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Cliff Smith
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I am currently a retired Aerospace Engineer. I am married with three children and seven grandchildren. I was born in San Francisco, CA in 1949 and moved to Newport News, VA in 1951 where I lived until I went to college. By God's grace, I received a B.S. degree from Virginia Tech (1972), a M.S.... More
  • Tactical Strategy Recommendations For February 18, 2014 2 comments
    Feb 14, 2014 8:09 PM | about stocks: CSD, GURU, MDY, HYLD, TLT

    Please realize you use these recommendations at your own risk.

    Here are the February 18, 2014 ETF recommendations for the tactical strategies I have discussed in my Seeking Alpha articles. To mimic the strategies, you should buy the ETFs of a particular strategy on the business day before a new semi-monthly period starts. February 18th is the day to make your trades.

    After the poor returns from last period, the current semi-monthly period (that will not end until the close of February 18th) has been a positive one for most of the strategies. That's the good news. But because many of the strategies were in a more defensive posture, the return for this period was not as good as it could have been if the strategies were mainly in equities and out of long-term bonds. Some of the strategies were caught in a whipsaw action.

    The CSD-Bonds (SSSEquity) Strategy is a good example. When CSD moved below its moving average at the end of the previous period, the SSSEquity Strategy signaled it was time to get out of CSD and into long-term bonds (NYSEARCA:TLT). TLT had been trending up in January, so it was selected instead of SHY (short-term bonds). But just as this happened, the market quickly changed directions in the current period, and the market became favorable for equities (i.e. CSD) and not favorable for long-term bonds (i.e. TLT).

    The result: the SSSEquity Strategy did not experience the equity rally like a strategy that stayed in equities did (like SSSEquity2). If there is a take-away from this, perhaps it is the idea that it is better to have multiple fast-growing equities (SSSEquity2) in your "real money" strategy rather than just one equity (SSSEquity). In the SSSEquity2 Strategy, FPX never dropped below its moving average level, so SSSEquity2 remained in FPX and recouped the losses of the January downturn.

    This happens sometimes in these risk-aversion strategies. In order to eliminate large drawdowns, the strategies quickly get out of equities when there is significant downside risk. But if the markets recover rapidly, the strategies are left holding the wrong assets for the short-term. I read this quote on Yahoo Finance (MrTopStep.com) that echoes what I have been saying: ". . . while we have seen a lot of big moves in 35 years, we honestly cannot remember a sharper dip and quicker rally back than the current one." Hopefully, the market will start trending again, or if there is another correction, it is not so short-lived. Very short-term market changes (less than a month) are difficult to successfully capture in these types of strategies. The trend is our friend.

    After this list of recommendations, I am going to stop tracking the SSS Equity Strategy and the SSS Strategy in lieu of the SSSEquity2 Strategy and the SSS2 Strategy. The SSS2 Strategy is just an enhanced version of the SSS Strategy, so if you want to go this route, please switch to the SSS2 Strategy.

    The overall equity market (e.g. S&P 500) has fully recovered. All of the strategies are again giving a bullish signal. Shown below are the results for this year and the recommended ETFs for the next period.

    Aggressive CSD-Bond Strategy (almost called SSSEquity)

    Jan. 2, 2014 CSD Return=+1.85%

    Jan.16, 2014 CSD Return=-8.24%

    Feb. 3, 2014 TLT Return=-2.51%

    Feb.18, 2014 CSD

    Total Return (including div.) YTD = -8.9%

    Please note: Please switch over to the SSSEquity2 Strategy. SSSEquity will be discontinued (see above) unless I get a lot of messages that say they want me to continue.

    Aggressive SSSEquity2 Strategy

    Jan. 2, 2014 FPX Return=+0.76%

    Jan.16, 2014 FPX Return=-4.21%

    Feb. 3, 2014 FPX Return=+6.75%

    Total Return (including div.) YTD = +3.0%

    Please note: I have gone to semi-monthly updates rather than monthly updates on this strategy

    Moderate AllAssetsExceptBonds Strategy

    Jan. 2, 2014 GURU(50%), IEV(50%) Return=+1.60%

    Jan.16, 2014 GURU(50%), MDY(50%) Return =-6.76%

    Feb. 3, 2014 MDY(50%), SHY(50%) Return=+3.22%

    Feb.18, 2014 GURU(50%), MDY(50%)

    Total Return (including div.) YTD = -2.2%

    Conservative AssetBlend Strategy

    Jan. 2, 2014 GURU(30%), IEV(30%), HYLD(40%) Return=+1.43%

    Jan.16, 2014 GURU(30%), MDY(30%), BLV(40%) Return=-2.78%

    Feb. 3, 2014 BLV(40%), MDY(30%), SHY(30%) Return=+1.35%

    Feb.18, 2014 GURU(30%), HYLD(40%), MDY(30%)

    Total Return (including div.) YTD = -0.1%

    Conservative Super Simple Savings (NYSE:SSS) Strategy

    Jan. 2, 2014 CSD(60%), HYLD(40%) Return=+1.57%

    Jan.16, 2014 CSD(60%), HYLD(40%) Return=-5.03%

    Feb. 3, 2014 IEF(40%), TLT(60%) Return=-1.83%

    Feb.18, 2014 CSD(60%), HYLD(40%)

    Total Return (including div.) YTD = -5.3%

    Please note: The SSS Strategy will be discontinued unless a lot of messages ask for it to be continued. I would advise anyone in the SSS Strategy to move to the more enhanced SSS2 Strategy.

    Conservative SSS2 Strategy

    Jan. 2, 2014 FPX(60%), HYLD(40%) Return=+0.92%

    Jan.16, 2014 FPX(60%), BLV(40%) Return=-1.25%

    Feb. 3, 2014 FPX(60%), BLV(40%) Return=+3.83%

    Feb.18, 2014 FPX(60%), BLV(40%)

    Total Return (including div.) YTD = +3.5%

    Please Note: Although the SSS2 Strategy recommends BLV for the bond this period, I would consider HYLD instead (my choice). BLV was the recommendation for Feb. 3, 2014, and then the strategy switched to HYLD on the 4th. It continued to select HYLD every day in the current period, until last night when it switched to BLV again (it beat HYLD by a whisker). The trend for HYLD, although slow growing, is very consistently increasing, while BLV is not trending well at the present time. With the threat of long-term interest rates increasing and its negative impact on BLV (and not HYLD), I think it might be more prudent to choose HYLD this period.

    Bond-Only Strategy

    Jan. 2, 2014 HYLD(100%) Return=+1.16%

    Jan.16, 2014 BLV(100%) Return=+3.19%

    Feb. 3, 2014 BLV(100%) Return=-1.60%

    Feb.18, 2014 BLV(100%)

    Total Return (including div.) YTD = +2.7%

    Please Note: See comments under Conservative SSS2 Strategy. My choice is HYLD instead of BLV this period.

    Simple Bond Strategy on HYLD/SHY - Trade on Day of 3 Day & 25 Day Moving Average Ratio Cross

    Please note: If you are interested in this strategy, I can send you the signal the day it occurs. Please send me a SA message asking to be included on the HYLD alert list.

    Buy: Jan. 2, 2014 Sell: Open Trade Return=+1.8%

    Total Return (including div.) YTD = +1.8%

    Simple Bond Strategy on BKLN - Trade on Day of 12 MDA & 3 MDA Cross

    Please note: If you are interested in this strategy, I can send you the signal the day it occurs. Please send me a SA message asking to be included on the BKLN alert list.

    Buy Jan. 2, 2014 Sell Jan. 28, 2014 Return=+0.34%

    Buy Feb.10, 2014 Sell Open Return=+0.08%

    Total Return (including div.) YTD = +0.4%

    Conservative Schwab-Free Strategy

    Jan. 2, 2014 CWB(20%), FEU(30%), IBND(20%), SCHC(30%) Return=+1.95%

    Jan.16, 2014 CWB(20%), PHB(20%), SCHA(30%), SCHC(30%) Return=-4.36%

    Feb. 3, 2014 HYMB(20%), PHB(20%), SCHH(30%), SCHO(30%) Return=+1.87%

    Feb.18, 2014 HYMB(20%), PHB(20%), SCHM(30%), SGOL(30%)

    Total Return (including div.) YTD = -0.7%

    For comparison, the total return (including dividends) Year-To-Date (YTD) of three benchmarks are presented below.

    Equity Benchmark: SPY

    Total Return (including div.) YTD = +0.6%

    Bond Benchmark: AGG

    Total Return (including div.) YTD = +1.4%

    Balanced (60% Equity/40% Bond) Benchmark: VBINX

    Total Return (including div.) YTD = +1.1%

    These strategies have been backtested over a limited timeframe and shown to produce good growth with minimum risk, but future results may be dependent on factors not considered. Use these recommendations at your own risk.

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Comments (2)
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  • thrillmn
    , contributor
    Comment (1) | Send Message
     
    Are you sure GLD is in the conservativeschwab free strategy?
    15 Feb 2014, 05:40 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (507) | Send Message
     
    Author’s reply » No, it isn't. It should say SGOL instead. I'll change it in the Instablog. I used GLD as a proxy for SGOL.

     

    Thanks for catching it for me.
    Cliff
    15 Feb 2014, 07:21 AM Reply Like
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