I was looking for a stock market rally out of the Friday before last, and we saw a good one. But one third of the entire gain from the panic low was given back this past Thursday and Friday. The 24 hour chart of SP500 emini shows it well.
As the 2CS and much else showed before the recent plunge, the stock markets were certainly over-bought and over-believed, and now they aren't. As detailed here I had cut back on stock fund exposure and on high yield closed-end funds which tend to trade as though they were stocks. Also I had added to CEF and PHYS. Both of those moves worked out well, and my total accounts finished with marginal new highs for the year last week. I also had trimmed down total holdings of the oil & gas trusts and the pipeline general partnerships since they had put in good gains.
Finally, this past week I switched from the longer term corporate bond fund (VWETX) to the short term corporate fund (VFSUX), as I had planned, and I switched from the intermediate term municipal fund (VWLUX) to the limited term municipal fund (VMLUX). These new funds have much less volatility, but also a lot less yield as well. These two are over 25% of total investment accounts. Depending on how things go I may put much of this into gold investments. As it is, gold funds and bullion are now 22% of total, and I may go up to 50% on pullbacks. If I am wrong I can cut back the "paper gold" funds (now 1/2 of the gold total) very easily.
In general I try to take a gradualist and technical approach and shut out the economic news as much as possible. I really got spooked last weekend when the EU reversed its position on Greece and upped the ante close to a trillion Euros for future rescues. At the same time the US extended new currency swaps (dollars for Euros) to increase dollar liquidity for those in Europe (and elsewhere) who have dollar obligations and committments. These two actions looked to me like abject panic in high places. Perhaps I am wrong, but a lot of people in Europe have also been buying gold as the Euro sinks. So I prefer now to be on the side of owning "too much" gold instead of "not enough".
Friday (May 14) was also a tide turn day and some of the sentiment and volume studies support a further rise. The only long exposure to generic (index) stocks I still have is Wellesley Income Fund (VWINX/VWAIX) which will be cut down on a rally. Hussman Growth (HSGFX) and TFS Market Neutral (TFSMX) are hedged or long/short funds and will be kept. Even they were down 11% from the 2007 highs to 2008 lows, but to put it into perspective the Vanguard S&P500 fund (VFINX) was down 45%. VWINX was down 16%, so I'll only trim it. I may cut back further on the oil & gas trusts and the pipelines if a bigger decline looks probable. The same for the two emerging market bond funds, ABW and SBW.
I've kept the larger position in Capstead Mortgage Preferred B (CMO.PRB) paying over 9% at my cost and Pimco Bond (PTTRX) and Loomis Sayles Bond (LSBDX). The latter two are flexible and very well run and are about 15% of total funds. There are days and weeks when I think I should totally retire from investing and let PIMCO and Loomis Sayles take care of it all! PAUIX (Rob Arnott's hedge fund of Pimco funds) and HSTRX (Hussman's strategic Income) are excellent funds but they only pay quaterly or less and are geared more to gains than income. I still have some PAUIX in one account.
Recent Comments