12 Apostles Rock Formations – Port Campbell National Park, Great Ocean Road, Victoria, Australia.
After trading in a 300 point range for the past 2 months, and starting the New Year with a push to new all-time highs is the first half hour of trading on Monday it was all downhill from there, sparked by hawkish comments from Fed Chair Powell on Wednesday, with US equities ending the week ~2.5% lower than last week’s close:
SPX 4600 looks like a strong support area – but we’ll have to wait and see.
Compared with the performance of other asset classes:
this falls in the middle of the pack – but only Commodities showed gains on the week – presumably due to continuing strength in the Oil sector (https://itawealth.com/hindsight-is-2021-a-year-end-retrospective-and-lessons-for-2022/).
Performance of the Rutherford Portfolio:
reflected this overall weakness in the markets based on current holdings:
In Tranche 3 (the focus of this week’s review) we are invested in TLT, GLD and the benchmark AOR Fund with minor holdings in DBC and VNQ and ~$5,000 in Cash.
Current rankings and recommendations from the BHS model look like this:
with a Buy recommendation for DBC and Hold recommendations for VTI, VNQ and GLD. AOR is a discretionary Hold? recommendation (no strong reason to Sell). TLT is a recommended Sell.
Checking the rotation graphs:
we see the significant movement of DBC and clockwise rotation towards the desirable top right quadrant. Everything else is looking pretty weak.
Recommendations from a rotation model look like this:
with only VNQ showing as a Buy and TLT recommended as a Sell.
Based on the above, I will adjust my positions in Tranche 3 as follows:
i.e. I will sell 32 shares in TLT and Buy 41 shares in VNQ and 220 shares in DBC.
David
Hello David.. Regarding your decision to buy more DBC. I have owned it for several weeks now and, for the most part, it has been going vertical. I am mindful of the adage to “let your winners run” and am in no hurry to sell what I currently own. BUT, my Loss Averse Bias is nipping away at me and yelling at me not to buy more. How do you handle this? At what point does some-
thing have such a positive run and become so overbot that you will pull the reins in. Thanks John
John,
Good question. One of the advantages of tranching is that we can “leg” into and out-of positions. With Max Assets set to 4 I might expect to hold up to ~25% in any individual ETF in the total portfolio (and remain comfortable). At the moment I only have ~$10,000 (10%) invested in DBC – so it doesn’t worry me too much adding an additional 5% – I’m still well within the 25% level where I might be getting nervous. If DBC turns around and goes south so as to generate a Sell signal next week I can always sell the shares that I am holding in Tranche 4. It doesn’t have to be “all-or-nothing” if one is prepared to “trade” a little in order to “invest”.
After recent strong performance there is always the possibility of “reversion to the mean” – but there’s also the possibility that the trend will continue and we should “let our winners run”.
So, what is the maximum (strategic) allocation you are prepared to put into DBC? Are you there yet? – or are you oversubscribed to the point where you are uncomfortable?
Who’s the shrink here? lol 🙂
David
David. I found his reply particularly helpful. Thanks John
1 SD TSLOs hit on VNQ – sold 197 shares
David