For the second week in the row, small cap stocks crushed large cap. The smaller you go, the higher the returns. Hence, I find myself, once again, invested in degenerate small caps. I made some minor tweaks to my portfolio this morning, such as reducing my TLT position and selling out of gold.
The overarching consideration is the fact that most good companies are losing market value. All of the money is being made in speculative stocks. Therefore, that’s where my money was placed.
For the 9th week in a row, I crushed the SPY, which shed around 0.65%, compared to my breakeven.
NOTE: I will be updating my semi-annually managed portfolio in Exodus today, predicated on GARP (growth at a reasonable price). It truly sucked wind the first half — making only 1.5%, compared to the 9% gain in the SPY. I was positioned poorly and will try to make amends in the second half.
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With the FED goosing markets and manipulating interest rates for political reasons there’s no way to tell which companies are good anymore. Good companies build capital which the FED readily destroys with their interest rate shenanigans. Declining rates destroy accumulated capital. Increasing rates will bankrupt good companies that borrowed at low rates.
Barring some sort of shock or global financial crisis, as long as people in the U.S. have jobs and interest rates stay low, we’ll have this bull market served up to us on a platter. I think the corrections we get in stocks will be driven more by sector selection and valuations than by economic worries. And the game goes on…
Dr. Fly,
Will you ever go back to the pro stock picking skills you used to do or is that a strategy that is not good in this environment?