Thursday, July 21, 2016

Performance Evaluation - July 20, 2016

As expected, Bond and Gold markets are taking a breather and so is the portfolio. As you know nothing goes up in a straight line. Although one can time the market on a shorter term time frame, it results in heavy tax implications. And therefore, the balance between long-term investing and market timing/tactical allocation, is a delicate line.

Furthermore, markets are supposed to be treated as a place where one can grow their wealth by investing in other people's ideas and innovation, so that the global wealth grows, lives improve and you reap the benefits. It is not supposed to be a stressful environment. Therefore, long-term investing demands patient, persistence and following longer-term stories to ride the waves.

Over the past 2 weeks, the waves of Gold and Bonds are declining, while wave of the stock market is gaining momentum. In fact, our proprietary model just triggered a buy signal in the stock market, which has prompted a shift in asset allocation.

We believe that over time, portfolio will come back in a very sharp manner. At the moment, portfolio is up ~22% YTD, while SP is up ~7.5% YTD with a Beta of 0.04. This suggests that the portfolio is generating totally uncorrelated gains and is not dependent on whether the stocks rise or fall.

At this time, there is a lot of confusion in the markets. Many pundits are ignoring the rally, while others are stating this as a bull-trap. There is a huge cash pile on the sidelines because fund managers have believed that a major recession is about to hit the US. Therefore, under these confusing times, it is best to stay with a time-tested model and prepare for the next leg-up in the assets held in the model portfolio by the grace of Almighty.

Monday, July 11, 2016

Performance Evaluation - July 8, 2016

Portfolio keeps out-performing the market by the grace of Almighty. YTD the model is up ~26%, while SP500 is up ~5.4%.

This performance is amplified in the aggressive portfolio, which is now up ~61% since January 1, 2016.

The basic tenants of out performance are:

1- Staying away from Stocks since September 2015
2- Having a well diversified portfolio in bull markets assets

These classifications of whether an asset class is in a Bull/Bear market is determined by proprietary models. Once you are on the right side of the market, gains will accumulate over time.

Monday, July 4, 2016

Performance Evaluation - July 1 , 2016

As we approach the mid-year mark, its a good time to reflect on the performance of our proprietary model based portfolio and the markets.

Last six months were one of the most eventful months that I remember in the markets. The year started with a bang, with the world markets anxious about free fall in oil prices and the associated bond market issues. Some were equating market behavior to Lehman brothers. But then the market came roaring back and many market participants were caught off-guard.

All of this happened at a time when a unique U.S. presidential race was going-on in full-steam. As the race for nomination winded down with some clarity, markets started getting anxious about potential Fed rate hike. Such eventful 5 months cam to a climax with the surprise Brexit vote. A vote which resulted in a precipitous market decline for 2 days, followed by sharp reversal last week.

After all was said and done, the SP500 (including dividends) gained 4%. Although this is an impressive performance under uncertain circumstances, it required investors to endure a lot of massive market gyrations. Investors also had to believe in the ability of the market to rally, in front of daunting economic and geo-political odds.

On the other hand, our proprietary model was up ~23% in the past 6 months. These returns were amassed through strategic positioning, pro-active risk management and statistical analysis based portfolio allocation.

Portfolio allocation might change over the next few weeks, as new market data comes out. But overall, the model portfolio has handsomely beaten the market in 2016. A aggressive version of this portfolio, utilizing leverage and exotic asset classes, is up ~50%. We will share results of the leverage portfolio after more data points are gathered.

The portfolio utilizes an algorithm that fuses together multiple market analysis strategies to define optimum portfolio allocation by assets. One of the key proprietary model is "Market Classification Algorithm." We will share the importance of Market Classification Algorithm in the next blog post.