Hello Folks
Well, on August 7, I told the world (well, told my multi-thousand email subscribers, and who knows how many web-only viewers) that I was going to G-Fund, and articulated my reasoning behind this decision.
As luck would have it, the market of course resumed its uptrend just as I was exiting to the G-Fund. The positive “spin” on this is that due to the typical two-day delay to process fund changes, I remained in stock funds and still grabbed some of the uptrend while my fund change was being processed. However, I missed out on any gains which continued to develop in the markets once I arrived into G-Fund. Dang it I hate it when that happens. I just wish I could always buy the bottom and sell the top, perfectly, every time. Of course, reality is different that that.
Not surprisingly, some of my sharp readers have contacted me regarding “my system” and my tolerance for risk. The readership ranges literally from new rookie entry level folks with 30 years in front of them, to senior folks pending retirement, to already-retired-folks. Some of my retired readers, if they are 98% G-Fund and 2% S-Fund, they are sweating bullets and can’t sleep at night. So the “one tool approach” does not necessarily work for every single person, due to the variety of circumstances out there. I got a good email from a younger reader, which I will paraphrase to protect the innocent, but it went along these lines:
Bill, I wonder if you are too conservative. I have 20 years ahead of me, and am willing to accept some risk to get some gains. Great site, just sharing my thoughts.
Since Bill (that would be me) is much closer to retirement eligibility than not being close, yes, I am a little more conservative. Or maybe much more.
With leads me to discuss my system. This is already in the FAQ Section but the FAQ section tends to get cobwebs and not read much, so I will touch on my system on this post.
The system combines fundamental analysis and economic concepts with market volume, price performance, technical analysis, and other metrics and this is what is used to determine my trading decisions. I have taken bits and pieces from other systems, studied (and continue to study) for over 20 years, and developed my own system. Similar to someone (Grandma) who develops their own soup recipe. Different ingredients from different recipes and a personal twist on things and now you have Grandma’s recipe. You can’t put a Patent on carrots or chicken broth, so Grandma’s recipe is probably not patented, and neither is mine, however I am going to go out on a limb here (remember, I will be searching for employment in the after life when I retire….) and push the envelope some, and call my system proprietary.
With that said, I am not going to hand over the launch codes, but I will say that my system derives “Sell Signals” and “Buy Signals” based on abnormal price and volume behavior, along with mathematical smoothing and time based parameters. It is my belief that behind the markets are people, and price behavior is a direct reflection of those people. In addition, if “background events” such as war, bombs, new political leadership, economic policy changes, are existing and “in sync” with my system’s signals, then I will go ahead and pull the trigger (this could be to enter G-Fund or to enter stock funds, depending on the situation). However I do not pull the trigger without having what I believe is the proper sight picture (discussed above). It so happened on August 7, that Ukraine/Russia, ISIS in Iraq, Argentina default, PLUS the markets flashing warning signs, led me to believe that I could put rounds on target and that the sight picture was correct.
Ok, enough beating myself up. On a positive note, the indexes are inches away from historical, All-Time-Highs, a concept discussed numerous times on this site. This week, Aug 18 – Aug 22, the Central Bankers Summit is happening at Jackson Hole, Wyoming, and market participation (aka volume) is less than average, as most major traders and money managers probably want this week to “clear” before they jump back into things. The general consensus so far, if you read the financial press, is that the economy is rebounding faster than anticipated, and that the interest rates may be raised even earlier than expected (currently believed to be summer or fall 2015). So while the markets have indeed gone up this week, the volume has been lackluster, and I am waiting until mid-next week to see how the markets are behaving, prior to making any TSP decisions. Lets take a look at some charts. Charts are shown with no comments, then with comments, for readability.
As can be seen, we had some very valid warning signs last week, but a few days later, this apparent new downtrend reversed itself.
With the bile still in my throat after the above trend reversal, I am tweaking my system and making some minor adjustments. Somebody somewhere said once that if you are not constantly learning and improving and seeking development, then you are dying, and I agree with that statement. Thus I plan to be improving my own methodologies. I have found (as one example) that by removing the 2008-2009 dataset from my research that my system is much improved. This time period was the notorious mortgage meltdown/housing crisis/financial doomsday market. But I still have work to do. I have sought out the advice of trusted fellow traders and colleagues, to include big name folks who I am fortunate to have internet e-mail relationships with. So this is a work in progress. My customer base (that would be you) demands it, so I am working on some minor tweaks to the recipe.
I would like to insert a link to an MP3 broadcast by Michael Covel, a bestselling author who is a proponent of Trend Following, which my style can be categorized as. This 15 minute audio file is entertaining, and relevant, his views and mine have little variation and are in agreement in almost all respects. File and audio is the work of Michael Covel.
The Fed Trader site has grown huge since it went “live” a few years ago, with no marketing or advertising on my part. I must be offering something of value, something useful, something informative, and something entertaining, thus resulting in such a huge followership. Just to refresh the disclaimer, this site is indeed entertainment only and the individual investor or TSP participant is ultimately responsible for his investment decisions.
I remain 100% G-Fund at the present time.
Thank YOU for reading and please continue to pass this site to your colleagues and coworkers.
Thanks and talk to everyone soon…
– Bill Pritchard
