“Delta Factor” for Sector Portfolio

What is the "Delta Factor" projecting for the eleven sectors of the market?  Based on recent analysis, the international market is over bought.  Is the same true for the U.S. Equities market?

Checking out the data table below, three years of historical data indicate the same over bought condition exists for the U.S. market.

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Risk Reduction Model Check

Readers using the ITA Risk Reduction Model with one or more portfolios, keep a check on the key eight asset classes.  The ETFs I use are as follows:  VTI, IWN, VEU, VWO, VNQ, RWX, DBC, and PCY.  All are commission free ETFs for TDAmeritrade customers.

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International ETFs: Priced to Buy?

Approximately once a month I post the "Delta Factor" projections for a list of international ETFs.  Below are two sets of data.  One covers a three-year period and the second expands to four years.  What is the outlook over the next six to twelve months if we use this type of probability projection? 

In the following tables I use two different time frames.  The first table is a three-year period that begins near the bottom of the last bear market.  Note there are no Buy signals for any of the international ETFs.  The future projections are unlikely to exceed the great market run we experienced over the last three years.  The "Delta Factor" uses a reversion-to-the-mean analysis so it only makes sense to be cautious.

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Performance of “Ivy Portfolio”

Platinum members who have been following the development of the ITA Risk Reduction model know that I based the ITARR system on the model laid out in Faber and Richardson's book, The Ivy Portfolio, and a modeling system I used back in the 1980s when I was co-authoring an investment newsletter.  ITA readers using the ITARR model will find the following link of interest.

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Chopin 24 Preludes

While Chopin ranks as one of my Top 25 Composers, I have yet to recommend any of his music on this blog.  This week is different as I am putting forward Chopin's 24 Preludes Opus 28 for the CD of the week.  To come up with this selection, I ran a screen for Chopin from my iTunes library and then requested 5-Star recordings.  At the top of the list were three cuts from this CD.  While Amazon does not provide audio samples from this CD, here is a top Amazon review of this CD recording.

"Grigory Sokolov is a pianist who just recently ventured onto my radar screen with his DVD of a recital from Paris (see my and others' reviews of it here at Amazon: Grigory Sokolov – Live in Paris). He's been around a long time — he won the Tchaikovsky Competition almost forty years or so ago when he was only 16 — but has remained poorly known, in the US at least, by carving an unusual career path for himself; in these days when a career is boosted most often by blockbuster recordings, he has recorded little and almost all of those recordings, and certainly all of them recently, have been of LIVE performances. That's the case here, as well, in this set of the Chopin Préludes from a 1999 recital. He's a deeply thoughtful and serious rather than commercially driven artist, apparently.

The Préludes tend to get short shrift from concert pianists, a few of them appearing now and again as encores. But for my money they are better music than the much more commonly performed Études. They are the heart and soul of Chopin's pianistic poetry, condensed, most of them, into only a couple of pages. Yet they cover the world in their expressivity. Most of them are not beyond the technique of moderately advanced pianists, but the expression required must come from the soul. And that, aside from technical near-perfection (this is 'live,' after all), is what we get from Sokolov. In some ways he is a throwback in that he plays with what some would call waywardness at times. By that is meant that he varies tempi, phrasing, dynamics from what is usual in order to express something deeply felt. For instance, in the very first Prélude in C Major, usually played like the wind by others, Sokolov plays dreamily, and with rich, warm tone. (By the way, it is said that Sokolov spends hours with the piano he will be playing on, often more or less taking it apart physically, tuning and voicing it himself. If that be the case, he is also a world-class piano technician by the sound of the piano on his recording.) And lest one think Sokolov can't play like the wind, listen to No. 3, in G Major: such pianissimo, such lightness and accuracy, and yet such phrasing as few are capable of. And then this is followed immediately by one of the most soulful readings of the No. 4 in E Minor, slower than most play it and almost weeping in its melancholy. (I will confess that I shed a few tears on hearing it.) The same sorts of insights and expression occur throughout this traversal of all 24 préludes. I have several special favorites, but I suspect others would pick different favorites because they contain all superb music-making. I loved the heroics of No. 22 in G Minor and No. 24 in D Minor, the intensity of the thrice-familiar No. 15 in D Flat (the trudging middle section, with its tolling bell, presages Ravel's 'Le Gibet' from 'Gaspard de la nuit'– more terrifying than I've ever heard it), the turbulence and digital fireworks of No. 16 in B Minor (Presto con fuoco – and boy does he ever!). And so it goes.

Discovering Sokolov, whose quiet demeanor onstage belies his soulful and fiery artistic temperament, is one of my major discoveries of this past year. I intend to pursue finding everything of his I can find, and will pray that he will some day play near me so I can see/hear him in person. "  – J. Scott Morrison

Portfolio Performance Update: 24 February 2012

What a dull market this week.  Several of the portfolios experienced no changes across the board.  In many cases the Internal Rate of Return (IRR) values dropped 0.1% point on an absolute scale.  When measured against the ITA Index, four portfolios remained the same, five lost a small percentage and two gained a small percentage.  Small changes occurred with respect to the IRR of VTSMX.  Once more, four remained the same, six lost ground and one (Gauss) picked up a fraction of a percentage point.

Keep in mind that not every dividend and ETF purchase has been recorded for the month.  That will occur when the broker statements are available sometime next weekend.

Click on blog title to expand table.

Portfolio Performance - 02/24/2012

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
Curie 02/24/2012 12/26/2007 TLH SS 5.0% 3.1% 1.9% 2.5% 2.6% 0.6 0.6 0.3
Newton 02/24/2012 06/02/2008 TLH SS 7.9% 6.8% 1.1% 7.8% 0.2% 0.3 0.1 0.1
Schrodinger 02/24/2012 12/01/2000 TLH SS 5.0% 3.8% 1.2% 3.5% 1.5% NA 0.1 0.1
Einstein 02/24/2012 06/30/2008 TLH SS 11.3% 9.7% 1.6% 11.5% -0.2% 0.3 0.03 0.03
Kepler 02/24/2012 11/01/2008 TLH SS 15.1% 14.7% 0.4% 16.7% -1.6% 0.05 0.00 0.00
Bohr 02/24/2012 08/14/2008 TLH SS 10.4% 7.7% 2.7% 6.5% 3.9% 0.64 0.20 0.20
Kenilworth 02/24/2012 08/18/2010 TLH SS 12.1% 17.3% -5.2% 15.6% -3.5% 1.01 -0.05 -0.05
Maxwell 02/24/2012 12/25/2000 TLH SS 1.7% 8.1% -6.4% 4.9% -3.3% NA -0.11 -0.11
Euclid 02/24/2012 06/30/1999 TLH SS 2.7% 9.5% -6.8% 5.1% -2.4% NA -0.08 -0.24
Madison 02/24/2012 03/13/2008 TLH SS 6.5% 10.0% -3.5% 9.1% -2.6% -0.59 -0.94 -0.94
Gauss 02/24/2012 12/27/2011 TLH SS 35.9% 59.3% -23.3% 71.3% -35.3% -1.62* -0.12* -0.12*

IR = Information Ratio

SR = Sortino Ratio

RR = Retirement Ratio

Difference values are rounded to the nearest 0.1% point.

* Insufficient data available to be accurate.  We need a minimum of 36 data points to calculate the risk or uncertainty values.
 

Examination Day Arrives for Gauss Portfolio

Regular Platinum readers are well aware that the Gauss Portfolio is one of the ITA Risk Reduction candidates.  Here we are near the end of the month and it is once more time to check on the ETF prices and their respective 195-Day Exponential Moving Averages (EMA).  For those new to the ITARR model, we use StockCharts for our analysis information.  Below is a screen shot for VNQ, the domestic REIT ETF we use to populate this asset class.

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Kenilworth Portfolio Update: 23 February 2012

While tomorrow is the actual day for updating the Kenilworth Portfolio, I have a number of pressing activities scheduled so I am pushing the review up one day.  All the prices of the critical ETFs are positioned well above their 195-Day EMAs so one day should not make any difference in the decisions. 

This portfolio is shy on cash so I am unable to rebalance commodities (DBC) and international bonds (PCY) without selling a few shares of large-cap blend (VTI) developed international (VEU).  Incoming cash over the next two months should be sufficient to bring the asset classes out of balance back into alignment.

For those not familiar with the Dashboard, percentages with the white background indicate the target and those with the light blue-green are the actual percentages held in the different asset classes.

Click on title to expand Dashboard.

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Bohr Portfolio Review: 22 February 2012

Shares of VWO [Emerging Markets (EM)] were purchased this week for the Bohr Portfolio bringing the EM asset class into balance.  Even so, we are over 250 shares shy of pulling EM up to the 20% target.  In the following screen shots Platinum members can see the Bohr Dashboard and performance data.

The following asset allocation is designed for the long-term investor.  While the Bohr is not one of the portfolios set up to use the ITA Risk Reduction model, one can apply a modified version of the ITARR to this portfolio if risk reduction or lowering portfolio volatility is a goal.

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Kenilworth Portfolio Review: 21 February 2012

While it is a few days early to update the Kenilworth Portfolio, based on the current ETF prices and their respective 195-Day EMAs, nothing is likely to happen over the next few weeks let alone the next three days.  Here is the link to the StockCharts graphs we use for the ITA Risk Reduction model.  The following two screen shots show the Dashboard and Portfolio Performance data for the Kenilworth.

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