aapl chart

PFE chart

RNWK Chart

HD chart

Can go to $37 but might face short term consolidation/ resistance,

MU Chart

2010

* Employment should improve
* Interest rates = Fed might keep rates down for first part of year, till employment recovers. The Treasury needs to refinance $2 trillion worth of short-term debt in 2010, in addition to $1.5 trillion of new debt. That's a recipe for higher interest rates. TLT has been falling like rock from $119 in Dec08 to $89.9 in Dec09 = 25% drop. Because of anemic interest rates, tonnes of side liners are being forced to clobber up bonds, high quality stocks, dividend paying stocks, xlu, ....
* Inflation should rise before fed will raise interest rates.
* Home depot/ Lowes will benefit from Obama's handy man tax credit plan
* Real estate = mortgage rates continue to remain low.
Fed extended first time buyer credit to Apr 2010. Fed is expected to pull out of mortgage business in 2010. Fed is expected to stop backing up mortgages in March 2010. This should prices of mortgage backed securities by a lot! Jim cramer/ Warren Buffet is getting interested in real estate. It might be really good time to buy.
* Some of TARP money has been returned. What is impact on future debt now? How will US pay off debt?
* Double dip = several pundits expecting first half of 2010 good but second part bad.
* What is impact of Health bill on Health insurance companies?


I am tempted to invest as follows:
Stocks:
PFE: chatter on pharmas valuations
New York Stock Exchange: Focusing on growth, CFR talked about it
HD: Obama incentives for home repairs
Germany: stabilizing economy - bill gross likes fiscal policies
icf: recovery
vbr: lagged others in 2008
eem: where growth is

TLT Charting

12/26: TLT is clearly in down trend, that too big time. Fibo shows that TLT could touch $70 in next year or two. AVOID TLT even if it looks "easy" to buy. All indicators are pointing downwards.



Strategy: We are in 2-3 leg down, wait for price to reach ~$86 level, sell 6month-1year put for same price, as wave 4 &5 will bring price back to same levels.

Overall avoid urges to buy TLT yet!

GLD Charting

GLD Charting:
wave theory reversal to uptrend happened at 68.81.

Based on 68.81->98.99 1st leg up move, We have reached first fibo peak @ ~118, Wave theory Pt3 reversal happened. GLD should fall to ~100
If GLD falls below 98.99, it has broken the trend, get out!!
Other wise buy more around $100 range. It should go to $145 in next wave (which will be final wave)

DCA studies

* DCA requires lots of patience. Strategy is to keep buying no matter what market is doing & MUST sell all at the place you think is top. best is to keep buying small amounts in distressed assets. wait for 3-5years & then sell when asset class recovers. this is similar to buy low sell high strategy except DCA gives a better place to stash your cash.
* it doesn't help to time getting in & out long term returns are same as keep dca'ing & waiting to sell lumpsum at peak
* when to start dca in particular class - look at monthly returns through out the year of a class & decide on when to put lumpsome in play.

DCA when you bought at high price might help you recover your money faster, but don't deploy DCA for ever esp when markets are high.
* accademia is correct that you can't time the markets, so its pretty hard to say when you are at peak or valley

Here is data I ran & found SPY hardly made any money for last 16 years. Pundits will argue that you should do it with asset allocation, doesn't work either. They will recommend international should have been part of your port. Investing in internationals became popular only in 90s/00s

ROR from Jan - 93 till date held
ROR from Jan - 93 till date held
December-93 9.13%
December-94 2.94%
December-95 20.39%
December-96 21.01%
December-97 24.84%
December-98 25.90%
December-99 24.68%
December-00 16.94%
December-01 11.06%
December-02 4.60%
December-03 8.07%
December-04 8.46%
December-05 7.99%
December-06 8.83%
December-07 8.41%
December-08 2.23%
December-09 4.50%


Look at EFA after huge run, returns are near 1% if you kept buying in 2005-7 after runups in 2008!
December-01 2.5%
December-02 -13.7%
December-03 23.1%
December-04 27.6%
December-05 23.9%
December-06 25.1%
December-07 21.7%
December-08 1.0%
December-09 9.4%

FFNOX, buying at lows was good but should have sold at high!

December-99 85.48%
December-00 -6.94%
December-01 -7.78%
December-02 -12.08%
December-03 3.46%
December-04 5.96%
December-05 6.20%
December-06 8.36%
December-07 7.85%
December-08 -1.78%
December-09 2.73%


Here is rolling DCA returns for large number of portfolios. In this study, I assumed investment of $1000 per month from Jan of particular year till date (Dec5, 2009). Investments are made at end of month prices.
I added returns from Madsinger as well, not sure if methodology used by madsinger matches with mine or not. Anyhow, here are results:

Return Since	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
XLF		-7.73%	-8.60%	-9.50%	-10.99%	-12.88%	-14.10%	-14.80%	-12.22%	1.94%	64.05%
FSNGX		8.07%	7.90%	7.67%	5.68%	1.62%	-2.71%	-5.55%	-6.98%	-1.55%	35.36%
ICF		6.19%	4.97%	3.59%	1.64%	-1.11%	-3.35%	-4.60%	-1.59%	13.77%	90.46%
Hot Hands	10.87%		8.27%			5.46%		-3.70%			20.75%
SPY		1.02%	1.46%	1.60%	0.92%	-0.39%	-1.23%	-1.90%	-1.05%	8.40%	46.18%
XLU		4.92%	5.19%	5.70%	4.89%	2.58%	0.09%	-1.67%	-3.43%	1.06%	25.43%
EFA				5.44%	4.34%	1.96%	0.21%	-1.50%	-0.70%	10.93%	56.77%
VFINX	0.63%		-0.31%			1.70%		-1.24%			24.07%
ffnox		2.77%	3.17%	3.21%	2.53%	1.27%	0.47%	-0.28%	0.40%	8.95%	41.49%
Newsletter G-IND	2.89%		3.26%			4.27%		-0.19%			28.30%
Sheltered Sam	5.27%		4.35%			4.66%		-0.11%			26.69%
LS G	2.64%		2.05%			3.35%		0.25%			23.35%
Newsletter G	7.68%		3.56%			5.14%		1.10%			30.10%
Newsletter CG	5.67%		3.32%			4.35%		1.16%			25.30%
Newsletter Inc	3.43%		3.53%			3.30%		1.32%			20.80%
OAKGX		9.16%	8.34%	7.52%	6.12%	4.04%	2.77%	1.63%	2.66%	14.17%	56.57%
LS MG	3.50%		3.09%			3.86%		1.76%			19.74%
XLV			2.43%	2.34%	2.16%	1.82%	1.71%	1.81%	2.94%	10.93%	37.62%
s&d	5.98%		5.16%			5.58%		1.84%			23.60%
3 fund	3.79%		3.40%			5.08%		2.32%			24.51%
STAR	5.22%		4.38%			4.79%		2.46%			23.40%
LS CG	4.05%		3.74%			3.96%		2.83%			17.11%
coffeehouse	5.89%		5.47%			5.24%		2.88%			18.44%
FGBLX		6.83%	7.25%	7.23%	6.62%	5.39%	4.56%	3.80%	4.00%	9.92%	33.55%
Wellington	6.00%		5.70%			5.84%		4.28%			21.75%
oakbx		7.62%	7.06%	6.80%	6.27%	5.42%	4.94%	4.32%	4.06%	7.74%	27.13%
QQQQ			4.54%	5.42%	4.85%	4.09%	4.12%	4.40%	5.84%	16.92%	53.34%
Wellesley	5.94%		6.04%			5.45%		5.42%			16.04%
PRPFX		10.35%	10.34%	10.10%	9.65%	9.21%	9.05%	8.76%	9.50%	13.29%	31.56%

Fixed Income Strategies

Strategy1: Sell long term covered call on TLT. Instead of Buying 1 Year CD, I propose following strategy:

TLT had a bad year after huge runup in last 5 years, its recovering but hovering between $90-$100.
For TLT, I studied 6month rolling returns, between Oct-Jan highest average perf over last 8 years, peaking in Dec. So it might be good to sell put calls expiring in December. Or sell Jan puts & close them in December.

Price 11/25/09 = 96.04
to reduce risk a lot, I propose selling $90 put for Jan 2011. For 13months, you get 7.9 back. Net returns are way better than 1 year CD (on black friday I am getting 2% promotional CD).

	Per Unit	Net cost
price	96.04	$ 9,604.00
option 90	7.9	$ 790.00
dividend	3.6	$ 360.00
1% price variance	0.9604	$ 96.04
Trading cost	3	$ 30.00
net cost		$ 8,580.04
Sale	90	$ 9,020.00
net return		5.13%

Strategy #2: Sell naked Put & lock in a CD for same maturity time
For same example above, naked put of $90 for Jan2011 can fetch $7.1 - trading costs.
Risk wise, this strategy looks similar to #1 only down side is that if price falls a lot during the year, you might get assigned the option & since your money is locked in CD, you have to break the CD & returns will reduce to 7.25% (you have to give back $180 you'll make).

	Per Unit	Net cost
price	90	$ 9,000.00
Naked option 90	7.1	$ 710.00
variance	1%	$ 702.90
trading costs		$50
cd return	2%	$ 180.00
Net return		$ 832.90
% return		9.25%

Monthly Returns

Last 5 years Monthly Returns (Jan 2004- Nov 2009)
	Sectors
	XLB	xle	xlf	xli	xlk	xlp	xlu	xlv	xly	fsdax	fstcx	fsmex	fsngx
1	-1.16%	0.61%	-5.17%	-3.59%	-3.55%	-1.87%	-0.67%	-0.91%	-2.13%	-0.61%	-1.90%	1.87%	3.95%
2	1.31%	1.29%	-4.63%	-2.78%	-2.24%	-0.59%	-1.00%	-2.03%	-2.26%	-2.22%	0.21%	-2.04%	1.22%
3	2.67%	1.56%	1.49%	2.72%	1.85%	1.55%	0.77%	-0.72%	1.53%	1.15%	1.18%	0.55%	2.48%
4	2.37%	4.11%	5.46%	4.02%	2.13%	1.27%	1.93%	1.94%	2.86%	4.56%	2.73%	2.40%	5.24%
5	2.51%	4.26%	1.72%	2.23%	3.04%	1.89%	1.73%	1.56%	1.69%	1.76%	2.60%	1.12%	4.91%
6	-1.22%	2.22%	-3.67%	-1.72%	-0.83%	-1.16%	1.65%	-1.02%	-2.23%	-1.91%	-0.87%	0.78%	2.38%
7	1.08%	0.49%	1.39%	0.97%	0.43%	1.01%	0.31%	1.34%	0.38%	1.67%	0.83%	1.31%	-1.02%
8	0.11%	0.39%	2.89%	1.07%	1.15%	1.69%	1.48%	1.87%	1.59%	2.22%	0.36%	2.51%	-0.07%
9	0.26%	1.79%	0.35%	1.02%	0.56%	0.90%	-0.39%	-0.75%	0.45%	1.14%	0.98%	1.16%	1.77%
10	-3.02%	-3.00%	-3.94%	-3.51%	-1.00%	-1.27%	-0.96%	-2.77%	-2.00%	-3.44%	-4.87%	-4.08%	-4.22%
11	2.45%	2.27%	-2.73%	1.99%	0.61%	1.52%	2.62%	1.28%	-0.02%	1.91%	1.98%	0.15%	-0.14%
12	0.61%	-0.17%	0.32%	0.77%	0.29%	0.83%	0.14%	2.67%	1.18%	2.05%	1.49%	2.17%	-0.16%
	Allocation			Bonds
	eem	efa	ICF	fsicx	tlt	trrdx	spy	vbr
1	-0.88%	-3.27%	-2.22%	0.42%	-1.95%	-2.00%	-2.52%	-2.22%		Recommendations		try to Have 1 recommendation per month max 2
2	0.37%	-1.02%	-3.81%	0.36%	0.50%	-1.17%	-1.88%	-1.91%		1	EOM Buy Russia
3	2.21%	2.19%	2.68%	0.32%	0.08%	1.25%	1.18%	2.03%		2	EOM buy VT
4	3.99%	3.41%	4.70%	0.98%	-2.34%	3.14%	2.77%	2.54%		3	Start Buying after Jan/ Feb sale
5	2.89%	2.19%	1.56%	0.65%	-1.00%	2.35%	2.11%	2.90%		4	lots of stocks peak in April, good time to start selling
6	-0.62%	-1.24%	-2.25%	0.48%	1.07%	-0.83%	-1.27%	-0.73%		5	EOM sell performers
7	2.10%	0.66%	3.24%	1.05%	0.64%	0.68%	0.75%	1.29%		6	EOM Sell FSNGX
8	-0.02%	1.20%	5.21%	1.30%	2.86%	1.05%	1.33%	2.13%		7
9	3.63%	0.62%	2.02%	0.63%	0.45%	0.48%	0.42%	1.02%		8	Buy RMBS
10	-2.26%	-2.51%	-4.31%	-1.04%	-0.43%	-2.57%	-2.50%	-3.92%		9	good time to protect, as everything falls in Oct
11	1.85%	0.84%	-2.64%	0.48%	3.54%	0.64%	0.97%	0.33%		10
12	5.05%	3.81%	2.33%	1.18%	3.12%	1.83%	0.69%	0.56%		11
										12	EOM sell performers/internationals of year, buy FSNGX; close TLT puts
	Stocks
	goog	intc	fxi	epi	eeb	rsx	mu	rmbs	eric
1	1.26%	-11.07%	-4.37%	-6.36%	-5.55%	-13.85%	4.93%	1.42%	-0.45%
2	-9.43%	-1.02%	0.18%	-9.43%	-1.13%	6.57%	-0.80%	0.30%	1.01%
3	0.39%	2.34%	2.12%	2.81%	2.21%	8.75%	0.54%	7.56%	-0.55%
4	15.21%	5.28%	7.91%	15.78%	12.47%	16.01%	5.86%	-3.67%	7.37%
5	5.60%	2.90%	2.27%	14.95%	11.94%	26.95%	5.90%	-5.33%	2.95%
6	2.95%	1.40%	2.94%	-13.32%	-2.69%	-4.87%	-6.16%	-3.39%	-0.22%
7	-3.46%	3.63%	6.12%	7.80%	1.91%	-0.41%	1.63%	-9.73%	-2.31%
8	0.07%	4.79%	-0.71%	-0.13%	-1.89%	-4.37%	-0.71%	-3.87%	2.63%
9	7.90%	-4.09%	2.47%	-3.11%	4.18%	0.75%	3.43%	6.44%	3.06%
10	17.62%	-2.71%	-1.77%	-18.80%	-0.36%	-7.60%	-4.04%	-3.91%	-9.07%
11	-1.05%	0.15%	3.40%	-0.01%	0.14%	-5.84%	-8.89%	20.09%	-0.96%
12	1.63%	-0.82%	4.33%	12.19%	5.68%	-2.36%	-3.22%	8.65%	1.76%

Strategies:
* For TLT, I studied 6month rolling returns, between Oct-Jan highest average perf over last 8 years, peaking in Dec. So it might be good to sell put calls expiring in December. Or sell Jan puts & close them in December.

Bottom for UNG?

Fibonacci is telling me that UNG could fall to $4.5 range.

Wave theory telling me that we are in last leg down:

Based on Wave theory & Fibonacci retracement: I could buy small lots at 9, 8, 7.5, 7, 6.5 & stock could rise back to 20 in next 6 months

8.94 diff 3.28
12.22 0% 0 8.94
38.20% 1.25296 10.19296 0.618061486
61.80% 2.02704 10.96704 0.78612976
100% 3.28 12.22
138.20% 4.53296 7.68704
161.80% 5.30704 6.91296
178.61% 5.858408 6.361592

Price1	17.55
Price2	4.80130628
	Delta	Price
0%	-	$ 17.55
21.39%	(2.73)	$ 14.82
38.20%	(4.87)	$ 12.68
61.80%	(7.88)	$ 9.67
78.61%	(10.02)	$ 7.53
100.00%	(12.75)	$ 4.80

Business Cycle & Stock Performance

Following chart is pretty good to show economic cycle & stock market cycle.

Stock market is usually ahead of business cycle. You could track "smart" money gushing into particular sectors to detect which phase you are in.

e.g. in 2009 recovery of stocks, I saw similar trends of recovery prices. In november I find Monsanto / Exxon as great value who haven't participated in rally yet. Gold is starting to run again. etc.... By January may be energy will also run up & we'd reach peak of bull market

On Shorting stocks

Naked short selling is robbing buy & hold investors. We “deposit” money in stocks of companies for “long term” investments. Short sellers take money out by crashing the stocks. Short sellers are blamed for “clobbering”, “carpet bombing” to take all money out of stock prices. In wallstreet failed trades result in “lost money” for ever for long term buy and holders. Companies as big as Intel suffered huge stock price drops due to short selling. This phenomenon peaked in 2000 crash & 2007 crash.

This news says, trend is your friend, follow the trends & get out when there is reversal happening. Trends let you make money only for “very” short duration till others figure out what’s going on & trend breaks.

Asset classes risk/ returns

According to IFA.com best return/risk classes to invest in:

Emerging Value, Emerging total mkt, International small value, US Large value, IV(?)

US large value is much better than IntV for higher return and lower risk

My Investment Mission statement

I would try to adhere to following investment principals:

My Investment Plan:

Overall:

1) Rebalance port at year end by selling SOME last year winners, and buying only little of last year beaten down asset class.

2) After market correction, invest new money according to asset allocation. After severe falls in market (not individual stocks), may be buy individual stocks - as they run sweet.

3) rest of year: accumulate additional cash, sell / buy at fibonacci ONLY. Hold off any other urges

401K: on quarterly basis, I add to Mo-Mo winners, Year end (once a year): rebalance a bit, sell some of last year winners, add some to beaten down asset class from last year. After market fall (once a year): invest new money added for the year.

IRAs/ 529s: Don't touch, may be 1-2 fund soln.

On Rebalancing Portfolios

Asset allocation:

Re-balancing portfolio every year leads to extra returns (rather than letting assets sit in same class over long periods). I experimented with permanent portfolio 1972-2008, don't touch approach generated 96X returns vs. rebalancing lead to 127X return

This strategy could be combined with Mo-Mo stop loss strategy. That is unload "heated up" class with stop loss rather than end of year rebalancing. similarly be cautious on picking up last years loosers randomly. But then academic theory suggests its not possible to time tops & bottoms, so may be no point worth trying.

I still feel best strategy is, plan rebalancing as follows:

End of year - rebalance your portfolio. Sell some winners buy some loosers

after market fall of year, add your cash hoards

Don't chisel around rest of year. Sit quietly for rest of year/