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September 29, 2008

Portfolio Update
by Bill Rempel

Given the large move in the markets, I thought it prudent to give a mid-week update.

Of the various mechanical portfolios, the Timing one is now doing the best YTD, with half in cash and one-fourth in Ts. I don't think it'll hit a Fear/Greed signal anytime soon, based on the extreme index volatility over the last few months. The VIX would have to hit unprecedented highs, 50+, in order to trigger that shift right now. Later, after things calm down, perhaps. On the other hand, perhaps the VIX model is broken, given the explosion in options "volatility" in industry-specific names and the newly widespread usage of inverse ETFs. On the third hand (!?!), how broken could it be, since it's been mostly in cash for 2008 to date? The Timing model certainly did better than my intuition would have done this year.

Rotational held up second-best in today's action, with it being pretty heavy into a variety of bonds since the last update.

The Aggressive portfolio fell quite a bit less than the overall market, but will probably still hand me the worst calendar month since the pre-mechanical days of May 2006 and the overly long gold, copper, steel portfolio. Since the backtest on Aggressive was run on transactions every fourth week, and it's already closed out a period, the last four-week segment stands as only the sixth-worst in test, and today's performance goes on the next four-week segment.

Fundamental's performance was about in the middle of the pack for the group of portfolios.

Only the Value portfolio had a drop coming anywhere close to the move that the S&P 500 took.

It certainly will be an interesting market going forward.

The various tracking portfolios will continue to execute on schedule, making moves once every four weeks, with the exception of Timing, which will execute whenever it gets a signal after the close of trading.

Personally, I will continue to trade the Aggressive plan with my own money, and will look to add capital to the trading account depending on how the market looks in the next weeks.

Bill Rempel
The Rempel Report

Disclaimer: Nothing at The Rempel Report, or any communication from The Rempel Report or its author, should be construed as personal advice, on investing or anything else, and at all times you are responsible for your own actions and you should perform your own due diligence. I'm not an investment professional, and you should probably consult with one, in addition to doing your own due diligence, before making any investment decisions.

I may have a beneficial position in any potential investment I mention. My positions in, and opinions of, those potential investments may change over time. I have no obligation to reveal those positions, and if I should reveal those positions, I am under no obligation to notify you, though this site or through any other means, if I change those positions.

While I do try to verify much of the data presented, I can make mistakes. I rely on third party vendors for data, and sometimes that data could be incorrect. Therefore, I cannot and will not be held liable for incorrect or erroneous data presented in text, table, chart, or other format. This is one more reason why you should consult with an investment professional, in addition to doing your own due diligence, before making any investment decisions.

Modeling is prone to error, and no statistical model is perfect. The output from statistical or predictive modeling should be viewed with skepticism.

Fundamental analysis is based on examinations of company filings such as income and cash flow statements, balance sheets, quarterly and annual filings, proxies, and other such items. Even though a company appears fundamentally sound today, that doesn't imply they actually are, or will remain, fundamentally sound. Fundamentals can change over time, and there is always the possibility that the company filed information that was either fraudulent or incorrect. I might make an oversight or error when examining company filings. In many cases, I will rely on a third party's presentation of filing data, such as a stock screening program's output, without actually reviewing the filings personally.

Technical analysis is based on the study of historical price, volume, and sentiment data over time. Past performance is no guarantee, and there are no certainties hidden in patterns, charts, indicators, or formulae.

FundaTechnical analysis involves those items which mix elements of Fundamental and Technical analysis, including valuation metrics such as the Price/Book or Price/Earnings ratios. Therefore all the warnings for both Fundamental and Technical analysis apply.

Take responsibility for your own actions. You should consult with an investment professional, in addition to doing your own due diligence, before making any investment decisions.

Copyright © 2005-2008 Bill Rempel

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