Rutherford Portfolio Review (Tranche 3) – 29 October 2021

Dessert Flowers

US Equities hit new all-time highs on Friday and closed the week ~1.3% higher than last week’s close:

We are still in an upward trend channel after breaking the downtrend a little over two weeks ago and breaking above resistance at ~4545 last week. We’ll see if this trend continues or whether we roll over to re-test former support/resistance levels. A little surprising is the increase in Implied Volatility (bottom pane) over the past few days as prices increased only modestly. Normally we see lower IV as prices edge higher and higher IV on price drops.

If we compare the performance of US equities relative to other asset classes over the past week:

we note that US Treasuries (TLT) was a stronger performer. Again, this is a little unusual in that we might expect equities and bonds to be less correlated. Commodities lost a little steam this week after a month or so of very strong performance. Emerging Markets were the weakest asset class.

Current holdings in the Rutherford tranches look like this:

as we try to re-build the portfolio after getting stopped out of just about everything ~3 weeks ago. This week week we focus on Tranche 3 that has a small holding in DBC with the balance (~$19,000) in Cash.

First, a check on portfolio performance:

where we can see that, despite adding shares over the past two weeks we are falling behind the benchmark AOR fund. Like the Kahneman-Tversky portfolio, the Rutherford Portfolio has been hurt by the use of TSLOs even though we have not had to wait a month to re-enter the markets.

So, let’s check the rankings and recommendations from the BHS model:

where we see a Buy recommendation for VTI and a Hold recommendation for DBC.

As usual, we’ll check the rotation graphs for the Rutherford assets:

that confirms the strength of Commodities (DBC) over the past month – although it is beginning to show signs of turning over and weakening slightly in the short term.

Removing DBC from the picture so that we can see the rest of the assets:

we see VTI and VNQ rotating back into the desirable top right quadrant with strengthening short- and long-term momentum.

Translating into recommendations from a rotation model:

we see the same recommendations that we’ve seen for the last 2 weeks with Buy recommendations for VTI, VNQ, DBC and the benchmark AOR fund. As for the past 2 weeks I’ll follow these recommendations and adjust as follows:

I’ll continue to use 1.65 SD TSLO’s for downside protection and to keep portfolio risk at ~5%.

David