Weekend Sept 9 2012
I was just listening to a Sunday morning investment program on the local Talk Radio. The fellows did not seem to have any particular strategy for investing as we do at TMP. Rather they , like most in the media, attempted to link various news events to what 'might' happen and then if it does, one needs to jump on board.
For this week they were pondering the implication of QE 3. To their credit they did note that all this stimulus had not created any job. They missed the fact that it has caused world wide speculation in real estate which will be a factor in the next market downturn. They went on to speculate about some vote in Europe on thursday. But....
The Euro is breaking out, Spanish and Italian bond yields are down, EWI is rallying, that is the information one needs, not what a bunch of politicians might or might no do.
And to their credit they mentioned the same thing we have noted. They pointed out that the HFI Performance Index for the year has only returned about 2.5%. I am not sure which index of the many on this lnk but one can scan the list and see lots of red. My point and theirs is that the funds must show to investors they are on the winning side with their month end holdings. Note one of the few winners for Hedge Funds was bonds. They will be bailing to get in on the commodity and stock boom this September.
It helped focus my mind on how to explain TMP strategy in our upcoming iBook. IN a nutshell we
Identify whether we are in an 18 year bull or bear phase for the economy.
Then further quantify that into whether the markets are in risk on or risk off mode, looking for the next extreme. Is the money flowing to the Dollar and Bonds or to stocks, gold, oil.
Such extremes are much easier to spot using the internal action of the market with the McClellan Oscillator, Summation index, A/D Line and Volume, and various High Low Indicators.
Using order placement techniques below the market to buy and above to sell are part of the strategy of buying low and selling high.
Social mood indicators can help verify where we are in the cycle. Insider buy and sell transactions are also helpful. The longer term weekly and monthly charts indicate potential extremes and are also valuable in measuring whether we are at an extreme. Comparisons with similar periods of stagnation can give important clues about when social mood extremes are achieved.
I will reflect on such an historic occasion in my next post.