Monthly Archives: September 2020

Beware the (Gold Stock) Ides of October

Is there even such as thing as the “Ides of October”?  Probably not.  But perhaps there should be.  At least when it comes to gold stocks.

First a great big caveat: Seasonality overall has not been as useful in 2020 as in previous years.  So, there is no reason gold stocks cannot register a meaningful gain in October of this year.  But investing and trading is as much a game of odds as anything else.  And the odds, generally speaking, are unfavorable for gold stocks in the month of October.

Gold Stocks in October

We will use Fidelity Select Gold (FSAGX) as our proxy as there is monthly data going back to 1986.  Figure 1 displays the cumulative return an investor would have achieved by buying and holding FSAGX every year since 1986 ONLY during the month of October. For the record, the result to date is a loss of -78%.

Figure 1 – Cumulative %+(-) for FSAGX only during month of October; 198-2019

Things to note:

Figure 2 – Relevant Facts and Figures

Figure 3 displays year-by-year total return results for FSAGX during the month of October.

Year% +(-)
Oct-86(1.4)
Oct-87(29.2)
Oct-881.0
Oct-891.0
Oct-90(16.4)
Oct-917.7
Oct-92(3.0)
Oct-9314.9
Oct-94(7.2)
Oct-95(12.1)
Oct-96(2.7)
Oct-97(15.3)
Oct-98(3.0)
Oct-99(8.4)
Oct-00(11.0)
Oct-01(1.9)
Oct-02(10.5)
Oct-039.6
Oct-042.6
Oct-05(5.7)
Oct-063.7
Oct-0712.1
Oct-08(35.3)
Oct-09(4.4)
Oct-101.9
Oct-116.7
Oct-12(3.1)
Oct-13(0.7)
Oct-14(17.9)
Oct-157.6
Oct-16(7.3)
Oct-17(3.4)
Oct-181.2
Oct-192.9

Figure 3 – FSAGX in October Year-by-Year; 1986-2019

Summary

In the current market environment, there is no reason that gold stocks cannot rally substantially to the upside in the month ahead. 

Gold stocks (using FSAGX as a proxy) have showed a gain in each of the last 2 Octobers and have done so 38% of the time.  So, the proper way to look at the data above IS NOT to say “gold stocks are doomed to fall in the month ahead.”

The proper response is to ask yourself the question, “is this where I want to allocate money right now?” 

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

What’s Up with Silver? Part II

On September 14th I posted a piece titled “What’s Up with Silver?”  It detailed a “potentially bullish” setup for silver that included:

*A bullish daily Elliott Wave projection

*A bullish weekly Elliott Wave projection

*A positive seasonal trend

*A lack of over exuberance among silver traders

Sure, sounded good.  Since then – and as you can see in Figure 1 – the bottom has dropped out for silver.

Figure 1 – Silver plummets (Courtesy ProfitSource by HUBB)

Now back in the day I might have been embarrassed to write an ostensibly bullish piece titled “What’s Up with [Whatever]?” only to have [Whatever] completely fall apart immediately thereafter.  But here are the important parts:

First:

*There is a critical distinction between identifying a “potentially bullish” situation and actually risking money

Second:

The trading process – at least for me – involves:

*Identifying a potential bullish or bearish setup

*Identifying a catalyst or trigger

*Making a trade

The original article covered only Step #1 of the trading process – identifying a setup.  The closing sentences from the 9/14 piece stated, “But if one was considering making a bullish play in silver, it may be getting close to time to do so.  My favorite play would be something using options with a relatively low cost and low dollar risk.  Stay tuned…”.  In other words, no action is warranted at the moment, let’s see what transpires.  Well now we know:

*Spectacularly, ridiculously, (almost) embarrassingly wrong in terms of direction and timing. 

*But the setup was there, so as a trader the proper response is to prepare to make a trade

*At the time (although I did not mention this specifically in the original article) I was looking for a breakout of consolidation to the upside as a catalyst to make a bullish trade

And then BLAM – the bottom drops out.  As a trader I put this down as “No Harm, No Foul”. 

So, is that “The End”?  Not for me.  As you can see in Figures 2 and 3, the daily and weekly Elliott Wave counts from ProfitSource by HUBB are both still potentially bullish, believe it or not. 

Figure 2 – Silver daily (Courtesy ProfitSource by HUBB)

Figure 3 – Silver weekly (Courtesy ProfitSource by HUBB)

Three important related notes:

*The longer silver stays down the more likely these wave counts will ultimately get “redrawn” (which is why I am not a fully committed “Elliott Head” but use it only when the daily and weekly counts agree)

*As you can see in Figure 3, silver has now fallen to a level which could complete Wave 3 down and (possibly) set the stage for a Wave 4 up

*In Figure 2 the bullish daily Wave 4 count remains intact (although as I just mentioned “for how long?” does remain an issue) 

As you can see in Figure 4, the recent plunge in silver has driven bullish sentiment for the silver ETF ticker SLV to an extremely low level (only 1.2% of SLV traders surveyed are presently bullish!).

Figure 4 – SLV bullish sentiment (Courtesy Sentimentrader.com)

So where does it all stand in terms of the trading process?

*We are still in Phase 1 – the Setup.  There is no action to be taken at the moment

*On the daily chart we would need to see, a) silver stop plunging by huge amounts day after day, b) some signs of an actual bullish reversal

Will I ever make a bullish trade in silver based on this potentially bullish setup? 

*It makes no difference to me.  If a catalyst emerges while the setup is still in place, then yes, it’s very possible.

*If a catalyst does emerge I will likely look to do something involving options on ticker SLV.

*If no catalyst emerges and/or the setup falls apart – Cest la vie, and onto the next setup.

Sometimes in the trading game patience is key. 

In the immortal words of Tom Petty, “the waiting is the hardest part.”

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

Have a Nice Week…. Or More Likely, Not

I have written in the past about the “dangers” of September (see here and here) and a lot of investors are aware that it has historically been the worst month of the year for the stock market overall.  But the truth is things can vary a lot from year to year – except for this week.  This week – defined as the week after the 3rd Friday in September – has been pretty awful pretty consistently for a pretty long time.  As you may gather, no, it has not been pretty.

Two of my favorite analysts – Wayne Whaley of Witter & Lester and Rob Hanna of www.QuantifiableEdges.com both made light of this recently.  The bottom line:

*The week after the 3rd Friday in September has seen the S&P 500 decline in 24 of the last 30 years.

Being the numbers geek that I am I went back to the start of my own database in 1928.  I found that in the prior 31 years this week was up 14 times and down 17 times. 

While at first blush this “doesn’t sound as bad”, the reality is that given the magnitude of the overall market advance since 1928, that this particular week is so consistently NOT bullish is downright dismal.  Especially when we consider the magnitude of the ups versus the downs and the overall long-term trend.

The Numbers

Since 1928, the week after the 3rd Friday in September has seen the S&P 500 Index:

*Advance 33 times

*Decline 54 times

*Unchanged once

*Average gain = +1.64%

*Average loss = (-2.04%)

Figure 1 displays the cumulative % +(-) achieved by the S&P 500 Index since 1928 during the week after the 3rd Friday in September.

Figure 1 – Cumulative % return for S&P 500 Index ONLY during week after 3rd Friday in September

Figure 2 displays the year-by-year results.

Figure 2 – Week after 3rd Friday in September Year-by-Year % +(-)

September “Hell Week” for 2020 is off to a pretty dismal start.  Will things improver anytime soon?  It beats me.  But I am of the mind that during September and October “anything can happen” so investors should be prepared.  I am also of the mind that starting in November the bullish trend will re-assert itself.

Here’s hoping.

On a slightly separate note – even a down September is not totally without value thanks to the “September Barometer” (see here and here).

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

An Alternative Approach to “Low Risk Investing”

As people age, very often investing becomes more about “keeping what you have” and less about “making more.”  Oh sure, more is still always better.  But the bottom line is there comes a point when Will Rogers old adage below becomes relevant.

“I’m less interested in the return on my money as I am the return of my money” Will Rogers

To this end, in this piece we will focus on one possible approach to “low risk investing” (which of course makes the assumption that there is such a thing).

The Components

Ticker VTIP ( Vanguard Short-Term Inflation-Protected Securities Index Fund ETF)

VTIP holds short-term TIPs bonds.  TIPs are treasury bonds that are indexed to inflation.  A newly issued TIPs bond has a principal value of $1,000 and pays a stated percentage of interest on that principal.  Moving forward, if the Consumer Price Index rises, the principal amount of the bond is adjusted upward, and interest is paid as a percentage of the higher principal amount.  If inflation were to soar, a TIPs bond could end up paying a lot of interest, hence the reason they are considered a hedge against inflation.

On the other side of the coin, if we have deflation and the CPI declines, then the principal amount for a TIPs bond gets adjusted lower and interest is paid on this lower amount.  HOWEVER, keep in mind that each TIPs security is repaid the full $1,000 original face value at maturity and the effective maturity of VTIP is roughly 2.9 years.  So even if the principal amount gets adjusted lower temporarily (resulting in lower interest payments for the time being), at maturity the full $1,000 is repaid.  This makes deflation less of a concern for a short-term TIPs holder than for a long-term TIPs holder.

Speaking of long-term versus short-term bonds, long-term TIPs can get hurt by rising interest rates.  Short-term bonds are less impacted by rising rates as they mature much sooner.

Ticker SHY ( iShares 1-3 Year Treasury Bond ETF)

Ticker SHY holds treasury securities that mature in 1 to 3 years.  The reality is that with interest rates presently so low the only way to make money on short-term bonds is if rates go even lower, or possibly even into negative territory. However, this portion of the portfolio is a play on safety and low volatility. If interest rates were to rise, a) short-term bonds would be much less sensitive in terms of any price decline than longer-term bonds, and, b) if interest rates were to embark on a sustained increase, short-term bonds would be able to roll over into higher yielding securities sooner and on a more frequent basis than longer-term bonds.

Ticker SWAN ( Amplify BlackSwan Growth & Treasury Core ETF)

I am always a bit leery of securities that seem “gimmicky”.  SWAN may be thought of as such by some investors.  But in the context of our “lower risk approach” it can be a portfolio enhancer.  Ticker SWAN holds roughly 90% of its portfolio in treasury securities (with a duration roughly equivalent to a 10-year treasury).  This portion of the portfolio has no credit risk and moderate interest rate risk (i.e., the value of the bond holdings may increase if rates decline or decrease if rates rise).

The other 10% holds exposure to the S&P 500 Index in the form of LEAPs call options.  This gives the portfolio the potential to gain during an advance in stocks. While this portion of the portfolio will decline during a stock market decline, the bond holdings can serve as a “buffer”, as treasury securities often rally during stock market declines as investors flee to investments perceived to be “safe”.

Putting the Portfolio Together

First a few caveats/footnotes:

*For the record, I am not actually advocating that anyone run out and put money into this idea.  At the moment, it is just that – an idea, food for thought.  This portfolio will rarely make a lot of money, AND it is possible that a given scenario (possibly an excessively large “spike” in interest rates, perhaps) could create a larger loss than what was experienced in back testing. 

*For testing purposes, I used ETF total return data wherever possible.  Prior to that I used either index data or a comparable ETF in order to generate a longer back test.  So DO NOT mistake the results below as “real time” results.  The results depicted are strictly a hypothetical representation of hat real world results might have resembled.  And as always, past performance is no guarantee of future results.

*For VTIP, I used Adjusted Close data from Yahoo (which is believed to account for price changes and dividend income) for ticker TIP (which has a longer duration that ticker VTIP) from 12/6/2005 through 10/16/2012, when VTIP started trading. From that date forward VTIP Adjusted Close data from Yahoo is used.

*For SHY, I used Adjusted Close data from Yahoo (which is believed to account for price changes and dividend income) for ticker SHY from 12/6/2005 to the present.

*For SWAN, I used total return daily data for the Index that ticker SWAN is designed to track from 12/6/2005 through 11/6/2018, when SWAN started trading. From that date forward SWAN Adjusted Close data from Yahoo is used.

Are we having fun yet?

The Portfolio

For our purposes we will keep it simple – 1/3 in each ETF with a rebalance at the beginning of every year.

VTIP = 33%

SHY = 33%

SWAN = 33%

The Results

Figure 1 displays hypothetical cumulative return for the portfolio from December 6, 2005 through 9/16/2020.

Figure 1 – Portfolio Hypothetical Cumulative % + (-)

Figure 2 displays some relevant statistics

Figure 2 – Relevant statistics

Three key things to note:

*The median 12-month return was +7.34%

*The standard deviation of 12-month returns is 4.17% (i.e., low)

*The maximum % drawdown was -6.54% (i.e., low)

Figure 3 displays the annual % gain on a calendar year basis.

Figure 3 – Annual hypothetical results

*The key thing to note is that – so far – there have been no down years.

Summary

Once more for the record, I am not “recommending” this portfolio.  I am merely pointing out that for a person who was seeking decent returns with relatively low risk and low volatility, hypothetically speaking this one hasn’t been half bad. 

Still, one has to consider potential risks before committing real money to anything.  I can envision at least one scenario – the stock market tanks BECAUSE interest rates are spiking BUT inflation remains relatively low – where this portfolio could have some more serious trouble.  There may be others.

All in all, though, not the worst idea as food for thought for investors looking for a low risk approach.

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

Large? Small? Growth? Value? Made Easy

Much has been written about the vast disparity in the performance of large-cap stocks versus small-cap stocks and of growth stocks versus value stocks.  And an equal amount of speculation keeps raising the question of how long the current trends can last and when things will reverse.

What to make of all this?

Let’s try to make it easy.

The Comparison

For our purposes we will use monthly total return data starting in January 1979 for:

*Large cap growth (using the Russell 1000 Growth Index)

*Small cap value (using the Russell 2000 Value Index)

Clearly these two indexes represent a vastly different subset of stocks.

Figure 1 displays the cumulative total return for both indexes starting in 1979.

Figure 1 – Large cap growth (blue) vs. Small cap value (orange); cumulative total return starting in 1979

Many investors would be surprised to learn that small-cap value had been outperforming by a fairly sizable margin not that long ago. Only recently did large cap growth once again “take the lead.”

To get a better sense of the “back and forth” nature of this relationship, Figure 2 displays the 10-year cumulative return for large cap growth minus the 10-year cumulative return for small cap value starting in 1989.

Figure 2 – Cumulative 10-yr % return for Large cap growth minus Cumulative 10-yr % return for Small cap value

To read Figure 2 – if the blue line is above 0 it means large cap growth has outperformed small cap value over the past 10 years, and vice versa.  In a perfect world this chart would eliminate all discussion of any “permanent edge” for one index over the other.  The lesson SHOULD be obvious:

*Large cap growth leads for a number of years, often by a wide margin

*Then small cap value leads for a number of years – again, often by a wide margin

Clearly large cap growth has been better of late and that trend still is in force.  Figure 2 does remind us however, that this trend WILL NOT last forever and that investors who pile into large cap growth now need to pay close attention to the location of the nearest exit.

How to Use This Relationship

One approach is to use a 13-month exponential moving average of the line in Figure 2 and note whether the line in Figure 2 is above or below that 13-month average.  These two lines appear in Figure 3.

Figure 3 – LC growth 10 yr. minus SC value 10 year (blue) versus 13-month EMA (orange)

In Figure 3:

*If the blue line is above the orange line then the trend favors large cap growth. 

*If the blue line is below the orange line then the trend favors small cap value.

So, let’s test the following strategy:

NOTE: Total monthly return data is reported sometime early in the next month.  So, because of this I use a 1-month lag in signals.  Specifically, if I get total return data for January in early February and the results through the end of January signal a “switch” (i.e., if the 10-yr return for LC Growth minus the 10-yr return for SC Value crosses above or below the 13-month exponential moving average) then the actual switch will take place at the end of February

*If the blue line in Figure 3 moves above the orange line in Figure 3 we will switch 100% into large cap growth stocks (Russell 1000 Growth Index)

*If the blue line in Figure 3 moves below the orange line in Figure 3 we will switch 100% into small cap value stocks (Russell 2000 Value Index)

For comparison sake we will also compare the results of this switching approach to simply buying and holding the Russell 1000 Growth Index and/or the Russell 2000 Value Index.

The % return for each appears in Figure 4.

Figure 4 – Cumulative % return for “Switching” versus simply buying and holding the indexes

Figure 5 displays some of the comparative results.

Figure 5 – Switching versus Buying and Holding (1989-2020)

Summary

Switching between large cap growth and small cap value is by no means a perfect strategy (note the -47.7% drawdown for the switching strategy).  But the real point is that this test clearly demonstrates that “falling in love” with one index over the other (as many have done in favor of large cap growth in recent years) is long-term a mistake.

A useful business adage is “Adapt or Die.”  Turns out it is pretty handy for stock investors too…

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

What’s Up with Silver?

It has been nearly impossible lately to view the financial news in the 2020 and to not see some headline or story about “the coming explosion in Silver!!!!” (I left off a number of exclamation points in order to save space).  While I do hold some bullish positions in metals it is more of a “trend-following thing” than an act of buying into the whole “MASSIVE RALLY AHEAD”.

Still, a quick recent look at all things silver suggests that if “something big” is going to happen, a good chunk of it might occur between now and the end of 2020.  That’s not so much a “prediction” as it a “possibility to be aware of.”

To wit:

Figure 1 displays ticker SLV with a daily Elliott Wave count calculated using the objective EW algorithm built into ProfitSource by HUBB.  As you can see, the current projection is for rally to at least 29.87 by roughly the end of the year.

Figure 1 – SLV daily Elliott Wave count (Courtesy ProfitSource by HUBB)

Figure 2 displays ticker SLV with a weekly Elliott Wave count calculated using the objective EW algorithm built into ProfitSource by HUBB.  As you can see, it is making a similar projection to the daily one, i.e., projecting a possible move toward $30 a share – in this case in late 2020 or early 2021.

Figure 2 – SLV weekly Elliott Wave count (Courtesy ProfitSource by HUBB)

Two notes:

*I am not a true “Elliott Head”, but I do tend to pay attention when both the daily and weekly counts (using ProfitSource) line up as bullish or bearish

*Elliott Wave counts from ProfitSource are like a lot of other things in the market – sometimes they pan out, sometimes they don’t.  There is no “magic” involved.  But the fact that they are generated “objectively” (as opposed to say Me picking what I subjectively “think look like wave counts”) gives me a bit more confidence.

Figure 3 from www.Sentimentrader.com displays the monthly annual seasonal trend for silver futures.  As you can see, the months ahead look fairly favorable.  For the record, seasonality on the whole has seen a lot of things “out of whack” in 2020, so there is every chance this won’t pan out either.  But for the moment I put it down as another factor in the “favorable” column.

Figure 3 – Silver seasonality by month (Courtesy Sentimentrader.com)

Figure 4 – also from www.Sentimentrader.com – displays the trader sentiment for ticker SLV.  For the record, this one is presently technically (in my mind) “kinda neutral”.  In other words, sentiment is neither excessively low nor excessively high.

Figure 4 – SLV Trader Sentiment (Courtesy Sentimentrader.com)

Given that all “hubbub” surrounding silver has been mostly bullish, I am actually counting it as a slight positive that sentiment is presently not “off the charts” bullish.  Looking at it this way may be seen as a bit of a stretch to some, but it makes sense in my market-addled mind.

So, will SLV actually “explode higher” as all the talking heads have been prognosticating since (well, technically since the peak in 1979, but I digress) early this year?  It beats me.  But if one was considering making a bullish play in silver, it may be getting close to time to do so.

My favorite play would be something using options with a relatively low cost and low dollar risk. 

Stay tuned…

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

Trees, Meet Forest

The recent “concentration” in the March-August 2020 rally is pretty well acknowledged at this point.  Apple, Amazon, Facebook, Nvidia, Tesla, Microsoft, growth, momentum, tech, etc. go up pretty much all the time – everything else, maybe yes, maybe no.

And his kind of ride is great.  While it lasts.  Now the market is selling off for three days and suddenly everyone wants to know if its time to panic.  So, let’s talk “perspective”. 

The Here and Now

Since the Covid panic in February and March, the stock market has staged a historic rally.  The rally has been dominated by large-cap/growth/tech/momentum stocks.  

*September-October: Anything can happen, so be prepared

*November-April 2021: Based on several seasonal factors plus a lot of bullish momentum signals I look for a resumption/continuation of the bull market into spring 2021

*May-Oct 2021: Based primarily on seasonal factors, the market could easily struggle between mid-2021 and mid-2022.  But that’s all a way off and mere prognostication.

For now, let’s focus on a few obvious trends – trends which may be getting a bit “stretched.”

Apple vs. The Little Guy

Figure 1 displays the market capitalization of AAPL versus the ENTIRE Russell 2000 Index.

Figure 1 – Apple vs. Russell 2000 market capitalization (Courtesy: www.BiancoResearch.com)

I am going to give you my perspective as straight as possible.  Apple is a great company, it will likely continue to be a great company for a long time, and I have no idea when the price of the stock will top out.  All that being said – and even forgetting Apple the company for one second – this type of herd mentality concentration in one asset almost NEVER works out well in the end.  The same can be said for Tesla stock market cap dwarfing the rest of the entire automobile industry. 

So, the bottom line:

*Will AAPL and TSLA stock ultimately rise further?  It wouldn’t surprise me. 

*Will all of this ultimately end badly?  Almost certainly. 

*Should you dump these highfliers now?  It beats me.

*Should you remain vigilant and be prepared to one day dump these highfliers? Absolutely.

Stock Market Returns vs. Stock Market Valuations

For the record, please note that P/E ratios are lousy timing indicators.  The market can remain “overvalued” or “undervalued” for years.  BUT, ultimately it does matter.  Figure 2 displays the following:

*The orange line is the P/E ratio at the beginning of a given 10-year period (the P/E ratio scale is on the right)

*The bars along the way display the average annual return for the S&P 500 Index in the subsequent 10 years. 

Figure 2 – Starting P/E ratio and subsequent 10-year returns (Courtesy: www.CrestmonthResearch.com)

The key thing to note:

*10-year periods that start with a high P/E ratio (look for peaks in the orange line) invariably experience below average 10-year returns

*And vice versa

*The current P/E ratio is at the high end of the historical spectrum

What does it all mean?  It likely means that stock market returns over the next 10 years will NOT resemble the returns in the past 10 year.

Growth vs. Value

In recent years “Growth is God” and “Value is Dead”.  The difference in performance has not even been close.  So, the longer this goes on the more it becomes “a given” in the minds of many investors that this trend will continue ad infinitum.  But will it?  History is pretty clear on this point.  With certain relationships (growth vs. value, large-cap vs. small-cap, U.S. vs. international and so on) there is a definite ebb and flow over time. Which leads us to:

Jay’s Trading Maxim #45: The only thing more foolish that trying to time the exact turning point in the ebb and flow of things is believing that a particular ebb or flow will last forever. 

Figure 3 displays 10-year total return for Value versus the 10-year total return for Growth since the 1930’s.  Note that the current reading is the most extreme reading in favor of growth ever using this data series.

Figure 3 – 10-year value return minus 10-year growth return (Source: RIA Pro)

While at the moment the “Growth is God” banner is flying high, Figure 3 argues pretty strongly that this trend will not last forever.  So, enjoy the growth ride while it lasts, but remember that it will end someday.

Commodities versus Stocks

Figure 4 displays the relative performance an index of commodity related stocks to the performance of the S&P 500 Index, going back to the 1930’s.  Note that commodity related performance has never been worse relative to stocks. 

Figure 4 – Commodity related stocks versus the S&P 500 Index. 

Once again, trying to pick the exact bottom in this relationship is a mistake.  The bigger mistake is assuming this relationship will never reverse.

Summary

Don’t get caught staring at the “shiny object” for too long.  The “large-cap/growth/tech/momentum party will likely resume and roll on for who knows how long. But just remember, all good things gotta come to an end.

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

A Glut of Energy Insider Buyers

Everyone hates the energy sector (Foreshadowing alert: Well, almost everyone).  And a quick perusal of Figure 1 clearly illustrates why the energy sector is unloved. 

Figure 1 – Ticker XLE versus ticker QQQ (Courtesy AIQ TradingExpert)

Since ticker XLE (Energy Select Sector SPDR ETF) topped out in 2014:

*XLE has lost -65%

*QQQ has gained +210%

And in another kick in the head to the energy sector, Exxon (ticker XOM) was just kicked out of the Dow Jones Industrial Average.  Take that, losers!

So yeah, who wouldn’t hate energy stocks and decide to shun them?  Well, as it turns out, the answer to that question of late is “the people who know the energy business the best.”

Figure 2 from www.Sentimentrader.com displays the Insider Buy/Sell ratio for executives and other muckety-mucks running energy related corporations.  The picture speaks for itself.

Figure 2 – Energy Insider Buy/Sell Ratio (Courtesy Sentimentrader.com)

As you can see, energy corporate insiders have been on a massive buying binge of late.  Interestingly, they went on a buying binge in 2019 – apparently expecting an improvement in the sector – then the sector got waylaid by Covid-19.  Instead of bailing out the insiders really kicked their share buying into overdrive as you can see at the far right of Figure 2.

Figure 3 displays ticker XLE with an indicator that I developed by simply smoothing Larry Williams VixFix indicator.  The gist of the idea, is that when this indicator reaches an extreme high level and then turns down, it often highlights a “washed out” situation which may be followed by a bullish move.  Ticker XLE is presently nearing that point.

Figure 3 – Ticker XLE with oversold indicator (Courtesy AIQ TradingExpert)

What to make of all this? 

Should savvy investors follow the insider’s lead and start piling into the energy sector?  Unfortunately, hindsight is the only way to know for sure.  But for what it is worth, my own answer is “probably, but maybe not just yet.”

Energy Seasonality

The primary reason for hesitation at this exact moment in time is seasonality.  Let’s use ticker FSESX (Fidelity Select Sector Energy Services) as a proxy for the broader energy index.  This fund’s first full month of trading was January 1986.  Figure 4 displays the cumulative total return for ticker FSESX ONLY during the months of June through November every year since 1986. 

Figure 4 – FSESX cumulative % return June through October (1986-2020)

The cumulative total return during these months for holders of FSESX during June through November is -94.7%(!!!)  So, you see my hesitation with “piling in”.

Additionally – climate change concerns aside – much of the energy industry still revolves around crude oil.  Figure 4 displays the annual seasonal trend by month for crude oil. 

Figure 5 – Crude Oil annual seasonal trend by Month (Courtesy Sentimentrader.com)

Seasonal trends can vary widely from year-to-year, and there is NO guarantee that trouble lies ahead in Sep-Oct-Nov for the energy sector.

But that is what history suggests.

Summary

The bottom line is this:

*Energy sector corporate insider buying should be seen as a bullish longer-term sign for the sector

*The energy sector is so beaten down, battered and unloved that it probably accurate to refer to the situation as “Blood in the Streets”

Based on these factors I look for energy to surprise investors in the years ahead.  That being said:

*Trying to pick the exact bottom in anything is typically a fool’s errand

*Getting bullish on the energy sector in early September is at times fraught with peril.

Sometime around December 1st it will be time to take a close look at the energy sector. If an actual uptrend develops or has already developed, the time may be write for investors to join the insiders.

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

Beware Beans

One of the keys to trading success is to put as many factors in your favor as possible when identifying a trading opportunity.  The other key is to understand that “this time around” those factors may not mean a hill of beans so you had better allocate your capital – and manage your risk – wisely.

A relevant potential case in point is found in the soybean market.

The Factors: Seasonality

Figure 1 displays the annual seasonal trend for soybeans.  Focus on the action of the blue line contained in the red box.

Figure 1 – Soybeans seasonal annual trend (Courtesy Sentimentrader.com)

The period contained in the box roughly equates to September Trading Day #5 through October Trading Day #2.  We’ll focus on this period more closely in a moment, but for now just note that seasonality is suggesting an edge to the bears during this period.

The Factors: Sentiment

Figure 2 displays the Soybeans Optix for the past 10 years.  As you can see at the far right, the current Optix value is just touching what would be considered the upper end (i.e., overly bullish sentiment).  By itself this should NOT be interpreted as a “Sell Now!!” signal.  However, as part of the overall “weight of the evidence” it is fair to add it to the “potentially negative” side of the ledger. 

Figure 2 – Soybeans Optix (Courtesy Sentimentrader.com)

The Factors: Hedgers Positions

Like sentiment, the current state of “hedgers positions” on a standalone basis is not flashing any kind of a definitive signal.  However, it is toward the lower end of the range following a significant decline in the indicator in the lower clip.  As you can see in Figure 3, previous significant declines in soybean hedger positions toward roughly a 1-year low have often been followed by weakness in soybean prices.

Figure 3 – Soybeans Hedgers Positions (Courtesy Sentimentrader.com)

From a Traders Perspective

What follows IS NOT a “recommended” trade.  It is simply an example of how a trader might approach this situation, taking this opportunity into account in terms of:

*Probability

*Capital allocation

*Risk control

If we look a little more closely, we find that the period that extends from the close on September Trading Day #5 through October Trading Day #2 has been unfavorable for beans over the year.  How unfavorable?

Figure 4 displays the cumulative dollar return from holding a short position in soybeans futures during only this period every year starting in 1975.  A price of 950 for soybean futures equates to $9.50 for a bushel of soybeans. Each 1 “point” move is worth $50, so a trader who sells beans at 950 and buys back at 900 earns 50 points times $50 a point, or a gain of +$2.500.

Figure 4 – Soybeans cumulative hypothetical $ +/- holding a short futures position from September Trading Day #5 through October Trading Day #2

Figure 5 displays the yearly $ +(-) hypothetical $ +/- holding a short futures position from September Trading Day #5 through October Trading Day #2

Things to Note:

*32 years showed a gain (71%)

*13 years showed a loss (29%)

*Average winning trade = +$2,663

*Average losing trade = (-$1,184)

*Win/Loss Ratio = 2.46 (71%/29%)

*Ave. Win/Ave. Loss = 2.25 ($2,663/$1,184)

Clearly this trend offers possibilities on a “probability” basis.

The real questions for an actual trader are “how much $ to commit?” and “how much risk is involved?”

Considering Drawdowns

Figure 6 displays the annual +/- from holding a short position in soybean futures for the full period along with the worst open loss experienced along the way. 

Year $ +(-) Worst Open $ Loss
1975 $13 ($2,425)
1976 $4,625 ($475)
1977 ($1,425) ($2,250)
1978 ($775) ($1,575)
1979 ($488) ($1,375)
1980 $2,850 ($1,163)
1981 $850 ($575)
1982 $1,325 ($938)
1983 $4,913 ($1,038)
1984 $2,338 ($75)
1985 ($238) ($1,050)
1986 ($513) ($650)
1987 ($1,038) ($1,200)
1988 $3,825 $0
1989 $913 $0
1990 $1,300 ($450)
1991 ($88) ($1,550)
1992 $1,725 $0
1993 $1,850 ($338)
1994 $1,988 ($225)
1995 ($263) ($1,650)
1996 $2,588 ($1,038)
1997 $475 ($488)
1998 $325 ($600)
1999 $1,250 ($375)
2000 $800 ($50)
2001 $850 ($600)
2002 $1,675 ($888)
2003 ($5,350) ($5,350)
2004 $2,913 $0
2005 $1,900 $0
2006 $275 ($500)
2007 ($1,288) ($4,550)
2008 $9,400 ($650)
2009 $2,300 ($1,300)
2010 ($138) ($3,875)
2011 $13,200 ($450)
2012 $9,400 ($1,450)
2013 $4,150 ($1,950)
2014 $4,125 $0
2015 $100 ($788)
2016 $700 ($613)
2017 $275 ($1,188)
2018 ($1,025) ($1,025)
2019 ($2,763) ($3,025)

Figure 6 – Annual hypothetical +/- and largest open loss during life of trade; 1975-2019

To read Figure 6, in 1975 the short trade registered a net gain of $12.50 (rounded to $13 in the Table).  The worst open loss during the life of the trade was -$2,425.  In other words, you had to sit through an open loss of -$2,425 in order to garner the $12.50 profit.  As you can see, these numbers can vary widely from year to year.

Now let’s get down to the nitty-gritty of capital allocation.  First off, there are no hard and fast rules, so we will simply highlight one common sense approach.

The worst recorded drawdown for any one trade was $5,350 in 2003.  As I write, the margin requirement to sell short 1 soybean futures contract at the Chicago Board of Trade is $4,725. 

*So, one simple approach would be to add these two values together ($5,350 + $4,725 = $10,075).  Using this simple approach, a trader would allocate capital of $10,075 to sell short 1 soybean futures contract. 

*IMPORTANT NOTE: A short position in a futures contract entails unlimited risk. So a trader should also consider a stop loss order. There is no “magic number” but for sake of example, let’s assume we want to put a stop-loss beyond the largest previous loss of -$5.350. If we will risk a maximum of $5,400 then we divide $5,400 by $50 and get 108 soybean “points”. So if we sell short a soybean futures contract trading at a quoted price of 965 (or $9.65 a bushel), we might place a stop-loss to buy back the contract at 1,073.

What Kind of Return?

For sake of example, let’s assume that every year a Trader allocates $10,075 and sells short 1 soybean futures contract at the close on the 5th trading day of September and then buys it back to close the short position at the close on the 2nd trading day of October.

Figure 7 displays the hypothetical annual results in terms of “% return on capital allocated” and “largest open loss as a % of allocated capital.”

Year % Return Largest % Open loss
1975 0.1% (24.1%)
1976 45.9% (4.7%)
1977 (14.1%) (22.3%)
1978 (7.7%) (15.6%)
1979 (4.8%) (13.6%)
1980 28.3% (11.5%)
1981 8.4% (5.7%)
1982 13.2% (9.3%)
1983 48.8% (10.3%)
1984 23.2% (0.7%)
1985 (2.4%) (10.4%)
1986 (5.1%) (6.5%)
1987 (10.3%) (11.9%)
1988 38.0% 0.0
1989 9.1% 0.0
1990 12.9% (4.5%)
1991 (0.9%) (15.4%)
1992 17.1% 0.0
1993 18.4% (3.3%)
1994 19.7% (2.2%)
1995 (2.6%) (16.4%)
1996 25.7% (10.3%)
1997 4.7% (4.8%)
1998 3.2% (6.0%)
1999 12.4% (3.7%)
2000 7.9% (0.5%)
2001 8.4% (6.0%)
2002 16.6% (8.8%)
2003 (53.1%) (53.1%)
2004 28.9% 0.0
2005 18.9% 0.0
2006 2.7% (5.0%)
2007 (12.8%) (45.2%)
2008 93.3% (6.5%)
2009 22.8% (12.9%)
2010 (1.4%) (38.5%)
2011 131.0% (4.5%)
2012 93.3% (14.4%)
2013 41.2% (19.4%)
2014 40.9% 0.0
2015 1.0% (7.8%)
2016 6.9% (6.1%)
2017 2.7% (11.8%)
2018 (10.2%) (10.2%)
2019 (27.4%) (30.0%)
Average +15.4% (-11.0%)

Figure 7 – % returns and risks

Summary

Will soybeans decline between the close on 9/8/2020 and 10/2/2020?  It beats me.  This seasonal trade has been a loser each of the last two years and seasonality overall has not been great in 2020.

Still history clearly suggests a negative bias.  When we add in sentiment and hedgers positioning, the odds seem to favor a the downside. In the end – and as always – the real questions are “how much money do you have to commit” and “is it worth the risk” in your opinion.

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

(Part II) What You Really Must Know about Your Bond Market Investments

Everybody invests for income.

Maybe not even consciously in many cases (think of any cash you have anywhere – checking, savings, money-market, brokerage account but not invested in anything at the moment, etc.), but most investors are “earning interest” on some portion of their assets.  Not much interest.  Not in the current “low interest rate environment”, but interest nevertheless.

Yet the interesting (har) thing is that the vast majority of investors never think about how changes in interest rates affect things.  For our example, we will go to the far end of the bond spectrum – the 30-year treasury bond.  Long-term treasuries are essentially the “purest play” on interest rates because treasury bonds are assumed to entail no “credit risk”, they trade solely based on “interest rate risk”, i.e.:

*When long-term interest rates go DOWN, long-term treasury price go UP

*When long-term interest rates go UP, long-term treasury price go DOWN

Figure 1 “says” it all.  The top clip is price action for ticker VUSTX (Vanguard Long-Term Treasury) and the bottom clip is ticker $TYX (an index that tracks the yield on 30-year treasuries times 10 – so if TYX is at 20, it means the yield on LT treasuries is 2%).

Figure 1 – Ticker VUSTX and ticker TYX (Courtesy AIQ TradingExpert)

The obvious thing to note is the inverse relationship.

The 2 Big Questions

The “2 Big Questions” in this example are:

*Where will long-term interest rates go from here?

*What will happen to long-term treasury bonds as a result?

Interestingly, the answers are:

“No one really knows for sure”

“We can calculate it almost exactly”

There is lots of speculation regarding where interest rates will go from here.  One camp says the Fed will keep forcing rates lower – possibly even into negative territory (it has already happened in other parts of the world, and “Yes”, it can happen here).

The other camp argues that all the money printing will spark inflation and that will lead to higher rates.

Again, no one knows for sure.  Fortunately, the one thing we can do – with only the help of a handy bond calculator – is figure out how long-term treasury bond prices will react. 

An Example

Let’s assume a new 30-year treasury bond is issued today with a yield of 1.35%.  These means:

*Buyer pays $1,000 to buy the bond

*Every year for the next 30 years the treasury pays bondholder $135 in interest

*In 30 years, the treasury pays the bondholder back the original $1,000

The calculations below estimate the expected change in price and $ value of a 30-year treasury bond based on interest rate movement and the passage of time.

NOTE: The data in the tables “may not compute” in your head at first.  If not, I strongly encourage you to step back and then take another shot.  Because this data spells out the potential risks and rewards pretty explicitly.

Figure 2 displays the expected dollar value of a current 30-year treasury 1 to 5 years from now based on some future level of interest rates.

Figure 3 displays the expected percentage change in dollar value of a current 30-year treasury 1 to 5 years from now based on some future level of interest rates.

Figure 2 – Expected $ Value of 30-year 1.35% bond based on change in current interest rate and the passage of time

Figure 3 – Expected % change in price of 30-year 1.35% bond based on change in current interest rate and the passage of time

So, let’s use the extremes as examples:

*If rates fall to -1.00% one year from now, today’s 30-year treasury will rise in value from $1,000 to $1,793 or +79%

*If rates rise to 4.35% five years from now, today’s 30-year treasury will be priced at $546, or -45% below today’s price level.

What It All Means

First off note that investments in shorter-term securities will have less volatility in terms of price movement, but will still be affected by changes in rates.

If interest rates rise:

*Bond holders – especially holders of long-term bonds – will get hurt. 

*As you can see in Figures 2 and 3, if rates were to rise over the next several years long-term bonds would be severely underwater and could take as long as waiting until maturity to get back to $1,000 in value.

If interest rates fall:

*Bond holders can still profit significantly.

*If the bottom fell out of interest rates and they plunged to -1.00% a year from now, our 30-year treasury bond would gain a massive +79%. 

BUT BEWARE: Remember – even if rates did fall to -1.00% a year from now, and if our 30-year bond soared in value to $1,793 a year from now – ultimately our 30-year bond is going to mature at a value of $1,000.  So, any gains above that value would eventually evaporate.

To spell it out: If interest rates do decline towards 0% or even below, hitting the “Sell” button would likely make sense at some point.

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.