Tuesday, March 04, 2008

Another month in drawdown. This is where the lesser experienced would begin to question the validity of their system. Has something stopped working? Did the market change? If you design your strategy based on a helter skelter of methodologies...you may have a point.

But, if you build your system based on capturing the market's inherent behavior: stocks can exceed 100% returns but never exceed 100% loss (unless on margin). Then you know when the market turns south...you'll turn south. Nothing you can do but weather the storm. The fortunate thing is you have allocated your money based on this knowledge...that there will be storms. And you must wait for the storm to pass...the skies to clear...and the markets to return.

Below are the sector breakdowns for the portfolio. The cash level increased 35% from last month's level. Again, the increase in cash will reduce the portfolio's drawdown should the market continue to stall. But, decrease our returns should the market recover.


In fact, you can see in the chart below the difference the cash level is making to the portfolio.
February's drawdown is beginning to slowdown in comparison to the benchmark. As we move further and further into the market's downturn...the portfolio will begin to break off from the benchmark due to the rising cash level.

This rising cash level is due to 29% of the portfolio's positions hitting trailing stops since Jan 1st. In that same timeframe, our new new positions increased by 4%. Is this good or bad? Neither. Just the way the market works.

On a side note...the weather here in Missouri is toying with us. You can tell spring is trying to push it's way in...but the winter isn't giving up without a fight. Crazy thing to be riding bikes in short-sleeves one day and bracing for snow the next. Markets and weather...what fun.

Later Trades,

MT

Labels: investing, portfolio

Sunday, February 03, 2008

I would like to have done a better job at my first portfolio performance post. But, I'm afraid I've been extremely busy at my day job. So, please be patient. My hope for future performance posts is to include much more information about the returns and portfolio breakdown.

One of the difficult items I've found in preparing for posting of portfolio performance is the lack of good tools. I've tried quite a few products the past few months and was about to give up hope until I found Icarra. Sweet product. One of the hardest things to create is a simple product. So many developers miss the mark...the tendency is to focus on the bells and whistles. Icarra hits the mark with it's great charts, sector breakdowns, and ease of trade entry.

This is a good segway into developing a portfolio. As an investor, you have unlimited choices. Question to ask yourself...do you focus on the bells and whistles? Or do you hunker down and keep your choices simple...your strategy simple. If you find yourself changing your portfolio on every market downturn just because you feel like you should be doing something...then maybe it's time to refocus. Are you really improving your portfolio returns? Or just keeping yourself busy?

Now, back to portfolio performance. There are some things to note. I have not entered my actual entry prices into Icarra. Just too much data to sift thru in order to accomplish that. Instead, I have entered all the positions as if I bought them on the last day of 2007 (12/31/2007). From this point forward I will enter all sells, new buys, dividends, interest, etc. into Icarra. But, keep in mind...all performance is based on the clean slate of 2008.

Below is the breakdown of sectors in the portfolio. This is one area that I found some differences in the chart and the actual breakdown in Icarra. But, useful nonetheless. I'll contact Icarra to find the reason for the difference and post in the next performance release.


You can see, I now have a very large cash position in the portfolio. I don't like this, I have to admit. This will cause the portfolio to lag should the market gain back momentum. But, this is the normal process of the system. During market downturns like we've had...the trailing stops are hit and the bugs in the portfolio are killed. Then we have the waiting game for new signals. The goal, of course, is to be 100% invested in the market...that is what generates our returns. But, all seasons have their winters...and this is where we bundle up and wait for the ice to melt.

Another area I want to point out in the sector breakdown is the lack of consistency in the sector weightings. My goal is to have a better balance in the sector weightings. These sector weightings cannot always be controlled due to the nature of the system's signals. Some sectors may be very cold and other sectors can be very hot. Based on the weightings above, the services sector was pretty hot for 2007....and have held up relatively well in the portfolio during our bug killing in the recent market downturn.

Finally, I want to review the monthly returns of the portfolio...

Pretty large differential between the portfolio's monthly returns and the S&P 500's. The system is more volatile than the market and as result drawdowns and gains are larger. This is par for the course with trend following systems in general. It takes a lot of patience to trade a trend following system. Especially, a long-term trend following system. But, I truly believe, that's where the returns are in the long-term.

Can this be improved? Possibly. There are ideas I have yet to test that could trim the portfolio's volatility. And hopefully, I'll get a chance to test these ideas in the months to come.

If you have any questions or would like to see other aspects of the portfolio...drop me a line.

Later trades,

MT

This post is for information and entertainment purposes only. Under no circumstances does this information represent a recommendation to buy or sell securities or any other type of investment instruments.

Labels: investing, portfolio

Wednesday, January 16, 2008

The last spike of the transcontinental Railroad is driven at Promontory, Utah in 1869.

"Look at a stone cutter hammering away at his rock, perhaps a hundred times without as much as a crack showing in it. Yet at the hundred-and-first blow it will split in two, and I know it was not the last blow that did it, but all that had gone before." -- Jacob A. Riis

MT

Labels: quotes

Sunday, January 06, 2008

"Risk is trying to control something you are powerless over." -- Eric Clapton

Hope your first week of the new year was a good one. I've spent a bit of time planning out the new year (talk about your risk). One of the first items on the agenda is a visit back to Texas to see the family. In addition, some changes will come to the blog.

My testing platform development is coming to an end and I should have more time to research and discuss portfolio ideas/strategies. So, each month I plan to review my personal portfolio composition: returns, drawdowns, sector breakdowns, you get the picture. The first few postings will be a bit raw...but hopefully over time they will improve as will the returns.

Later Trades,

MT

Labels: quotes

Tuesday, January 01, 2008

"I sometimes meet people who say, I'm going to be this and I'm going to be that. You feel kind of bad for them because they're limiting themselves. It's different from having an enthusiasm for something and seeing where life takes you. I feel lucky to never have planned to go into what I did. I always said, "All I want to do is make things, whether it's drawing or writing." If I'd said, "I'm going to be a director," it probably wouldn't have happened." -- Tim Burton

Tim's quote is a great one to start the new year. Focus on what you enjoy and let life handle the details.

Happy New Year!

MT

Labels: quotes

Wednesday, December 26, 2007

"Pick a mountain in life to climb and don't stop til' you reach the top. When you reach the top...be lookin' for the next mountain to climb." -- Life philosophy of Helen Taylor

My Mom died 6 years ago today. I lost track of the times I heard from her, "climb that mountain", when life turned difficult. And the many times I responded, "I'm tired of climbing."

Never would have thought her mountain mantra would have such an impact in my life. That recalling those nagging words would continue to push me forward in life. Even after she's gone.

Still an inspiration, after all these years.

Thanks, Mom.

Mike

Labels: mom, quotes

Tuesday, December 25, 2007

The picture above is from December 2006. Our first snow in Missouri. There is a bit of snow on the ground today...but quickly melting. We may have more snow tomorrow.

Hope everyone is having a great Christmas. I've spent my time drinking coffee my daughter gave me and putting together all the presents for the kids. Next step is grilling some nice tenderloins wrapped in bacon. No thoughts about the markets or programming. Just kicking back and enjoying the day.

Oh, and very thankful for the great gift a friend of mine gave me last year. I've never owned a cordless drill before. A friend of mine felt sorry for me and gave me a full set of Dewalt cordless power tools. All these years I've been cussing at putting toys together...until now. Wow, what a difference Dewalt makes. Thanks, buddy!

MT

Labels: christmas