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Selections For June 2019

Summary

The ELVS selection for June is NHMAX with VFIIX a strong second.

The selection for the weekly-updated MDBS_ETF is HYD. This strategy has performed well in 2019, returning 5.0% YTD.

For June, the strategies are picking high yield municipal bond assets and mortgage-backed securities. High yield corporate bonds are showing strong negative momentum.

My Schwab accounts show I am up 4.1% YTD. In my Vanguard accounts, I am up 3.0% YTD. So far, so good in 2019.

Give a portion to seven, or even to eight

for you know not what disaster may happen on earth. (Ecc. 11:2)

Please refer to a previous blog (posted December 23, 2018 on my SA Instablog) as background for my strategies in 2019. Links to Portfolio Visualizer for each strategy are included in the December 23rd blog post. Free, easy-to-use spreadsheets of three of my strategies (Original ELVS, DF_ELVS and ULVS) were developed by Greg Katai, and they can be downloaded at this post.

Well, these are perilous times in the stock market, to say the least. And even more turmoil occurred on Friday with Trump pronouncing tariffs on Mexico. Treasury yields are dropping quickly and there seems to be a flight to the safety of treasury bonds. Global and U.S. growth seems to declining, and the Federal Reserve might need to step in to help the economy. We have gone very quickly from a Fed policy of increasing overnight rates, to neutral, and now to a large possibility of decreasing overnight rates.

In May (in hindsight), the assets to hold in my bond strategies were high yield municipal bonds and mortgage-backed /GNMA securities. The assets not to hold were high yield corporate bonds (primarily) and senior floating rate loan funds (secondarily). Owning high yield corporate bonds like WHIYX in May 2019 was similar to holding it in October 2018, i.e. the fund was selected and then its price turned south right from the very beginning of the month. WHIYX was selected for May by the ELVS strategy, and it proceeded to lose 1.37% for the month; the loss started from day one and escalated as the month continued.

I hope you learned from October 2018 that you need to put a stop loss order (at least mentally) on an asset during the month; I actually sold WHIYX on May 23rd. For the case of original ELVS, you will remember that the May selection was very close between WHIYX and NHMAX, and if you followed the daily signals from Portfolio Visualizer, the selection turned to NHMAX on the second day of May and never looked back. I actually bought both NHMAX and WHIYX for May, so May turned out O.K. for me. I'm actually thinking about reviewing all of my strategies on the 10th trading day of the month (via the daily signals from Portfolio Visualizer), and adjusting my selections based on these findings. 

On the positive side, high yield corporate bonds certainly did better than equities in May. Once again, owning equities proved to be way too volatile for me. I'm just not going to do it any more. So I am dropping the VAA-G4 strategy from now on (for my personal investing). I'm going to stick with bond strategies only. 

Here are the June 2019 selections for my strategies:

1. Original ELVS: NHMAX (100%, overall ranking = 1.0) with VFIIX a strong second (overall ranking = 2.0). In May, ELVS held WHIYX and lost 1.37%. If you purchased both WHIYX and NHMAX for May (remember, NHMAX was a very close second in May), then you would have come out with a positive month because NHMAX gained 1.79% for the month. And if you sold WHIYX anytime during the month (see above), you would have been better off. 

2. DF_ELVS: NHMAX (50%) and MMHAX (50%). VFIIX comes in third. In May, DF_ELVS owned WHIYX (50%) and DSIAX (50%) with NHMAX a very close third. The overall May rankings were 1.98, 2.00, and 2.02 for WHIYX, DSIAX, and NHMAX respectively. In May, DF_ELVS lost 0.93%.

3. ULVS: NVHAX (100%) with LEXNX a very close second. In May, LSFYX was the selection with NVHAX a very, very close second. ULVS lost 0.25% in May. 

4. VV_ELVS: VFIIX (100%) with VWAHX a strong second. In May, VV_ELVS owned VWAHX and gained 1.61%.

5. Weekly MDBS_ETF: HYD (100%). In May, MDBS_ETF owned HYD all month, and earned 1.56% for the month. This is the best performing strategy, with a YTD return of 5.0%.

6. VAA-G4: IEF (100%). VAA-G4 owned VOO (50%) and VWO (50%) for May, and it lost 6.4% for the month. As with all equity strategies, VAA-G4 can be very volatile. YTD return is now only +0.1%. For the past year, it has lost 0.2%.

7. Weekly LSFAX/LSFYX Strategy: VMBS (100%). This strategy owned LSFYX all month in May and it lost 0.25%. On Friday, the price of LSFYX crossed the 35-day SMA for the first time in awhile.  

Please let me know if I made any mistakes.

Overall, the strategies did not do well in May. But if you owned any high yield muni funds (like NHMAX or NVHAX), and you sold high yield corporate bonds during the month, the month turned out to be somewhat profitable. Also, I didn't own the VAA-G4 strategy in May, so I escaped the large equity losses.

For June, it looks like high yield munis and mortgage-backed securities are the way to go. Avoid high yield corporate bonds and senior floating rate loan funds.

In my Schwab accounts, based on my own personal money I am investing, I am now up 4.1% YTD, while in my Vanguard accounts I am up 3.0% YTD. So far, so good this year. These YTD returns translate to about 9% on a yearly basis (I have more money in Schwab than in Vanguard). I am seeing slow and steady growth, just like what is expected in our low volatility approach. I am very thankful.

Cliff