw a movie career, let alone a foray into politics. (Reuters - Handout)

Now let's see:  Who is Arnold Stang?  Most recently the voice of Courage the Cowardly Dog.  That takes real talent.  I admire Arnold Schwarzenegger because he was truly focused.  He accomplished what he set out to accomplish - be a bodybuilding champion and a movie star.  When he came here he knew no English.  I wish him the best in the race for Governor of California, although I am afraid nobody can really do much to solve that state's problems.

September 3, 2003

This journal starts out in medias res, just like the epic poems in the ancient world.  That is where the comparison ends, however.  I had kept a journal earlier in the year, but then did not find the time to keep it up, and it is too much trouble to reconstruct what happened during the gap.  Hopefully I will continue this one.  So anything with a September 3, 2003 starting date was purchased earlier.  I have done pretty well so far up to September, considering the fact that I have taken an extremely conservative approach. The conservative approach was a mistake, but that is another story.  At this point I am being more aggressive.

I have recently subscribed to Fred Goodman's Trend Macrolytics site, as well as Timing Cube.  While the people at FT-Talk provide excellent timing and commentary, I decided it was important to get different opinions and approaches.  These guys all know what they are doing.  

One of the things I have learned this year is that it is important to maintain several mechanical systems at the same time.  I also decided to start one of the systems with half of my allocation and then follow up with the other half a bit later.  This gives further diversification.

Currently I am following three systems.  The returns are given as of 9/2/2003.  Users of Fasttrack, Trade, and FastBreak may right-click on the links to download these systems, which are in proprietary format.

(1) AGEM5 holds 5 funds from the AGEM family.  These are mostly growth funds.  I started this system recently, and later added some funds to the family.  Hence new buys will possibly include those funds.  In the table below, this first set is denoted A1.  The second set is to be labeled A2.  Today I sold a junk bond fund and a little of PSPLX in order to go into the second set.  I also got rid of RSIFX in the family.  Its chart is virtually identical to RIAFX, and I saw no reason to buy them both.  I had bought OBEGX earlier, because I had a little extra cash, and I predicted it would be picked by the second buy on AGEM.

(2) PTREG holds 3 funds from the PTREG family.  These funds include growth funds, foreign funds, bond funds, and gold funds.  The idea is that something is always likely to be going up.  I am not in this system yet.

Since 2/3/1997, the two systems combined have given 49% average annual gain with a max drawdown of 10%, when timed with MICROC2.

(3)  BRTDR gives several systems, which I like to think of as one.   Mixing the timing and the funds; being able to go both long and short is a real advantage.  The three systems give a combined return of 41% with a max drawdown of 11% since 9/6/2001.

Because of the fact that September and October are often months in which we get a sell signal, I may not add PTREG as a new systems.  If the market goes down, then it will be easy for me go go short with the Potomac funds and with the Rosenberg funds.  They can hedge against the others.  This has been a strange year, however, and it may turn out that September and October will be good months, just to keep up the strangeness.  Later, I may decide to go into PTREG.

During any periods when the signals are on a sell, I will update the FastBreak systems with new funds, if there are any, and otherwise recalibrate.

Burning Man

Remains of the Burning Man effigy after the ceremonial Burning of the Man at the festival in Black Rock City, Nevada August 30, 2003. The Burning of the man marks the ending of a week long celebration that gathers more than 20,000 in the desert. REUTERS/Shannon Stapleton

A naked patriot?  Is George Bush pleased?

I always did want to go to Burning Man, but it is really a difficult thing just to get there, and besides you have to camp.  I want a Residence Inn.

September 8, 2003:  Department of This Makes Me Very Angry

It seems that some mutual funds conspired with a hedge fund to allow such things as buying after the close for the closing price.  The funds named are Bank One Corp.'s Banc One funds, Bank of America's Nations Funds, Janus Capital Group Inc. and Strong Capital Management.  These are well known funds in the business.  Read the full story so far.  I hope these guys go to jail, but unfortunately there is not much chance of that.  These are the same guys who object to market timing in their prospectuses.  They only object when they are not getting some under-the-table money for it.  I read a piece by Cramer about this.  He is downright apoplectic. Of course, that is his usual state.  I wish I had seen him on Kudlow and Cramer, but the TV is out for repair.  More in-depth coverage is in a three-page article:  Page1, Page2, and Page3.  John Mauldin has written a very good piece on this as well.  Then Donald Luskin at Trend Macrolytics wrote an excelent piece in which he says that the outcome could be very grim indeed.  If I had any money in any of those firms, then I would sell immediately.  No point in taking any risk in that area.  Of course, none of those funds other than SASPX have come to the top of my list.  I wonder if now we know why.  Too busy wheeling and dealing to pick good stocks.

September 11, 2003

Well, here we are on the anniversary of the attack on the World Trade Towers.  Yesterday a tape of Bin Laden was played on Arab TV, and that spooked the market.  It remains to be seen what the market will do today.  I do have the option to go short with the Potomac Funds and/or the ASA Rosenberg Funds.  That would be a hedge.  But it remains to be seen if this is just a blip or the beginning of a downtrend.

Meanwhile there is a debate in Jamaica about the statue depicted below.  Some people think that the man's penis is too big.  I have seen quite a few that size in the dressing room of the gym.  The whole thing is just too funny.  And why is nobody complaining that her breasts are too big?

Penis too Big?  I Report, You Decide.

September 16, 2003

Yesterday I sold part of each of the three AXA Rosenberg Funds, together with all of PSPLX.  The fact is that I really do not have any good timing system for the S&P 500, so I might as well just get rid of that one.  Now Fred Goodman's Trend Macrolytics signal does seem to work pretty well for the S&P 500, and it went on a sell yesterday, as he predicted.  Even though Goodman's signal is on a sell, I am not ready to sell everything or go short at this time.  All of the Fasttrack-based intermediate term signals are still on a buy.  The reason I sold was so that I could start the PTREG system, which is currently in 2 gold and 1 technology fund.  Gold has backed off a bit, and hence I will wait to see what happens there.  Gold seldom has a good run when the market is doing well.  This time has been an exception.  I expect that either the market or gold will sell off, but of course anything can happen.

September 18, 2003

Well, I did buy the gold funds, and also DRGTX, so I am now in the PTREG system.  All three funds did well yesterday, even though the market was down.  Time to sell UMESX - the 30 day holding period is up, and it is my only losing fund.  I can do that today.  No telling if we will have electricity tomorrow, what with the storm coming in.

 September 19, 2003

Well, just look!  We have electricity.  Little damage around Silver Spring, from what I can see.  So I can trade.

Sold UMESX yesterday and bought NPMCX today.  I am making the transition to the augmented fund list in A2, and it is the top ranked fund in A2.  Last night SEMIX fell off the bottom of the list, and so I am selling it today.  Then I will see what is at the top of the A2 list, and buy that.

September 22, 2003

Well, what a difference a weekend makes.  Talk from the government to the effect that the Chinese currency should float, and thereby appreciate in terms of the dollar, has caused the dollar to sell off and the market to go into a tailspin.  Nobody wants to own U. S. Bonds if the dollar is going to go down.  Of course, I don't know why anybody wants to own U. S. Bonds at such low interest rates, and with such obvious currency risks.  Gold is up.  This may be a one-day wonder, or it may signal a serious decline in the market, together with a serious move up in gold.  In any case, I doubled up on the gold fund in A1, and I went to the Potomac short funds.  That should be a decent hedge.  If the market goes down further, I can go to the AXA Rosenberg long/short funds.  

Of course, everybody knew that the Chinese were going to have to float their currency some time.  This should not have been a surprise.  They still may not allow the currency to float any time soon.

 September 24, 2003

Wow!  What a difference a day makes!  I thought my short positions might be a mistake, but today they certainly were valuable.  At this point the S&P 500 and the NASDAQ are in negative territory for the month.  I wonder what will happen tomorrow.

September 26, 2003

Well, yesterday I felt terrible in the morning, but perked up a bit after lunch - and about 6 Ibuprofen pills.  So I decided I should walk down to the gym to work out.  Now that my knees and back are shot, the only real cardiovascular thing I can do is the orbital machine.  Those does not stress the knees or back. The market was essentially unchanged all day, and about 3:30 things were basically flat.  Then everything fell apart, and I had only a few minutes to get out of most of the long funds, and switch to two of the Rosenberg long/short funds.  I stayed long in the third because it seems to be doing well, and it is a foreign fund.  But that was probably a mistake - we will see what happens today.

Anyway, after the market closed and I had done all the trades I thought appropriate, I finally got to the gym, and put in a solid 45 minutes on the orbital machine at Random 14.  Maybe in a couple of weeks I will try Random 15.

I have some cash that I might put into other short funds, or BEARX.  I will see what the market does today.  The FUBAR signals went on a sell  MICROC2 is still on a buy.  But that cannot last through another day like yesterday.

Gold sold off yesterday, after being up big time in the morning.  I hope that my gold funds do not disappoint me.

September 30, 2003

Well, it is the end of the month and it has not been a very satisfactory period at all.  Yesterday I got gutless and closed out some short positions.  Today I added to the short positions, and got rid of all the long positions except for OBEGX and HENLX.  For some reason, it is emotionally very difficult for me to short.  I had the following exchange with Fred Goodman (Trend Macrolytics):

    Why is it that when it comes to shorting, I am very nervous, but I am not nervous when your or my systems tell me to go long?

    Have we just been conditioned to buy all the time?  Almost never do we hear somebody on CNBC telling us what to short.  But when the market is going to hell in a handbasket, they

    always trot somebody out to tell us what to buy.

    And it is not the supposedly "unlimited" risk in shorting.  The funds that short the indices cannot be said to have unlimited risk.

    I need to be more confident.

    "Fear is the mind-killer" - Frank Herbert in Dune.  Very true.

    Joel Williams

    I feel the same way about shorting -- it is more difficult.  Some of the problem stems from being told that we are somehow "unpatriotic" if we go against business.  Intellectually it is

    nonsense, shorting provides a damper on the market's tendency to go haywire in one direction or the other.  Using the Rydex inverse funds, RYAIX and RYURX (and others) does permit

    one to buy a mutual fund and let them do the shorting -- the concept has helped me.

    The TV touts are hired by the mutual fund touts who profit from stability in the money they manage.  When you sell their fund they have to make trades to balance their portfolios, and

    they hate that almost as much as they hate losing billable dollars.

    Fred Goodman

I am glad somebody else agrees with me about the mutual fund managers.

Definitely not wonderful results this month.  Things fell apart, and I did not react as quickly or as decisively as I should have