Hello,
Old_Skeet's market barometer opened June with a reading of 154 indicating that the S&P 500 Index was in fair value range on the barometer's scale and moved between the range of 147 (fair value) to 157 where it closed the month (undervalued). The yield on the US 10 Year had a range yield from 2.95% to 2.86% where it closed the month. Short Interest for the Index ranged from a low of 2.2 to a high of 2.3 days to cover. The percent of stocks trading above their 200 moving average ranged from 55% to 64% closing the month at 55%. The technical score reading ranged from a high of 63 to a low of 41 where it closed the month. The blended P/E Ratio ranged from a high of 20 to a low of 19.6 where it closed the month. What all this means is through the month of June more investment value developed within the Index as measured by the barometer.
The barometer drives an equity weighting matrix; and, when set to my risk tollerence score suggested and equity weighting for my portfolio of 50% at the beginning of the month and a 51% weighting at end of the month as more investment value came into the Index. In addition, seasonally stocks trend to go soft during the summer months. Interestingly, I opened the month with an equity weighting of about 52% and closed the month with a weighting of 51%. This was due in part to June being a big income distribution month for many of the investments I hold along with a drop in equity valuations for the Index (2735 to 2718).
The income distributions from many of my investments raised my cash weighting within my portfolio even though I did a little buying (around the edges) in my convertible securities fund (FISCX) and my small cap growth fund (AOFAX). My commodity strategy fund (PCLAX) had the biggest percent payout (about 4.5%) plus many of my other positions had good payouts as well. Some may remember that I started building my commodity position about a year ago and thus far I have better than a 25% total return in this position.
The earnings feed in the barometer will be reset now that we are in the month of July which starts the begining of the third quarter.
I may do a little equity buying in July; but, first I need to see how the market moves. I'm thinking we could go lower even though Q2 Corporate Earnings reporting is soon to begin tariffs seem to be the big news story of late affecting both stock and bond valuations.
Have a great summer ... and, I wish all "Good Investing."
Old_Skeet
Comments
@Sven: Likewise.
@Sven- In the effort to recover some civility here on MFO I'm going to pass on that one.
Cash is indeed part of Old_Skeet's asset allocation. Within my portfolio I have two sleeves of cash. One is for investment cash consisting of a CD Ladder and a couple of money market mutal funds. The other sleeve is for demand cash targeted for investment puropses and also for disbursement when necessary. Generally, I take no more than one half of what my five year average total return has been. In this way, I grow principal over time.
Thx for the Update.... Please kindly list your three top holdings in your portfolio if you Don-t mind. Thx
Before I get to the questions I felt some may want to know the barometer reading as we close out the first week of July. It came in at 155 which includes the reset of the earnings feed as some of the other feeds changed as well. Still the barometer scores the 500 Index as undervalued (but, just barely). In addition, I have provided a link below as to how Morningstar scores the market.
http://www.morningstar.com/market-valuation/market-fair-value-graph.aspx
For @Sven's question ... Do I have a range for my cash sleeves? Yes, my range for cash held outside what my mutual funds hold ranges from a low of 10% to a high of 20%. Currently, I am at 10% in my cash investment sleeve consisting of my CD Ladder and savings (money market funds). In my demand cash sleeve I am at about 5%. This is the sleeve that I maintain for investment purposes and for quarterly income distributions when necessary.
For @LLJB's questions ... Why the goal to grow principal over time? Mainly to offset the effects of inflation and to stay ahead of it as well. In addition, should a downdraft come (decline of 10% or more) it does not sting as much when I do a look back to prior valuations as I have grown my principal. This is important when taking distributions. Let's say the market drops 10% as measured by the S&P 500 Index and my portfolio drops about 5%. With a distribution rate of 3% this could result in a portfolio decline of about 8%. As the market recovers I stand a good chance of getting back to even by deploying some cash for investment purposes in the faster moving market currents. In the past, this has been my plan of action and what I have done. Since, my portfolio generates more income than needed I buy around the edges with excess cash.
For @johnN's question. What are your top three positions? My top three positions size wise are AMECX and FKINX at about 6% each followed by CAIBX at about 5%. Each of these are long term positions dating back many, mnay years one to my mid teenage years. From a performace perspective, my top three positions year-to-date are AOFAX, SPECX and FISCX.
In closing now being in retirement I run an all weather asset allocation with my Cash area having a range of 10% to 20% currently at 15% ... my Income area having a range of 30% to 40% currently more towards 30% ... my Growth & Income area having a range of 30% to 40% about 35% ... and my Growth area having a range of 10% to 20% currently more towards 20%. Today, an Xray analysis bubbled (net %) cash at 18% (including what my funds hold) ... bonds at 25% ... domestic stocks at 32% ... foreign stocks at 19% and other assets at 6%. Since other assets consist mostly of convertibles when combined with bonds equals my above income allocation at about 30%. Having ranges within my asset allocation gives me the flexability to do some positioning from time-to-time. Currently, I am underweight in my income area by about 5% and overweight in my growth area by about 5%.
Again, thank you for your questions. I hope my answers are in some way helpful.
Old_Skeet
I close out each month on the last Friday with the exception being my year end close which is done on the last market day of December. This month's close came on Friday July 27th.
I'll open this months barometer report with the question. Is investing a learned art or a science? I'm thinking it is both as the barometer helps me put some science with the learned art (skill) of investing. Perhaps, others might have some comments they would like to share on this subject.
Old_Skeet's market barometer opened July with a reading of 157 indicating that the S&P 500 Index was undervalued on the barometer's scale and moved between the range of 157 to 151 where it closed the month at fair value. The yield on the US 10 Year had a range from 2.82% to 2.96% where it closed the month. The 2/10 US Treasury yield spread continued to narrow through the month and moved from 0.32 down to 0.29. Short Interest for the Index ranged from a low of 2.1 to a high of 2.8 days to cover where it closed the month. The percent of stocks trading above their 200 moving average ranged from 55% to 66% closing the month at 66%. The technical score reading ranged from a low of 41 to a high of 66 where it closed the month. The blended P/E Ratio ranged from a low of 18.8 to a high of 19.6 and closed the month at 19.2. Remember the earnings feed was reset as we opened July. What all this means is through the month of July the Index moved from being undervalued to currently being fair value as measured by the barometer. During the reporting period the Index gained 3.7% (2718 on 6/29 market close to 2819 on July 27 market close).
The barometer drives an equity weighting matrix; and, when set to my risk tollerence score suggested an equity weighting for my portfolio of 51% at the beginning of the month and a 49% weighting as we closed the month. Currently, I am at about 52% equity (a little overweight and not reducing) due to a seasonal trend investment theory. Interestingly, all of the areas of my portfolio were up including the cash and income areas but most of the gains came from the growth & income and growth areas.
During the month of July I did no buying and let all my mutual fund distributions roll to the cash area of my portfolio due to a decline in the investment value as measured by the barometer. Generally, a higher barometer reading indicates there is more investment value in the Index over a lower reading.
Now that we are again approaching all time highs for the Index I'm thinking that once we get through earning season the Index will perhaps pullback and thus present a better buying opportunity as we move into early fall; and, then turn upward after midterm elections. Anyway, this is how I am planning to play it. I'll let my equity weighting matrix assist me with my call as how to position the equity allocation within my portfolio along with a seasonal trend investment theory.
Thanks for stopping by and reading.
I wish all "Good Investing."
Old_Skeet
I’d liken investing more to driving. Once you master some basics (often by imitating the behavior of older drivers while young), than 90% or more of the time you’re relying on basic learned instincts. No need to think about steering, braking, yielding right of way, etc. For anyone whose been driving a while most everything is instinctive. I suppose that’s science - but awfully simple science.
I think the same may apply to investing. Many here have an investment template, schematic, model, diagram (or whatever else you want to call it) that evolved and matured slowly over time (as did our driving skills). So, 90% of our job as investors amounts to making sure we’re in sync with that program (similar to keeping your eyes on the road while driving).
- I’ll allow that many here like to play “around the edges” with maybe 5-10% of invested assets in pursuit of some additional gain. I suppose that’s where some would apply the term “art.” In my own case it’s “gambling.” And it can be fun.
Regards
But more advanced Science intrigues me, fascinates me. It has the feel of exploring the edges, new horizons. What if THIS idea is correct? It was an amazing revelation for scientists to realize that black holes are not rare. They're at the center of almost all known, formed, developed galaxies. Those experts can take known facts and use them to ask NEW questions, to find out about more stuff, and ourselves.
In the context of Old Skeet's question, "Art" cannot be a creation disconnected from everything else, like non-representational art. The art and science of investing must go hand-in-hand, I think. There's more than one way to skin a cat. I do appreciate your use of "instincts." That has the sort of feel I'm looking for, too.
Some folks, surely, are totally fact-driven and rely on the technical side, and occupy themselves with the statistics. And ONLY that stuff. I want to introduce the term, "intuition" here. Those of us for whom this is an actual, very real, dominant function of personality may not always be able to tell anyone else just HOW we came to the right conclusion to a given question or problem. We can "read people" very well, looking at more than just the spoken word. And we can analyze Systems better than others. I can create my own investing system. Though I want to KISS it, of course. I can learn to see how the Big Picture works, without getting bogged down in the day-to-day stuff. Surely, that can serve me well, when it comes to investing. This is an interesting question.
Thanks to you both for making comment on my question. "Is investing a learned art or a science? My perspective is that it is a combination of both becoming a skill. The below link will expand this concept in more detail and explain the different parts that make up a skilled investor.
http://mastersinvest.com/newblog/2016/7/22/investing-art-or-science
After reading the article please revist this months barometer report and see if you can pick out what part comes from science, what part come from art and what part comes from a learned skill.
In next months report the summer series which will combine June, July & August recaps I'll comment on this a little more in detail as what part comes from science and what part comes form art and how when combined becomes a skill.
Now it's time to do your reading assignment (homework) before the next report gets posted. In the meantime, fill free to make any comments or ask any questions you may have.
Thanks again for stopping by and reading.
earnings-and-stock-market-valuations
For those that might have missed reading my daily thread "Three Things of Investment Interest" I recently covered the charting I use along with some blurbs about the barometer and its equity weighting matrix. If interested in reading these simply troll back through the stack.
I plan to continue this thread under a new title for the fall investment season which opens on Tuesday September 4, 2018 and will run through November. The thread "Three Things of Investment Interest" will be no more and has now become history.
Thanks for stopping by and reading.