Archive for December, 2009

A Year in Review

Since the “System” has been live for a year, we though it appropriate to review our oldest portfolio to use real money.

The result from Dec 1st 2008 to Dec 1st 2009 was +48.4% with 5 switching trades through the year.

So what did we learn?

  1. Financial markets and instruments are not primarily designed to make money “out of the box” for the end user (you and me).
  2. Using an unemotional system made us feel “in control” as the switching recommendations made sense.
  3. We never had complete information. And more information would not have led to better investment performance.
  4. We have written up a journal of the trading year and the circumstances in which those trades occurred. You can see them in pages 2-4 of our Ebook which goes on to explain the thinking behind the development of the IRP System.

Interest Rates to Rise in 2010

As 2009 draws to a close, it is time to think about 2010 . We started 2009 in a tailspin and ended it with a bull market in many asset classes.

That bull market was driven by low interest rates. And the low interest rates were created by massive government intervention.

But the situation is unlikely to stay static for long. Japan could maintain massive government spending, a weak economy and extremely low interest rates because its debt was largely owned domestically. Japan financed its “Lost Decades” by raiding individual Japanese savings.

In the case of the US, the deep pockets of savings do not exist (except for the Social Security Trust Fund) so the US deficit spending will have to be funded with foreign savings.

How will the markets react to higher interest rates? This week we see REITs fall off the top 5 list after a good run in the second half of 2009.

But, the actual impact will depend on how fast and which rates rise. Our prediction is that the IRP System will come in very handy in 2010.

Trial Gold Membership

To celebrate our first Christmas, we are offering a free month of Gold Membership to all our Newsletter subscribers and Facebook fans.

For our existing Gold Members, we will add two months to your existing subscription.

As we noted above, the investment environment will remain tricky in 2010 and we can think of no better tool to navigate these choppy waters than the IRP System.

To take advantage of this offer, email us at with your email and name.

Then, if you have not already done so, register as a Free or Silver member on the site and we will upgrade you for a one month trial Gold Membership.

With Gold Membership, you will have full access to the current portfolio rankings.

There is no risk to you. If you decide to continue, you will have that option. If you do not, the account will automatically revert to Free after one month with no action necessary.

Time to Buy Gold?

With GLD topping the US only ETF Portfolio, the interesting question is whether one should pile into Gold. The answer really depends on your investment universe.

In our Long Only ETF universe which includes non-US equity markets, commodities and currencies, Gold ranks #24 out of 35 ETFs in the Universe.

Why the discrepancy? Actually there is no discrepancy. The IRP System is designed to rank a given investment universe. If your investment universe of 20 ETFs is made up of 17 US Equity Sectors, 2 US Bond Sectors and 1 Commodity, then the results are telling you two things. One, that gold is looking better than US equities and bonds. And two, that the falling dollar, rising stocks relationship which has been in place for the last 9 months is either changing or breaking down.

The fact that GLD does not rank as high in the global ETF portfolio is a reflection of the stronger momentum in the Emerging Markets. This is also borne out in our Taiwan Fund Sectors Portfolio.

Global Fund Flows Shifting Slightly

With year end approaching and the Dubai mini crisis largely resolved, it is time to look at the “weather systems” that drive financial flows.
We present 3 pictures on the second page of the newsletter to demonstrate the latest “jet stream” of high powered money.
Here we are most concerned with how to position our portfolio to take advantage of the year end jostling.
On the fund and ETF side, the system still points to higher risk assets. For equities that means emerging markets and for fixed income, a preference for high yield over safer instruments.
Black Friday? Cyber Monday? There’s been a slight move in Consumer Discretionary funds and ETFs but not enough to crack into the top of the rankings.
In terms of currencies, the very subdued signals from the IRP System suggests an attempt by the global Central Banks to minimize currency fluctuations in the near term.
On Commodities, it is all about metals, precious and industrial, as China and India continue to stoke demand globally.