Portfolio Performance: 28 January 2011

Portfolio performance and risk is what it is all about, and here are the results as of 1/28/2011.  Nearly all portfolios gained on either the ITA Index or VTSMX benchmarks.  Several portfolios also showed improvement in the Sortino and Retirement Ratios.  Since today is the last business day of January, all portfolios will be updated by this coming weekend.  Platinum members using the SR worksheet inside the TLH spreadsheet will want to update that material after the market closes today.  I updated all the portfolios last Friday as I am entering the risk data twice a month in order to build information for the ITA Index at a faster rate.  I need a minimum of 36 data points for the ITA Index to be viable and I am still lacking that information in several portfolios.

 

Portfolio Performance - 01/28/2011

Portfolio Last Update Launch Date Tracking Tool Port. IRR ITA Index Diff Port. vs. ITA Index VTSMX IRR Diff. Port. vs. VTSMX Index IR SR RR
AA-Mosaic 12/31/2010 07/21/1999 Captool 2.5% NA NA -0.4% 2.9% 0.05 NA NA
Curie 01/28/2011 12/26/2007 TLH SS 4.9% 0.8% 4.1% 0.5% 4.3% NA 12.2 4.9
Mosaic2 12/31/2010 07/19/1999 Captool 4.9% NA NA -0.6% 5.5% 0.15 NA NA
Newton 01/28/2011 06/02/2008 TLH SS 9.7% 12.7% -3.0% 7.2% 2.5% NA 3.0 3.0
Passive Port. 01/31/2011 12/01/2000 Captool 5.12% NA NA 1.25% 3.87% 0.69 NA NA
Schrodinger 01/28/2011 12/01/2000 TLH SS 5.1% 4.8% 0.3% 2.9% 2.1% NA 4.3 4.3
Jane 12/31/2010 02/14/1997 Captool 9.13% NA NA 3.01% 6.12% 0.53 NA NA
Einstein 01/28/2011 06/30/2008 TLH SS 14.7% 22.6% -7.9% 11.2% 3.5% NA 6.7 6.7
Gauss 12/31/2010 02/19/1997 Captool 9.32% NA NA 3.0% 6.3% 0.22 NA NA
Kepler 01/28/2011 11/01/2008 TLH SS 20.3% 22.0% -1.7% 20.6% -0.3% NA -0.1 -0.1
Scrappy 01/31/2011 08/14/2008 Captool 12.85% NA NA 5.6% 7.25% NA NA NA
Bohr 01/28/2011 08/14/2008 TLH SS 12.5% 4.5% 7.9% 5.3% 7.2% NA 0.5 0.5
Kenilworth 01/28/2011 08/18/2010 TLH SS 25.0% 28.3% -3.3% 42.4% -17.4% NA -0.1* -0.1*
Projects 01/31/2011 12/01/2000 Captool 5.6% NA NA 0.02% 5.58% 1.32 NA NA
Washington 01/31/2011 06/18/1999 Captool 3.13% NA NA -0.19% 3.32% 0.28 NA NA
Maxwell 01/28/2011 12/25/2000 TLH SS 0.6% 2.1% -1.4% 4.3% -3.6% NA -0.2 -0.2
Adams 01/31/2011 06/18/1999 Captool 3.39% NA NA -0.19% 3.58% 0.71 NA NA
Euclid 01/28/2011 06/30/1999 TLH SS 1.2% 8.7% -7.5% 4.3% -3.21% NA -0.1 -0.1
Jefferson 01/31/2011 03/13/2008 Captool 5.62% NA NA -3.21% 8.83% NA NA NA
Madison 01/28/2011 03/13/2008 TLH SS 5.4% 3.8% 1.6% 9.8% -4.4% NA -0.3 -0.3

Empire Brass

This week I am recommending "Music for Organ, Brass and Percussion" featuring one of my favorite brass ensembles, the Empire Brass.  Here is what one reviewer had to say about the recording.

"This is an unbeliveably good recording. It's the best organ music I've ever heard and the brass section is also excellent. Just have a listen to the deep bass of the organ. Buy it and take a listen on a Sunday morning and you'll swear you're in church. Excellent quality."

Many of the Amazon reviewers complained that the brass overpowered the organ.  True, but I did not mind as I love brass.

 

Photograph: Tibetan farmer sowing winter grain.

HDR Photography

In answer to Bob's question, I'll explain a little more about what I am learning with respect to HDR photography.  HDR is an acronym for High Dynamic Range photography.  The included image is an HDR composite from three photographs taken by my friend who lives on the Oregon Coast.  The three photographs were taken from his house this week.  The deep blue in the upper right hand corner of the picture would show up better if I were to spend additional time tweaking the image.  Nevertheless, here is what I am doing.

1.  Set a camera up on a tripod and use a cable release to trigger the shutter.

2.  Bracket the photograph using f-stops of +/- 2.  One might reduce the extreme f-stops, but I've been testing the outer limits.  One shot is under exposed, one shot is taken at the correct exposure, and the third shot is over exposed.

3.  The three images are blended into one picture where the spectrum shown extends well beyond what one can capture with just one picture.

4.  The software I am using is Photomatix Pro, and I only recently purchased it so I do not have many examples to show.  If anyone is using Photoshop, there is a built-in HDR application within that software.  I do not own or use Photoshop as it is an expensive program.

5.  I also located an excellent e-book that explains how to use the Photomatix software and it is Captain Kimo's "Secrets to Mastering HDR Photography."  The cost is about $15.00 if one signs up for his free newsletter.

While I read about HDR photography some two to three years ago, I only recently began to pursue the idea vigorously.  The weather has not been such that I could experiment much, but we may have sun later in the week where I can get out and capture some sunrises or sunsets. 

 

Photograph:  Images to construct this photograph were taken by Gene Williamson in an area south of Newport, Oregon.

High Dynamic Range Photography


The image of a neighborhood house is my first effort at HDR photography.  Expect to see more HDR images later this summer.

“Creme List” for 28 January 2011

We have a new leader to the "Creme List" this week and one stock is attractively, something that has not happened for weeks.  No companies were added or deleted from the list.  Examine the list below and keep in mind that this is a list of interesting companies.  No buy or sell recommendations come with this list of stocks.

 

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Equal Weighted vs. Cap-Weighted Indexes

Before Robert D. Arnott came out with his book, "The Fundamental Index: A Better Way to Invest," the subject of building indexes around equal weight given to each stock rather than cap-weighted methods was under hot discussion.  Which is the better approach?  Arnott makes a compelling case for equal weighting as does the following paper referenced below.

 Equal weighted paper.  I recommend readers download and read this paper to gain an overview of what equal weighting is all about.

Fundamental indexes have not been available to investors sufficiently long to make a final decision.  On the surface, there appears to be an advantage to this approach to building an index.  But it is not all positive.  Expense ratios are higher as there is ETF activity in keeping the index equally weighted.  These ETFs border on becoming actively managed indexes, a contradiction in terms. 

While I see merit in the equal weighted approach, I don't like paying the higher expense ratio to own these ETFs.  There are ways we can build portfolios with lower expense indexes and still gain the advantage of holding a higher percentage of smaller cap stocks, something that happens with the equal weighted index approach.  We are doing it all the time with our portfolios.  We simply skew our asset allocation plan toward value and smaller-cap ETFs.

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Risk Avoidance the Mebane T. Faber Way

Managing risk is a significant component of portfolio management.  We monitor risk through the Sortino and Retirement Ratios within the TLH spreadsheet, but we do not use the TLH as a technical analysis tool.  It is not designed to perform those functions. 

This morning I pulled Matt Willson's article off Seeking Alpha.  Within the article is a reference to Mebane T. Faber's paper, "A Quantitative Approach to Tactical Asset Allocation."  Faber's TAA is a very old idea and I wrote about it last August. (Only Platinum members have access.)  As I mentioned in the August blog entry, my TAA method varies slightly from the method advocated by Faber.  One difference is that I use the 200-Day Exponential Moving Average instead of the 10-month simple moving average.  Sometimes I shorten it to a 190-Day EMA.  Those differences will be slight, but in most cases, the 200-Day EMA is a little faster to react to market movements than the 10-month simple moving average.  I highly recommend readers go to Willson's article and click on the link in the first sentence to download Faber's article.  The paper will provide background for the TAA moves.  The screen shot below shows the 200-day EMA I am discussing.

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Music Recommendation

Karl Jenkins' Requiem

One of my favorite modern composers, and there are not many, is Karl Jenkins.  Today I am recommending his Requiem.  Check out the Requiem by listening to clips on the Amazon site to see if his work is a good fit for your listening tastes.  I find the Requiem filled with many rich sounds.  Below are two reviews I pulled off Amazon as these writers express my reaction to this composition much better than I am able.

"Jenkins' Requiem is without question a modern work, although its mold is probably a bit closer to that of Britten's War Requiem, or even Herbert Howells' "Hymnus Paradisi", than to other modern Requiems, such as those of Fauré, Duruflé, or Rutter. Jenkins' use of haikus in Japanese–and his intertwining of the haikus with the text near the end–add an extra dimension to the work, even though those movements have a substantially different sound than the rest of the work. Even the "Dies Irae," with its unusual orchestration (I won't spoil the surprise), is a success. The fact that there are no well-known names here doesn't matter; the orchestral and choral sounds are both excellent. Fans of Jenkins' music will definitely want this disc. I look forward to hearing more of his music myself. "

 

"I guess you could call me a "number one" fan of Karl Jenkins music. I find his music uplifting and soul-stirring. After a few listenings to Requiem, I quickly found so much to enjoy out of the variety of tracks.  For consumers that are only aware of Diamond Music, Jenkins has composed a whole collection of works, five to be exact, that are under the Adiemus title. You must, I repeat, must expand your collection to include some if not all of these titles, particularly Adiemus I, II & IV. These are such emotionally charged works, fashioned with a chorus of female singers and soloists and full orchestra. Do a quick search and you'll learn more about this themed works. But I digress…. 

Requiem is unique in that the composer uses a full chorus including male voices and a baritone soloist in the short work, "In These Stones…" This is the first time I'm aware that Jenkins embraces the SATB structure. What an exceptional inclusion to his body of works! I've picked out a few favorites including Introit, Dies Irae, and In Paradisum. However, Pie Jesu shines as a gorgeous heart felt work that effortlessly soars between child soloist, soprano soloist and chorus. Guaranteed to bring tears to your eyes. Finally, the short work that closes this CD, "In These Stones Horizons Sing", calls to mind Ralph Vaughn Williams and a touch of Glass. As a singer in many choruses, I found myself itching to bring this short piece to the attention of various choral directors. It conveys such a powerful quality, visions of Celtic settings arise in my mind. If you are a choral singer, I assure you, you will find something to inspire you. Enjoy Requiem and look into Jenkins other works as well. You won't be sorry."

Photograph:  Pompeii, Italy

 

Portfolio Performance: 22 January 2011

 

While is was not a great week for portfolio returns, most of the updated portfolios showed gains in both the Sortino and Retirement Ratios.  Of the seven portfolios available to Platinum readers, five have positive SR and RR values, not a trivial accomplishment.  The Kenilworth is a very young portfolio so a few dollars difference away from the benchmark causes major swings in IRR values.  Over time the volatility will moderate.

Several portfolios still need major work to bring the asset classes back into balance.  As the market rises, limit orders are left wanting.

 

Portfolio Performance - 01/22/2011

Portfolio Last Update Launch Date Tracking Tool Port. IRR ITA Index Diff Port. vs. ITA Index VTSMX IRR Diff. Port. vs. VTSMX Index IR SR RR
AA-Mosaic 12/31/2010 07/21/1999 Captool 2.5% NA NA -0.4% 2.9% 0.05 NA NA
Curie 01/22/2011 12/26/2007 TLH SS 5.0% 1.1% 3.9% 0.7% 4.3% NA 12.1 5.2
Mosaic2 12/31/2010 07/19/1999 Captool 4.9% NA NA -0.6% 5.5% 0.15 NA NA
Newton 01/22/2011 06/02/2008 TLH SS 9.9% 13.1% -3.2% 7.4% 2.5% NA 3.0 3.0
Passive Port. 12/31/2010 12/01/2000 Captool 5.11% NA NA 0.02% 5.09% 0.69 NA NA
Schrodinger 01/22/2011 12/01/2000 TLH SS 5.1% 5.0% 0.1% 3.0% 2.1% NA 4.2 4.2
Jane 12/31/2010 02/14/1997 Captool 9.13% NA NA 3.01% 6.12% 0.53 NA NA
Einstein 01/22/2011 06/30/2008 TLH SS 15.0% 23.0% -8.0% 11.4% 3.5% NA 6.6 6.6
Gauss 12/31/2010 02/19/1997 Captool 9.32% NA NA 3.0% 6.3% 0.22 NA NA
Kepler 01/22/2011 11/01/2008 TLH SS 20.7% 24.1% -3.4% 21.0% -0.2% NA -0.1 -0.1
Scrappy 12/31/2010 08/14/2008 Captool 12.9% NA NA -3.7% 16.6% NA NA NA
Bohr 01/22/2011 08/14/2008 TLH SS 12.7% 4.8% 7.9% 5.5% 7.2% NA 0.6 0.6
Kenilworth 01/22/2011 08/18/2010 TLH SS 28.4% 33.1% -4.7% 47.3% -18.9% NA -0.1* -0.1*
Projects 12/31/2010 12/01/2000 Captool 5.5% NA NA 0.02% 5.3% 1.31 NA NA
Washington 12/31/2010 06/18/1999 Captool 3.1% NA NA -0.19% 3.29% 0.27 NA NA
Maxwell 01/22/2011 12/25/2000 TLH SS 0.7% 2.5% -1.8% 4.3% -3.7% NA -0.2 -0.2
Adams 12/31/2010 06/18/1999 Captool 3.3% NA NA -0.19% 3.49% 0.71 NA NA
Euclid 01/22/2011 06/30/1999 TLH SS 1.2% 8.5% -7.3% 4.4% -3.2% NA -0.2 -0.2
Jefferson 12/31/2010 03/13/2008 Captool 5.44% NA NA -3.31% 8.75% NA NA NA
Madison 01/22/2011 03/13/2008 TLH SS 5.4% 6.1% -0.7% 10.0% -4.6% NA -0.3 -0.3

“Creme List” for 22 January 2011

CSCO is back on the list and we lost LLY.  Otherwise, only minor shifts occurred this week.  No stock was priced to purchase according to my analysis.

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