A Look at the Coming Week - January 15, 2009
The year started pretty well in the financial markets, but
has eroded steadily the past week. Now that the holidays are over, we are
starting to see massive layoffs and bankruptcies. Warren Buffett is fond of
saying that you don't know who is swimming naked until the tide goes out! The
problem is almost everyone is naked! The President Elect Obama's honeymoon
appears to be over but knowing the public relations department, they will start
whipping us up into a frenzy. Not even a religious revival can stir up the hearts
and souls of people like we are about to witness after the inauguration.
It is very likely that we will see a small rally soon unless
the underlying problems become too dominant for the PR department. They have an
uncanny ability to put a positive spin on grim news. Guess who (besides all of
us) needs help? Why, it's the banks of course. Yep, the banks are smart. They learned
from AIG and now the automakers have figured out the same thing. If you need
$100 billion (let's say), you whine and ask for $3 billion and tell Congress you are the backbone of America
and are too big to fail. As soon as the first check is received, the game is
over. Now you can go back to the feeding trough as often as necessary until you
get all the money you need/want. We are now entering phase two of the banking crisis
and we simply don't know the extent of their problems.
With the markets far less volatile than last year, we have
started to change our strategies a bit. We are now starting to add a few more
positions. For three months, we basically rotated from cash to long positions
to short positions. Now, we are buying oil and gold as well as inverse
(remember, these make money when markets go down) funds in financials, real
estate and consumer discretionary products.
Going forward, we hope that we can capitalize on some longer
term trends. The markets are still very rocky and we continue to trade
frequently. We are trading more frequently than we would like but as you know
from 2008 it has paid off nicely. Speaking of trading, I need to make something
very clear. When we make a trade such as a buy of something, the money leaves
the account and three days later the security is in your account. That means
there is a gap of three to four days. If we trade daily which has happened a lot,
then it gets even more confusing and complicated.
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The bottom line is that the Trust Company of America website
is only accurate if we don't trade for a week or so. The best thing to do is
not look at the website! If you do and it looks funny, it probably is. Turn off
your computer, take a deep breath and continue trusting us like you did for all
of 2008! But seriously, we are getting a lot of calls and these portfolios are
designed for long term investing, not for daily profits. They are not designed
to go up every day but only because that is impossible. Believe me; we are
still trying to be the first!
The solution is simple: you get a newsletter at the
beginning of the month and a mid-month (except December) email. Essentially,
you are getting an update about twice a month. This is actually too frequent
but we are doing it just to keep people informed. The chart in each letter is
as accurate as we can get at the time. Yes, your account may look different. If
it does, it is because of when you started, money you took out, money you added
and management fee differences. In addition, you could have different returns
just because your trade is 1-3 minutes different than the chart. We trade all
accounts at the same time which means your account should look very similar to
the chart we publish.
We have held our own this month so far. We have maintained
tight stops and spreads and have been very cautious. Our conservative account
was not traded this month. The moderate account gained 1.47% so far this year
and the aggressive strategy is up 2.0%. The S&P 500 is down 3.65%. That
means our moderate strategy outperformed the market by 5.12% and the aggressive
strategy beat the market by 5.65% (source: Google
finance and TCA accounts #306687, 306705, 306703)
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So far, so good. We look forward to another good (and
probably very challenging) year. Happy New Year to all; May it be prosperous
for you!
Working for your wealth and peace of mind,
The Vance Capital Management Team | |
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