Today's Market
by Dr Invest

Today, I will be investing in two ETFs: TIP and BND. If you are completely unaware of the on-going investment strategy I am using, begin reading this blog from May 1st.

• I am using the Ivy Portfolio System
• I am investing $10,000.00 for illustration purposes
• I divide the $10,000.00 into three parts
• One part is set aside for CASH, another for BONDS, and another for STOCKS
• I will only invest when I am most likely to increase my earnings
• I will sell when my investments are most likely to decrease
• I sold my stocks in MAY and bought BOND Positions in TIP and BND in MAY
• The 1/3 set aside for BONDS was itself divided into thirds. I invested $1,111 into TIP and BND on the 2nd of May, I will invest another $1,111 into TIP and BND on June 1st, and yet another $1,111 into TIP and BND on July 1st, when I will be full invested into bonds.
• I will use a stop-sell on all purchases of TIP and BND of 3% below the purchase price.

As of yesterday, my total gains for TIP and BND in May was 1.39%. This isn't much, but if there is an average of 1% each month until January, the total gain on this investment will be 8% for 2012. That is better than the .92% offered for a CD by the banks and is equal to most stock dividends.

STOCK DIVIDENDS

About stock dividends: I like them, but when there is a chance for a drastic downturn in the market, you could lose 20% to 40% of the value of the stock with a dividend of only 6%. This is not the way to make money.

As of today, the DOW JONES is lower than where it began in January. If you were bragging about staying in that stock mutual fund and the 12% you had gained, you now will be back to the original value of your portfolio.

As explained in the previous blogs, I have expected the DJIA to climb some, but as I also said, "bad news" could keep the market down. The bad news has been so over whelming, that the market just hasn't recovered. I expect we will hit the lows of last year.

If you are wise, you will be overly cautious and only take gains you know are possible. Eventhough gold may rise, for a number of months, it has been down. I would avoid gold like the plague. I couldn't enjoy an investment that could lose 1/3 to 1/2 of its value now, even if it went up 200% in the next four years. Just from an emotional stand point, it is not worth losing sleep over or becoming overly stirred up by temporary losses.

There are BOLD traders, and there are OLD traders; but there are no OLD BOLD traders. This is the bottom line, I am not going to attempt to make 20% more with higher risks of loosing 20%, when I can take lower risks and be reasonably certain I can make 10%.

Another favorite saying is: It is better to be out of the market wishing you were in, than to be in the market wishing you were out. Before I enter the market, I want to know that the trend is moving upward.

(note: the above information is for entertainment purposes only and not to be used for financial advice.)

Today's Market
by Dr Invest

A one percent gain is significant, but not unexpected. Just like the market can't continue going up indefinately, the market will not continue downward indefinately. At the end of April, Benanke's promise to stimulate the market if necessary, brought on an expectation of a QE3. What was a "head and shoulders" pattern, defining a downturn in the market, was broken by renewed speculation with a sharp downturn as predicted in the first part of May.

It is possible that the market will temporarily rebound between June and August, but I would expect a significant rise. Almost all the year's gains were erased by the last week in May as indicated by the red-line. Unlike previous years, the market has not continued an upward climb into June and July. I think what few climbs in the market we see, will be tepid at best. I would predict a flat to downward trend in the market, with a recessionary move in August and September.

A new QE3, twist, or new and innovative stimmulus by Bernake would halt temporarily this downward trend. I feel that there is a 70% change that some kind of stimmulus will take place, if for no other reason than to give both presidental candidates a fair opportunity to engage in political battle without the distraction of a failing economy. By the way, regardless of how you dress a pig, it is still a pig; no matter how you dress this economy, it is still a failing and stagnant economy.

A new stimmulus would give our current president bragging rights that the economy has revived under his wise direction and the Republican contender to raise doubts that the economy will remain viable. This is perfect stuff for good ole presidental election.

Yes, I am guessing that we will revisit the lows of August and September of 2011 once again around the same months of 2012.

The Bottom Line

I don't see many investment opportunities in this market. New bad news out of Europe will come, bringing painful losses. These losses will come without warning and could cut deeply. My view is that a cash position in your stock portfolio might be the wisest choice. A thirty-day uptrend might convince me otherwise; but if a dirty and ragged up and down in the market continues, I will want to remain in cash.

As represented in the seasonal chart above, I will be looking for the seasonal trend that begins at the end of October to re-enter a stock position.

For now, it is best to establish your bond portfolio. I have recommended TIP and BND exchange traded funds (ETFs). Go back to the blog on the first of May to learn how to enter the position.

My Bond Investment

As of this date, my mix of TIP and BND has gained .55%. As you know, using the IVY PORTFOLIO method, we don't really look at the performance until the 1st of June; and then we either sell the ETFs or buy more. As of this date, there is no reason not to buy more of TIP and BND. Unless TIP and BND fall tremendously, a stronger position will be purchased in TIP and BND. It is expected that TIP and BND will return 6% to 8% by the end of 2012.

We will be patient and disciplined in our buying and selling. Buying too early can mean loss, as well as selling to late. We will buy stocks when it is most favorable to see gains. Don't be concerned about what happens in between the now and the optimal time to purchase stocks. Even if there are 5% gains or 5% losses, these market moves are not important to being in the market at the optimal time. If you gain 5%, then loose 5%, you have profited nothing. If you buy at the optimal time and the market has energy to climb 12% to 20%, you have suddenly multiplied your portfolio significantly.

There is a season for everything under heaven; a time to sow and a time to reap, a time to gather stones and a time to cast away stones, a time to be born and a time to die. And so it is in the seasons of the market. A seed cast in winter will not produce fruit, but a seed cast in the spring, will multiply itself and bring bounty to the sower.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Weekend Report
by Dr Invest

"All that glitters is not gold!" Gold appears to be an attractive buy right now, but only if it rebounds in a significant way. Please remember, gold purchases are speculation and for some periods of time gold has not gone up much, proving to the "worst investment in the world". While my gold bug friends will point to the extraordinary gains in the past few years, a close look at the S&P and it's gains between 1980 and 2000 show gains that are extraordinary good. Conversely, gold prices were terribly weak between 1980 and 2000. When over laying the S&P and the Kit Gold Prices charts and reducing the lag time for gold, they almost look identical, including the flattening out of the S&P from 2000 until present and now the beginnings of Gold Prices, though lagging the market, are now flatening out into a sideways movement.

When we look at a more current gold price chart, we see gold in a downward trend. The gold bugs point out that it appears that gold is making a double bottom at the end of May, and that gold will rebound in the first part of June. Repeat after me "SPECULATION". A return to the rise in prices for gold in 2009-2010 signals a 1000 good reasons to buy gold, otherwise the continued downtrend in gold prices here in 2012 is the orderly collapse of  a "gold bubble". Look for either a breakout around 1730 or a clear downtrend after falling below 1450.



What amazes me is that whether you invest in stocks, bonds, gold, real estate, etc. people are quite dedicated to their committed investment. You would think that investing is like football with each investor rooting for his committed investment to win. This isn't the way to invest. Eventhough gold is declining in price, professional financial advisers who have a preference for gold, are saying, "BUY! BUY! BUY!".

A double-bottom may be forming in gold, but for now, whatever gold is doing is inconclusive. Charles Nenner was an analyst for Goldman Sachs, until he started his own finanical advisory firm. Charles doesn't base his analysis on current financials, but on financial cycles. Though some might call Charles Nenner as someone from the "Twlight Zone", one can't argue with the results that he has brought to financial analysis. If only for fun, I would like for you to listen to his assessment of the present market conditions. http://www.bloomberg.com/video/92684661-commodities-supercycle-is-over-real-estate-euro.html

Another interesting personality is Marc Faber. Again, gold is the topic, so listen for his analysis about gold. http://www.bloomberg.com/video/93063825-marc-faber-says-stocks-in-significant-correction.html Marc is also one of those interesting personalities, but his analysis of the present market deserves discusssion.

Have a great weekend.

(note: the above information is for entertainment purposes only and not to be used a investment advivce.)

Today's Market
by Dr Invest

Gold, Gold, Gold! Like stocks, the mantra has been repeated again and again. Gold may break upward any moment, but it seems that for the present the trend is downward for gold. Now it is not that gold will not rise higher, it will. Just like stocks, one day stocks too will move higher. Oil, the sad puppy it has become, will also move higher in time. The objective in making investments is to see a rise in value, not a decline. In gold, that decline has been 18.42% since the high of $1,900 per ounce in August of 2011.

I can't think of anyone who would recommend buying stocks after they had fallen 18.42% and still seemed to be in a downtrend. And I can't imagine anyone still carrying gold in their portfolio after it had fallen 18.42%. Now if gold began to recover, one could consider that gold had hit a low and there was potential growth.

I see gold no different than stocks or bonds. Gold is a commodity and when it begins to slide, I have no emotional attachment to it... I sell it! That is exactly what happened when GLD began to fall last year. My STOP-SELL automatically sold my GLD position. I didn't cry about it, nor did I go and purchase more gold. I explained to my friends my fear that there was a GOLD BUBBLE. And in this case, I was right! Some of my friends are still waiting for gold to recover. The honest question is "What will you do if gold continues its decline another 18%?

I don't have an investment in gold at this time and wouldn't buy gold until it shows promise as an investment. Listen, even if gold has gone up 500%, you can't afford a 20% loss. Think about $100,000 investment in gold...it has grown to a value of $600,000 and a 20% loss of $600,000 is $120,000. Can you afford to lose $120,000?

It doesn't matter whether it is stocks, bonds, or commodities don't settle for losses. I determine how much I am willing to lose before I make an investment and then move a stop-sell behind the closing price of the investment. When I see a weakness in the stock, I move the stop-sell even closer to the closing price. My objective is "Don't lose money!"

Consider looking at gold without rose colored glasses. Treat it as you would any other investment. If it doesn't perform, sell it!

(note: the above information is for entertainment purposes only and not to be used as investment advice.)

Buy, buy, buy! Gold is cheap!

Today's Market
by Dr Invest

I want to reaffirm, do not expect any spectacular increases in the market. And please... I'm asking, pleeeese don't believe anything the financial media says.

Mark Kiesel at Pimco exhorts, "Now is the time to buy houses.", while Gary Shilling predicts a 20% decline in housing prices in 2012. Yes, I said in 2012. Both men are looking at similar telemetrics with very different interpretations.

See: http://www.bloomberg.com/video/93205371-shilling-housing-will-decline-20-percent-in-2012.html

What's Up?

As reported yesterday, the most probable track of the market will follow the seasonal chart. As I said, "bad news" can change that track. If the "bad news" doesn't persist, the market will return back to the seasonal track most of the time.

"Good news" will quickly push the market higher because of the exuberance still present in the market. Greedy sales people lead people to believe that the market hasn't lost its momentum, and the present losses are "buying opportunities".  Listen, if the professionals are confused about whether the market is moving up or down, then I'm not interested in investing into it.

What to do?

It seems that having a reliable investment method is critical to increasing your profits. Go to the 1st of May and begin reading this entire blog. Understand, that the financial reports you are getting from companies, are reports from APRIL. If just 1/3 of the companies are reporting profits less than projected, these reports of losses will get worse as the companies report for MAY. Don't get suckered into buying more stocks and immediately put STOP-SELLS on your stocks. That is what I have done. Again, the needs of each individual investor is different, so methods that I am utilizing are solely for discussion and thought. As you follow this blog, I will be candid and honest in the returns from my positions. At the end of the year, we can assess the results my investment strategies.

The higher the risk, the higher the return. What we want to do in a volatile market is to lower the risk and maximize the return. A 6% return for 2012 would be admirable and an 8% return would be remarkable. Remember, we have diversified our portfolio by dividing it into thirds. 1/3 is kept in stocks, 1/3 is kept in bonds, and 1/3 is kept in cash. The 1/3 set aside for bonds is invested only when the time is optimal. The 1/3 in stocks is sold when the market turns down and re bought when the market is most optimal at the end of October. The final 1/3 is kept in cash in case there is a sudden downturn in the market. (see previous blogs starting in May)

About that 1/3 in Cash

This is my opinion, but DO NOT PUT 1/3 YOUR PORTFOLIO INTO GOLD. Gold is a "speculative investment" and as recently experienced by "gold bugs", gold does go down in value. In the 80s gold sold for $200 per ounce, rising to $830 per ounce, then falling back to $300 per ounce. One of my friends leveraged (borrowed money) their investment into gold at that time, losing all of their money and part of a brokerage's money when the gold market settled.

My understanding is that the value of gold is related to the value of the dollar. With the collapsing value of the euro, the dollar has risen in percieved value. So think about this with me... if a dollar is worth more comparative to an ounce of gold, the price of gold will decline in value because it takes fewer dollars to buy an ounce of gold. Also, if the price of gold rises too high, people will stop buying gold (as they have done in India.) and a loss of demand, the price of gold will fall.

Looking at the S&P 500 from the year 2000 til' the present, we see a SIDEWAYS movement. This is either a consolidation toward a downward movement or a consolidation toward an upward movement in the market. Because gold is a commodity, when there is "market destruction" gold will also turn downward as it did in 2009. (see http://en.wikipedia.org/wiki/Creative_destruction) Look at the gold price in 2009, marked in red on the chart to the left. Debt is not only sinking world economies, but our economy as well. Among many economists, the feeling is that the market will proceed in a downward trend.  All that is really clear here, is that there has been a LONG-TERM CONSOLIDATION in the market. Gold prices LAG the market. In the ORANGE BOX is a line showing the beginnings of a CONSOLIDATION or sideways movement in the price of gold. Note the five-year chart below.

This gives us a clearer picture of what is going on in the ORANGE BOX. This would tell me that there is a TRADING RANGE in a downtrend. If gold makes a move ABOVE THE BLUE LINE, it will be a BULLISH MOVE, but if the price continues BELOW THE BLUE LINE, it will be a BEARISH MOVE.  If you draw a line at 1600 across the two lowest points that gold has recently touched and draw a line from the most recent high price from 1800 to 1600, you will have a descending wedge pattern suggesting a bearish trend.

Some people swear by these kind of technicals, but at best, technicals are only suggestive of a potential move.

Before launching out to buy gold, you should be wise (educated) to how our government has grown to handle gold and a fiat currency. For your homework is a FREE book on Google book search... and look for FREE e-books. We are looking for "The Economic History of the United States" by Ernest Ludlow Bogart and in particular, the subject is "The Financial panic of 1873".  Read Dr. Bogart's history on the panic starting on page 385. (see: http://books.google.com/books?id=cS0XAAAAIAAJ&pg=PA390&dq=financial+panic+of+1873&hl=en&sa=X&ei=-Xe8T7rKD4ae2gXxoOWtDw&ved=0CDkQ6AEwADgK#v=onepage&q=financial%20panic%20of%201873&f=false )

If you don't understand the development of currency, banking, and legal tender in the U.S. you will put your hopes for a quick gain at risk. An understanding of the "Greenback Party" and the interaction of the "gold standard" to "fiat currency" is critical to the gold investor. In 1933, F.D.Roosevelt issued a national emergency confiscating all gold bullion. (See http://www.the-privateer.com/1933-gold-confiscation.html) And yes, today's president has the power to issue such an order without the permission of Congress.

I would not put the 1/3 you have set aside for CASH into GOLD. Put the 1/3 CASH into CD. In the panic of the great depression, the market collapsed so rapidly that there were "no buyers" for stocks. Having their entire savings in the market, they lost everything. Especially in a volatile market as we have today, having at least 1/3 of your life savings protected could be a comfort.

Most importantly, don't think that the market can't crash that way again. Do you remember the FLASH CRASH? (see http://en.wikipedia.org/wiki/2010_Flash_Crash) With computerized trading, the right set of parameters could bring deep sell offs over a few days. To get OUT OF THE MARKET, you need someone who wants to GET INTO THE MARKET. It is theoretically possible be stuck in the market with no one to sell to.

So protect yourself by keeping 1/3 of your portfolio in cash. If you have three million dollars in your portfolio, keeping one million in cash may not apply... and you wouldn't need this blog's thoughts anyway. But for someone with a smaller portfolio, keeping around that 1/3 of your portfolio in cash would be a positive thing.

(note: the above information is for entertainment purposes only and not to be used as investment advice.)

Buy, buy, buy! Stocks are cheap!

Today's Market
by Dr Invest

As I predicted, the market moved higher today and a further rise in the market is possible over the next few days. The financial "talking heads" are using this time to renew their lies that we are in a "strong rebounding economy" and that "now is the time to buy stocks while they are cheap". Don't believe any of this. Go back to my week-end report and look at the seasonal chart for stocks. Think about what has happened over the past 32 years in May and June...especially note what happens in August and September.

I hope I can keep you from a world-of-hurt as you make your own investment choices. There is no perfect investment record, every investor loses money from time to time. The objective is to limit the amount of money you lose, and to be maximize the amount of your returns.

HOW ARE THE BOND FUNDS?

Both TIP and BND increased in value today and since investing into BND and TIP on May 2nd, the total return has been .88%. If I had an average gain of .88% per month over the next eight months, my gains in my portfolio will have been admirable.

As the market turned down in April, most of my stocks sold. In January, I had already sold numerous stocks because the fundamentals of the market were poor. The fundamentals are still poor and care should be taken to protect all investments with a STOP-SELL.

TIP and BND were purchased in May, because BOND ETFs perform well from May until October. Neither TIP nor BND will be sold unless they fall below their 10 month SMA (simple moving average)

LEARNING AN INVESTMENT SYSTEM

Go back and begin reading the blog from the first of MAY to learn how I diversify my portfolio and how I slowly invest in three tiers. Investing in three tiers is optional, but it is a good habit to develop in investing. If a BOND or STOCK is really going to be a long-term performer, investing at three different times will not largely affect your total profit. Though it takes two months to get 1/3 of your portfolio fully invested, it is a safer way to move into an investment position. (1st investment <month passes>, second investment <second month passes>, final investment <1/3 of your portfolio designated for BONDS is now invested>)

(Note: the above information is for entertainment purposes only and not to be used as financial advice)

Weekend Report
by Dr Invest

I want to give my readers a quick update before the opening on Monday morning. The markets have been pretty beaten down over the past two weeks. A little rise in the market is expected, unless further bad news develops in Europe. I am not suggesting any changes in your investment strategy, because stocks are likely to continue a track that is trending downward. Look again at our seasonal chart below:



What happens in MAY in our seasonal chart for the DOW JONES? Right, from the middle of May until the the last few days in May, the course has been downward. This is not always the rule, but over the past 34 years this course has been typcialy true. With all the bad news coming out of Europe the trend could continue in a forceful downward direction, but probably not! I think the market could flatten out a little higher than the present low, but within several weeks begin to fall-off in price as the market falls to the lows of last year.

Don't be caught by surprise if you see the market climb a little higher. Most likely, the market will be choppy with volatile moves up and down but staying within a narrow trading range during June and July. Your best to be out of stocks and invested in TIP and BND for now. Remember to follow the IVY PORTFOLIO RULES. If the price of these ETFs fall below the 10 month SMA, sell them, but only if it is the first day of the month. Set a stop-sell at 5% below the closing price just to protect your position.

In the market, any investment can lose value. Protect yourself from losses. Read all this blog to learn the best ways to protect yourself.

(Note:The above article is for entertainment puroses and not to be used as financial advice.)

Today's Market
by Dr Invest

Arrogance comes in many colors: political arrogance, religious arrogance, and in this blog we talk about market arrogance. The surest way to failure is pride and arrogance; while humility and meekness leads to success.

New information has come that JP Morgan was betting that the credit markets would strengthen. They, with thousands of other finanical gurus who are investing your money, believed that the party was begining. What they failed to see was that the party was over. Click on the link below:

The source of JPMorgan's problems is an obscure group of indexes that track the performance of corporate bonds. One of the indexes, the Markit CDX NA IG Series 9 maturing in 2017, is essentially a portfolio of credit default swaps - basically contracts that protect against default by a borrower.

This particular index is tied to the credit quality of 121 North American investment-grade bond issuers, including such names as Kraft Foods and Wal-Mart Stores.

JPMorgan used that index, and others, to bet that credit markets would strengthen. Because that position is widely known on Wall Street, many traders are betting the opposite way in the hope of profiting as the bank's losses increase. The index has been moving against JPMorgan in recent days. http://finance.yahoo.com/news/jpmorgans-future-losses-mercy-obscure-042458127.html

In the fifth day of a market decline, the financial news is not improving but deteriorating. Still, many fund managers are standing at the doors with their hands out-stretched pleading with their investors to remain calm... "Buy on the dips!", they plead. "The market is just making a small correction!" is the mantra.

ICI.ORG records the inflows and outflows of various investments. Insiders are selling their shares the acquired from their own companies. Traders are dumping their stock portfolio. Hugh amounts of money is flowing out of stocks into BONDS and TREASURIES. Hold on here...I thought I needed to be buying the dips. What gives?

LEAVE THE LOSSES WITH THE LITTLE GUY

A pattern of leaving the losses with the little guy is common in the market. Misleading information attracts the "fool hearty dupe" to buy as the real investors slip out of stocks with profits. I know I will draw criticism for this observation. Get to CNBC and search for AMERICAN GREED. You will learn about "pump and dump" and this is done by seemingly legitimate brokers.

I would not trust anything I heard in the financial news about a recovering economy until I could see a return to some kind of normalacy. What does that look like?

1. Reduction in Personal and National Debt
2. Increase in Personal and National Savings
3. Reduction in unemployment
4. Increase in Exports
5. Increase in GNP

There are some other thing to look for, but the above is so obvious. We saw increases in profits a the begining of 2012, but these profits were synthetic. (See my APRIL, 22nd Blog)

Profits are not always indicative of a recovering economy. Profits can be synthetically produced by stimmulus and inflation, until there is weakness in the market. Only then is the weakness unmasked. I can't say that panic and despair is now characteristic of the market, but today's fall of 150 points on the DOW is the first indication that the market is slipping toward panic.

I expect that the market will regain a little and then continue downward for a while. Just STAY OUT! for now. To me, BOND FUNDS still look good. So TIP and BND seem good buys to me.

I bought TIP and BND on MAY 2nd. My return to date is .70%. Considering that anything nearing 1% per month is a great return for bond funds, my investment has had some success. 1/3 of my portfolio is in TIP and BND and I am hoping to see a 6% to 7% return on the BOND FUND investment by the end of the year.

(Note: For entertainment purposes only, not for investment advice.)

Today's Market
by Dr Invest

What a three-ring circus. In one ring are pundunts explaining the importance of taking advantage of this buying opportunity. In another ring are traders and brokers with rivlets of sweat streaming down their faces, who are focused on liquidating their stock positions. In yet another ring are individual investors with one holding a sign that says, "buy gold", another holding a sign that says, "sell everything", another holding a sign that says, "buy bonds".

Though entertaining, one could debate whether anyone has made any real money from the circus. Those recommending gold, have and investment that is down 19% from the high in August. Those recommending stocks have lost over 50% of their gains from the start of the year. In that ring, advisers are still recommending that investors hold their stock positions eventhough their positions are accelerating downward.

The above chart provides some typical downturns in the market. I have not included the dramatic fall of the market in 2009 because of the enormity of the financial collapse at that time. Also, I did not include compounding in a series of market downturns. I am simply using the typical downturn, noting the depth of a typical downturn and the length of a typcial downturn.

Though no one can adequately determine, project, or analyze where the market is truly going, there are some interesting patterns. No downturn is identical, but many of the illustrated downturns are remarkably moving at the same depth and length. This is only interesting because it appears that we are on-track to revisit the lows reached in August of 2011.

This downturn may not be STRAIGHT DOWN and could include several rebounds before continuing toward the lows of August of 2011. Should the market take several stairsteps down, we would arrive to the month of August. It seems that we are repeating the 2011 downtrend. Today the FED promised that they were watching the market downturn and would implement further easing, when necessary to support continued growth in the market.

It would seem that the market voted with their feet today, regardless the promises by the FED to look into further easing. Remember, continued government intervention into the markets change all formulas, projections, and rules. How you lose 2 Billion Dollars? You let the FED implement an artifical market!

Marty Feldstein, economic adviser to Ronald Regan, and Harvard Professor gives us his wise opinon today. This is worth your listen.
http://finance.yahoo.com/blogs/daily-ticker/marty-feldstein-more-air-going-come-stock-market-114307713.html


 ECRI's Lakshman Achuthan gives detailed information on the downturn. Please notice the arrogant protagonist. It is typical of the attitude of many young economists who believe you can control the market.
http://online.wsj.com/video/why-us-economy-is-heading-back-into-recession/243FCFBE-0A8D-4168-9EA2-182E5850EC1B.html



(note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

There's not much to say, especially if you are invested in BOND FUNDS (TIP and BND) as I suggested at the first of May. Everything I have suggested is happening and it seems that the unraveling has begun for the Summer.

I was surprised that there are still fund managers and financial advisers protesting that the economy is sound and secure that that now is a buying opportunity for stocks...they continue, that you will never be able to get stocks any cheaper. Honestly, it seems that I'm watching a late-night re-run of The Twilight Zone.

No one need remind me that the market is accelerating in downward trend. I almost hear the whistle and whine of a plane in a nose dive.

HERE'S HOW I'M HURTING

The above title is SATIRICAL. I've been largely in cash for the past three months. Mother fate taunted me to return to the market and join in the opportunity for double digit returns from stocks; but I rejected the temptation, feeling the risk just too high. I'm glad I stayed away from the market.

Seeing that seasonal charts show a decline for stocks in May, I purchased two BOND ETFs. One was TIP and the other BND. By looking at ETFreplay.com, I backtested these two ETFs, feeling that with stocks falling and bonds rising in value, I could see returns of 6% to 7% by investing into TIP and BND. (read the blog from May 1st until now, to see how I would accomplish this.)

So on May 2nd, I purchase equal shares of TIP and BND, placing a 5% stop-loss below the purchase price. The GAIN over the past 14 days has been .62%. That is slightly over 1/2%. Listen, these are BONDS and TREASURIES and your not going to see a dramatic rise in value in a month. Likewise, you shouldn't see a dramatic fall in value either. I would be thrilled to see a 1% gain in the value of this selected portfolio investment each month. That would give me 8% by years end, and much more than the return of a Certificate of Deposit.

STAYING ON TRACK

The continued fall of stocks in the market until the end of October, should keep TIP and BND performing. 1/3 of the total portfolio will be devoted to these two stocks, and another 1/3 will be invested in other STOCK ETFs at the end of October should the market return to an uptrend.

While using this investment strategy, there is the FACT that the FED might well attempt another QE-3 or TWIST, upsetting the markets yet again, and moving them toward some unknown direction. Adaptability will be needed to keep your investment track.

I would like to think that by August, a 3% return from TIP and BND would have been recorded. For me, I will begin moving my stop-sell closer to the daily closing price as new profits are accounted for. By August, I will have moved my stop-sell within 3% of the closing price, and by the end of August, would hope to see a 1% profit secured.

Keep following the blog. Hopefully I can demonstrate the investment model.

THE INVESTMENT MODEL

The investment model is the Ivy Portfolio. I am watching the 10 Month Simple Moving Average, and will not sell TIP or BND until their price falls below the 10 month SMA.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)

Weekend Report
by Dr Invest


There are many cycles in the market; there are daily, weekly, monthly, annual, and multi-annual cycles.

I have already demonstrated that by using SEASONAL CHARTS, you can identify annual trends. Understanding these trends are important to choosing the most favorable time to make investments.

Currently, using "market timing" is adversely received; yet, every reliable trading system uses "market timing" to maximize returns. One trading system noted, that as the trades made after the market closing were processed the next morning when the market opened, the market would spike (under a normal trending market) and then hit a morning low. Buying at the low point, provided a 2% or 3% profit. If you make even 2% a day for a month, you have gained 46%. Unfortunately, in the volatile market which now exists, the reliability of this market anomaly cannot be predicted. Every system uses "market timing" to provide an indication of the most favorable times to invest.

POSSIBLE LONG TERM TRENDS

This week-end, we want to look at some long-term trends in the S & P so we can identify cycles that could be favorable to our investment strategy.



The above chart provides an interesting look at the market cycles of the S&P since 1870. Clearly, there are some trends in place showing market cycles. Let's look at the year 2000 - till the present.



In each downturn, there have been three stages down. If we are not at the top of the second up cycle in the market, we are very near the top. The last downturn is very near in this cycle. Does that mean an immediate drop below the fall in March of 2009. Let me answer that, NO!

Using the above chart, the author suggests December of 2013, February of 2016, and December of 2019. So, although we have some helpful information, it is hard to see a clear direction.

Looking at the other examples, the high in a cyclic downtrend NEVER RISES ABOVE THE PREVIOUS HIGH. On one of these cyclic downturns, there was a FOURTH step down. (see: http://www.ritholtz.com/blog/2012/05/long-term-secular-cycles-on-sp/)

MY SPECULATION ON LONG-TERM CYCLIC TRENDS

Look, no one ultimately knows where the market is heading. If I knew where the market was heading, I would be worth BILLIONS, but the objective here is predict the general market movement and to adjust my portfolio as the market changes. Here is my best guess.

I don't think that we will see the market move toward a major uptrend in 2012. I do think that we will see the typical seasonal cycles with a progressively deteriorating market possibly until October. I do expect that, true to seasonal patterns, we will enjoy a return to a market uptrend from the end of October until the March of 2013.

I think that a strong drop in the market could occur in 2013, falling below the 2009 low on a third leg of downtrend. ONE OTHER OPTION is that the manipulation of the market by the FED will prolong our season in the cyclic downtrend and after another brief uptrend, we will experience a final FOURTH downtrend in 2016 or 2019.

KEEPING PERSPECTIVE

Markets are always going up and down. Markets are always going through cycles. It will be hard to see increases in your portfolio in a MARKET CYCLE that is in a downtrend, while using a BUY & HOLD method of investment.

The object is to identify when the market is likely to turndown and I think in the next few months a decline is in order. WORLD RECESSION can drive a continued downtrend if markets in China and Europe continue a march downward. The charts presented herein seem to point that we are nearing a downtrend. As always, we want to identify buying opportunities. BONDS will be they a safe harbor as stocks turn down in value.

If you want to know what I am doing at this time, read the blogs starting May 2nd. You will see how to diversify, how to invest in BOND ETFs (TIP and BND), and how reserve part of your portfolio for stock investments when the opportunity is favorable.

As you already know, any investment can loose value and there are no guarantees when it comes to investments. Each individual has different needs and different investment styles. You should seek professional investment advice; but by reading this blog you will have a better idea about what to ask you investment adviser.

(note: The above information is for entertainment purposes only and not to be used as investment advice.)

 

Today's Market
by Dr Invest


One of the challenges in making investments is the perception of performance. Before 2008's sharp drop, investment advisers were suggesting a withdrawal of 8% before affecting your core investment; today, it has been revised to 4% withdrawal per year.

The market has changed and what you can expect over the next ten years has changed, so marginal growth is the "New Norm". If you have been following this blog, on May 2nd, I invested into TIP and BND. Read my blog starting May 2nd to learn how to position yourself in BOND FUNDS.

As we learned from seasonal charts, stocks begin to decline in value in May, while bonds begin to increase in value. Now is a favorable time to invest in bond ETFs. Buy going to ETFreplay.com, you can BACKTEST your selection of ETFs. A combination of TIP and BND would have returned 9.8% over the past year, and when you divide that by 12 months, your average performance is around .78% per month.

When you are trading stocks, 3%, 5%, even a 12%  return is not unheard of in two or three weeks. Bond EFTs don't PERFORM that way. While the increase in the value of BOND EFTs grow slower, the investment is put at less of a risk. Still, any return over 8% is a good investment.

BOND ETFs DO GO DOWN

In 2008, when the market crashed so violently, TIP and BND also crashed. When the market collapses, and believe me, everything crashes. Oil, bonds, stocks, commodities, treasuries will all fall. In economics, it is called "value destruction". See, people are so greedy that they will "overvalue" THINGS. It is natural, that once THINGS are overvalued, the value falls until the THINGS are undervalued. This is how the market works.

Since ANYTHING can go down in value, you want to get out of the market before they do. An orderly and slow decline can be good for BOND prices, but a sudden panic driven downturn can result in potential losses.

I am watching my TIP and BND investment and after 9 days, my return is .21%. I have decided that the most I am willing to lose is 5%, so my STOP-SELL is set at 5% below the purchase price. You will remember that I set aside 1/3 of my portfolio for BOND EFTs. I then divided that 1/3 into thirds, investing 1/3 in MAY, another 1/3 in JUNE, and another 1/3 in JULY. Each time I make another purchase of TIP and BND, I will readjust my STOP-SELL. At the end of October, I will review the gain of TIP and BND, moving my STOP-SELL within 3% of the closing price. TIP and BND had solid gains through out 2011 and as long as stocks are volatile, the flow of money will continue into BOND ETF FUNDS.

REMEMBER RULE ONE

Rule one of investment is: Don't lose money. Rule two is: Remember rule one! A friend explained: The best way to get a MILLION DOLLARS from trading stocks, is to start out with TWO MILLION DOLLARS.

Here is how I confidently lost money. I believed the advertisements that in weeks, I would turn $1,000 into $10,000, then the $10,000 within two years would grow to $1,000,000.00. Go ahead and ask JP Morgan how they could lose 2 billion dollars. Even the professionals have problems. Every time I lost money, I started by being greedy, attempting to make "quick money".

A lawyer friend told me of a couple in a little town called Fredricksburg, Texas. Through out their lifetime, they invested only in EXXON if they had some extra money. The total value of the portfolio from small investments... three million dollars left in their estate. They never diversified, yet old EXXON took them to the top, doubling their portfolio from time to time.

When you attempt sophisticated trading stragegies, there more cogs and gears that can break. A trader at JPMorgan was using sophisticated trading methods, using derivatives while hedging a large position. More will come out later, but making your own investments SIMPLE will reduce the risk to your portfolio and keep you following RULE ONE.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest


There is little to comment on regarding the market. Minimal "good news" was exaggerated or ephasized pushing the market higher until everyone came to their senses at the end of the day, leaving the DOW with a paltry 19.98 point gain. The headline for the day was "Market Break Five Day Loss".  Only later did they mention that JPMorgan Chase & Co stunned investors with news that its chief investment office had incurred "significant mark-to-market losses" that it said could "easily get worse."

Here is the bottom line, the market will continue in a downward trend for now. I draw these assumtions from limited resources, but some of the very largest funds get advice from a battery of analysts and unlimited real-time data banks. So let's glean some of this information.

FUND REPORTS

Listed in my blogspot in the tag to the left is RESEARCH & MARKET REPORTS where you will find the Hussman Weekly Report. Click on the Hussman Weekly Report and select "Unbalanced Risk" by John Hussman. He writes: As of last week, our estimates of prospective return/risk in the stock market remained in the most negative 1% of historical observations. That overall assessment reflects a variety of horizons from 2 weeks to as much as 18 months. Very simply, I remain concerned about a blindside recession, significant market losses, and overconfidence in the ability of the Fed to create anything but temporary psychological lifts in the face of real structural economic problems.  

See: http://hussmanfunds.com/wmc/wmc120507.htm


FINANCIAL BRANIACS

Martin Feldstein, a professor of economics at Harvard University, talks about the impact of Federal Reserve monetary policy on the stock market. He served under Ronald Reagan as Economic Adviser and was considered for the position of Chairman for the Federal Reserve until beat out by Bernanke. Please... Please.... listen to this video: http://www.bloomberg.com/video/91807743/

ECRI's Achuthan, predicted that all of Economic Cycle Research Institute's indicators showed that a recession was eminent. May 9th  http://www.businesscycle.com/news_events/news_details/5094 See another interview at http://www.businesscycle.com/

CONCLUSION

I don't want to be negative here but warn, that you need to limit your losses by putting a STOP-LOSS in place. Now is a good time to purchase BOND ETFs like TIP and BND. Please read the blogs from the 1st of May to learn how I diversify and invest properly. These may help you develop your own investment plan.

(Note: the above information is for entertainment purposes only and not to be used as financial advice.)

Today's Market

by Dr Invest

On May 2nd, because of a seasonal trend for stocks to decline in value and bonds to increase in value, I purchased two BOND ETFs (Exchange Traded Funds); BND and TIP.  If you want to make similar purchases, go back to the BLOG ON MAY 2nd and read to the current date. YOU NEED TO KNOW WHAT YOU ARE DOING BEFORE WILDLY INVESTING.

I have used an IMAGINARY PORTFOLIO of $10,000 to demonstrate the return from investing in BOND ETFs, symbols BND and TIP.

I suspect that after such a "hot market", there will be a reluctance in the market to let go of the idea that the run-up of stocks is over. When exuberance has been "the rule" in the stockmarket, denial will always arise because brokers, advisers, and analysts just can't believe that they missed seeing the possibility that the market could turn down. They have egos too, so to admit to their clients that they were wrong about a recovering economy is hard to do.

Today, the DOW dipped to a two-month low before climbing on the news that Greece was getting billions in emergency funding for the present (€28bln from the IMF). Once again, the can is kicked down the road, reinforcing the idea that Greece need not worry about their austerity program for the moment. The new Greek president is promising to pour money into keeping the government employees, and he was elected on an anti-austerity ticket. In the weeks ahead, the Greek president will be calling the European Commission, International Monetary Fund (IMF) and European Central Bank's (ECB) bluff.

The IMF has promised, €1.2bln payments as long as Greece is implementing the agreed plans to decrease their debt. The DOW responded by rising from its low of the day, showing a .75% loss.

The way I read the market, is that a head and shouders pattern formed, Bernanke's promise to not raise interest rates and some unknown tools he had as a way to stimulate the economy, brought continued speculation and exuberance. With the help of Greece and Spain's negative news, the market stalled, erasing almost half of 2012's gains. If the DOW moves below 12,700, the entire market will likely move lower. I think that tomorrow (Thursday) could see the DOW revitalize or the DOW could go ahead and move below the 12,700 bottom. Tomorrow will be an important day and will determine if the market will regain from its stumble or whether the market will continue its tumble.

Whether this week, or next, I feel that the market will continue its tumble. The SUMMER MONTHS are not kind to STOCKS and I don't see any extraordinary reasons the market would move upward. I do, however, see the market moving further downward and heard that electronic manufacturing was slowing. This is of concern because it suggest that consumer demand is slowing. Though it might take six months or more to feel new recessionary winds on the street, the wind is blowing.

REMAINING CALM

One must believe in their trading method. Being CONSISTENT means being in the right place at the right time to maximize your investment return. Being CAUTIOUS means being careful not to take risk, but to invest the proper percentage of your portfolio in the right place, with a STOP-SELL to protect your position. For instance, from May until November Bonds could be a good investment. ETFs like TIP and BND can produce income for you. YOU DO NOT want to be invested in STOCKS in MAY; stocks decline from May to the middle of October. Being QUICK means you can't play around with losses. I can't emphasis this enough, USE A STOP-SELL. Whether BONDS or STOCKS, protect yourself. Only you can limit investment losses and you do that with a STOP-SELL.

When panic ensues, the market can drop rapidly. One percent, even two percent per day is not out of the ordinary. If you are not paying attention to your investment, over a two-week period the losses can mount up to a significant loss.

I never worry about the daily losses or daily gains. When I buy the stock or ETF, I immediately determine how much I am willing to lose. If 5%, I set my STOP-SELL 5% under the purchase price. The market can move where it wants to, but when it falls below 5%, my stock sells. If it moves down 2% one day, another 1% the next day, and goes up 4% the third day, I could care less. I don't look at prices, I look at percentages.

For example, if your portfolio was $500,000.00 and lost 3% over two days, you would have lost $15,000. Do you really like the idea of loosing $15,000? From the other perspective, a 3% gain over two days would mean gaining $15,000.00. When dealing with larger numbers like this, there is a psychological dimension that is un-nerving. This kind of finanical pressure will drive you insane, wait till the end of the year to determine your real gains and losses. Focus on the percentages. Did I gain 2% this month? Did I can 6% over the past six months? This is easier on the mind and eliminates the pressure at looking at large numbers.

WEAK CHINA DATA

Just before bed, I looked at the Hang Seng Index (China) showing a decline of almost 1% due to data showing a slow down in the Chinese market growth. Be cautious tomorrow. I don't think that we will see an upturn in the DOW, so expect the DOW to trend lower.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

Get ready for a wild ride because the Asian markets are down nearly 3%. This doesn't bade well for the U.S. market when it opens tomorrow. The likely culprits are the elections in France and Greece. Political forces have gathered against the Euro-stimulus program and the people of France and Greece are declaring "like hell we are gonna continue the austerity programs".

Both presidents have made promises to discontinue the austerity program and fund government and the unemployed with money gleaned from the rich. The new socialist French president is suggesting a 70% tax on the rich to keep the government workers and fund programs for the unemployed.

Greece is likely to go bankrupt and whether Greece is kicked-out of the Eurotribe or remains as part of the Euroeconomy, they will affect the Euro. What is already bad in Europe, will not be worse. Much of our trade, which is with Europe, will now be decimated and a further slowdown in our own economy is predicted.

How soon will this occur? It seems that the Asian market is already responding and we will see how the U.S. market responds tomorrow. I still see broad swings in the U.S. indexes and expect that the U.S. market could become paniced quite quickly.

I would think that Bernanke and company could let this year's profits burn-off before considering a new QE-3. That means a 12% drop. I think that it is more likely that Bernanke will let the market fall 20 to 30% before directing a QE-3 or he may be reluctant to do any easing in an election year. The object is to see an orderly recovery in the market, but if the world markets were percieved as 'so bleak that a world-wide recession was unavoidable' I think Benanke would do nothing. In this case, without the support of FRANCE, I think GERMANY would be reluctant to do QE on their own.

If you have your STOP-SELL in place, these downturns should not affect you much. I recently purchased BOND EFTs and expect them to rise in value. At times, BOND EFTs can also fall if the market collapses. This is all the more reason to put a STOP-SELL on your bond ETFs.

Tomorrow could be a "bad day" for stocks. I don't own stocks right now, but if I did I would move my Stop-Sell to 3% below the closing price. If I just purchased stock, I would consider selling before risking an immediate decline.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)

Weekend With Dr Invest
by Dr Invest

Over the next few weeks, we will be watching the Dr Invest Portfolio. Please, Please, Please read the past three blogs to understand the invesment method and cycle. I want you to know what I am doing, how I avoid losses, and how I maximize return while minimizing risk.

Look, I already know that you can buy on downtrend and buy on uptrend; I know that regardless where the market moves, you can make money. All this trading only generates fees for the brokerages and puts your portfolio at risk. If you trade, YOU WILL HAVE LOSSES. If you make many trades, you will have MORE LOSSES. The object here is to have more WINS, than LOSSES.

I have demonstrated that by understanding SEASONAL CHARTS, you can make an educated guess at when the market will best perform for a particular stock. Markets do not always follow a SEASONAL TREND, but on a 30 year average, monthly trends are demonstrated.

Anticipating a downturn in January, and having some of my positions sell (stocks, bonds, ETFs, etc.), I did not reinvest. I missed out on the 12% run-up between January and April. Listen, I don't regret being out of the market. The TRUE economic fundamentals have been very poor, regardless of the HYPE of Wall Street. As I have said before, "Is is better to be out of the market, wishing you were in; than to be in the market, wishing you were out!"

I am glad that some people made money, but the vast majority of people will have had purchased mutual funds, or a family of funds, with a 2% load (a fee to get into the fund) and will be reluctant to leave their newly purchased mutual fund when it drops 25% - 30%. This is the problem... you are too much in love with your portfolio to sell it, when it is losing money. So you BUY AND HOLD.

If I had bought positions for my portfolio in January, I would have felt the risk to adverse. Unlike people in a front-loaded (fees) mutual fund, I can sell anytime the market is open. But I just couldn't stomach the risk. So I chose to "stay out of the market". For me, not knowing when the axe would fall, staying out of the market was a good thing.

THE DR INVEST PORTFOLIO

I am following the "Ivy Portfolio Method". Below, I have purchased BND and TIP, putting $555 in each ETF. I will invest this much again in June, and this much again in July, provided the price does not fall below a 10 month SMA (simple moving average). May was chosen to invest in BOND FUNDS because bond funds have a seasonal rise in value from May to November, while STOCKS typically fall during that same period in time. Using a $10,000 porfolio, I divided it by 3. 1/3 went to CASH, another 1/3 is held for STOCKS (when the investment time is most optional), and 1/3 is held for BONDS. So I had $3,333 held for BONDS and I was going to make my BOND purchases over a three month period, investing $1,111 at the begining of each month. Buy the ETFs called, BND and TIP with each purchase meant investing $555.50 in BND and $555.50 in TIP. So there you have it. Below is the outcome of the initial investment and if the BOND market moves as SEASONALLY PREDICTED, we should see and increase each month in our BOND porfolio.

I would not predict that Bond Funds would move upward very quickly, but they should give a consistent return. Like STOCKS, you need to determine when you cut your losses buy putting a STOP-SELL on each ETF. I would suggest between 3% to 5% would be reasonable.

You don't have to use a $10,000 portfolio, this is just a good example of the method of investing. If you add a ZERO to the end of all the above figures, you will have the example of a $100,000 portfolio.

(note: the above information is for entertainment purposes only and not for investment advice.)

Today's Market
by Dr Invest

I have never seen RATS so quickly abandoning ship. Only two days earlier, the talking heads were speaking with such conviction that "NOW is the time to buy while the market has hit new lows". Now, before the JOBS REPORT is out on Friday, the little beady-eyed financial advisers are jumping ship.

After eight months of market rise, there is still the belief that if the market acts paniced enough, Bernanke and company will stimulate once again, and the markets will be flying high.

This is the fundamental problem. Simulation and promises of stimulation only have a short-term effect and prolong the inevitable. The financial ship has been sinking since 2008. Monetary policies has kept the ship afloat...kinda. After the initial collapse in 2008 and breath taking job losses, people began to save money. With the feel-good QE-1 and QE-2, people were fooled into thinking that good times were here again. After a cage rattling August in 2011, the market began to cautiously move forward at the urging of more monetary polices (twist). People began to spend again... to spend money that was borrowed and some they had saved back; they had not learned the lesson that debt was the reason the market had become so volatile. An 8.2% unemployment rate is NOT GOOD. People consuming their life savings to pay debt while waiting and hoping for a job is NOT GOOD. Admittedly some of this is SEASONAL, but our economy and the world's economy is staggering, reeling as someone off balance.

I do believe that some will try everything to revive the hot financial market, if only to get private investors to drive the stock prices a bit higher, but the RATS have already left the ship.

BOND INVESTING

Seasonal charts point to investing into BONDS at this time. I am investing into BND and TIP. I have given you the process and steps that I use. This method is simmular to the "Ivy Portfolio" method. Read the past two blogs to learn more.

On May 2nd, I purchased BND for 83.72 and TIP for 119.20 per share. Today, BND closed at $83.85 and TIP closed at 119.02. Bond ETFs move at a much slower pace than STOCKS or Stock ETFs. For example, a stock like CATM could swing 5% in just one day. This large of a swing in BONDS is not likely. As instricted in the "Ivy Portfolio" I will wait to see the status of BND and TIP at the beginning of June.

According to the method I am using, if you had a $10,000 portfolio, the first investment would have been $555 into BND and $555 into TIP. Investment is made again in June, and again in July using the same numbers. Go back and read the previous two blogs to learn how to invest your portfolio.

By the way, today record numbers were recorded in the INFLOWS to TIP. So if you have been smart enough to make your own purchases of BND and TIP at this time, you will be optimizing your opportunity for success.

NO GUARANTEES

There are no guarantees when it comes to investing, just opportunities. You want to protect any investment you have with STOP-SELLS and limit your losses. You want to move the STOP-SELL behind your ETF as the price moves higher. Right now, I want to get into BND and TIP. In the next day or two, I will set a STOP-SELL on each ETF.

(note: the above information is for entertainment purposes only, contact your investment adviser before making any investment.)

Today's Market
by Dr Invest

Do not read any further until you have read the previous blog. At the first of May is a favorable time to invest in BONDS. We have chosen two ETFs that could produce a return of 5% to 7% for the remainder of the year. We are using a method called the "Ivy Portfolio" to guage whether the price of the ETF is above the 10 month Simple Moving Average. We only buy once a month (at the first of the month) and only if the price remains above the 10 month SMA. When the price dips below the 10 month SMA, we sell the ETF. I am using BND and TIP as the favored ETFs.

Review the previous day's blog to see how a $10,000 portfolio is divided up and how the investment into EFTs is made in three tiers over a three month period.  Today, I want to show how to use OptionsHouse to make this investment. (Remember, OptionsHouse is constantly changing and you will need to contact OptionsHouse for the proper instructions on the use of their trading platform.)

Selecting ORDER TICKET at the bottom left is the way to begin a trade.

After you open the ORDER TICKET, select STOCK TICKET and proceed to the opening window.

At the top left, enter the symbol...in this case BND. Take the ASK PRICE and divide into the amount you want to invest. In this case, we are investing 1/3 of $10,000. $3,333 is the amount set aside for investment in to BOND FUNDS. (read the previous blog.) Cutting to the chase, $555 is invested into BND and $555 is invested into TIP. Using a calculator, divide the ASK PRICE of $83.99 into $555 to determine the QUANTITY OF SHARES to BUY. Under ACTION select BUY. Since this is a simple BUY, select the PRICE as LIMIT and enter the ASK PRICE in the window to the RIGHT of the label LIMIT. Since you are buying immediately, DAY is fine for the DURATION. As you see below, the amount that you are spending is calculated for you, showing you the amount of your investment.

To complete the trade, select PREVIEW on the bottom RIGHT.

Make sure, make sure, be certain, that ALL and I mean ALL the numbers are correct. Especially pay attention to the PRICE you are offering for the stock. How shocking, when you find out you acidently paid $600 per share for a stock and the price was only $60 per share. When you strike the button PLACE ORDER, you are stuck with the all the terms you agreed to on the Stock Ticket.

You will see that your newly acquired stock shows up in the STOCK DETAILS, ORDERS, and POSITIONS on the start page.

That's it! Place another order for TIP and then wait a month. If the price remains above the 10 month SMA. Buy BND and TIP again at the first of JUNE. If the price remains above the 10 month SMA for another month, then at the first of JULY make your last purchase of BND and TIP and hold until the PRICE of either BND or TIP moves below the 10 month SMA.

To learn more about how to set up the charts for BND and TIP with a 10 month SMA go to the sidebar selecting MODEL ETF PORTFOLIO. At the end of that blog, you will see the PROFOLIO PDF. Open it and read how to setup your charts for the 10 month SMA in YAHOO.

If you have questions, feel free to contact me at DRINVEST@mail.com.

(note: the above information is for entertainment purposes only and not to be used for investment advice.)



Today's Market
by Dr Invest

A time and season for everything under the sun. I am personally avoiding the stock market at this time. I feel convinced that exuberant and enthusiastic investors are pumping money into stocks, believing that the market will only go higher and higher. The result of all this hopeful money flowing into stocks will be a further, but momentary rise in the market. It is only a matter of weeks before investors finally realize that the fundamentals of the market cannot  rise further due to our slowing economy and continued recession in Europe.

Time to Invest

Here is my approach beginning tomorrow. Now is a key time to invest in BONDS. Look at the seasonal chart below:

We note that STOCKS seasonally rise between the end of October and the end of April. The old adage, "sell in May, come back another day" is relevant. SECOND, take a look at BONDS in the seasonal chart. Over the past 35 years, BONDS have had their best performance from May until the first of October.

Bonds are favored to climb in value over the next months and now will be the best time to begin making purchases. As STOCKS weaken, BONDS will strengthen. We will still use a STOP-SELL to protect the money invested in BONDS, but the expectation is that the investment will grow through the summer.

How to Make the Investment in Bonds

I'm gonna start with the amount I want to invest. In this case, I am using a common example of $10,000. Here's how I would begin my investment into a BOND ETF.

 Everyone has a different size portfolio. Also, more sophisticated investors like to use several INVESTMENT METHODS. The example above could represent an entire portfolio (savings) or a partial portfolio.  We divided the $10,000 into three equal parts, categorizing each part as labeled above. Because now is a favorable time to invest into BONDS, we have taken the $3,333 set aside to BUY BONDS and divided it into 3 parts. I will invest only one-third ($1,111) into bonds initially. After the initial investment into BONDS, I will wait ONE MONTH to see if the initial investment has made money. On JUNE 1st, I will invest another $1,111 into BONDS and wait another month to see if the second investment will have produced a profit. Finally, on JULY 1st, I will finally make the last investment into BONDS of $1,111. (Investing cautiously keeps you from making one large investment and then if the market suddenly turns down, having one large loss.)

I will keep ONE-THIRD of my portfolio in CASH to protect my portfolio from catastrophic market crashes. In the Great Depression, people lost their entire savings. By setting aside 1/3 of your savings in cash, you would have something to fall back on if the financial markets completely collapsed.

We will use a similar three tiered method of investing into STOCKS, but only when the financial market is favorable for stocks to grow. Now is not the time to risk your savings in an investment in stocks.

Details in Bond Investing

I use a method called, "The Ivy Portfolio". A key to buying and selling is the 10 month moving average. See: http://blog.pro-folio.net/files/8/9/6/7/6/276554-267698/Pro_Folio_Original.pdf

 Instead of varied bonds, each purchased separately, I am buying a BOND ETF. These are the bonds from the TOTAL US MARKET. This gives you diversification across the U.S. BOND MARKET. You will be BUYING the symbol: BND.

This should be a very stable ETF, but as always, you must be alert. Acording to the rules of the "Ivy Portfolio", you will only buy or sell at the beginning of the month. Selling if the price is below the 10 month Simple Moving Average (SMA) or BUYING if the price is above the 10 month SMA.

Sweetening Your Bond Investment

For simplicity, you can invest in the symbol BND; but if you want to increase your return, you can add the symbol TIP.  This means you will, as my example porfolio of $10,000 above, invest $555 into BND and $555 into TIP initially, then again in JUNE, and finally in JULY, provided the conditions are met according to the "Ivy Portfolio".

As you can see, the 10 month SMA (simple moving average) is below the ETF's price. This means that it is a favorable BUY for MAY. Let's go to WWW.ETFREPLAY.COM to see how this combination might work. Remember we are looking a past returns and they really don't guarantee future gains. When you get on the home page, keep selecting BACKTEST ETF PORTFOLIO.

For ETF 1, enter BND and weighted at 50%; for ETF 2, enter TIP and weighted at 50%. Together BND and TIP would have returned 9.3% over a year. And investment in only BND would have returned only 7.3%, still not a shabby return in a down market.

Conclusion

I now know HOW MUCH I am are going to invest into BND and TIP. I have also indentified that both BND and TIP should return somewhere between 7% and 9% in a year. (Since 8 months remain in this year, expect a little less in returns. Perhaps 5% to 7% ) I have also identified that from May until October is a favorable time to have investments in in BONDS. I will place a STOP-SELL around 5% below the present price of BND and TIP.

Tomorrow, I will explain how to make the purchase using OptionsHouse.

GOLD: 10% to 12% invested in gold is typically suggested by investment advisers. While I think that there is still some growth in the gold market, I would caution that a "Gold Bubble" may well be presenting itself. This raises questions whether a top is in sight and whether gold could return to lower lows. A recent loss in the demand for gold in India occurred because prices have risen too high; this may be an indication of things to come. If you want gold, I suggest the GOLD EFT under the symbol: GLD. Like the other ETFs, buy in tiers and wait to gain some profit, then buy again. Putting a large one-time investment into gold is just a bit too risky for me, so follow a buying plan and then use a STOP-SELL in case the market suddenly turns down.

(note: the above article is for entertainment puroses only and not to be used a financial advice.)