Biderman’s Market Picks 11/5/2012

Nov
05
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Biderman’s Market Picks model portfolio dropped 0.6% last week, underperforming the overall market, as the S&P 500 rose 0.2%. While the overall market was basically unchanged, tech stocks took a big hit as did gold. While we reduced our tech and gold holdings over the past few weeks, obviously owning any of both hurt our overall performance as the rest of the market has been relatively unchanged, meaning our shorts have not been making up for the losers – as of yet.
 
The reason, as I see it, why tech and gold are doing so poorly is simple. Obama is going to win and therefore capital gains and dividend tax rates are going up. That is why tech and gold – two groups who have outperformed the market all year are now being sold. So far the rest of the market has been doing better, but after the election, I would be very surprised if the rest of the market did not tank as well. That is why the model portfolio is 45% short.
 
Why I say Obama will win is based upon Intrade.com. Those betting on Intrade have made Obama a 65% favorite to win, down from 67% the middle of last week, but still in the virtually can’t lose range. What’s more Intrade says it is a lock that the House will remain Republican and Senate Democratic. Therefore with the same gridlock as is in place now, it is hard to imagine very many scenarios where capital gains and dividend taxes do not go higher at year end.
 
While I have reduced our tech longs to 8.5% and gold to 18% of the model portfolio, they could go lower before year end. However, in my opinion tech and gold will go higher longer term. Therefore, probably sometime before year end, I will be adding to the model portfolios holdings of gold and tech, particularly, Apple, Amazon and Salesforce.com.
 
Meanwhile the overall economy is now weakening. Unfortunately, given the lousy job the government is doing tracking the real time economy, very few really know what is going on. For example, in August we had estimated that 185,000 new jobs were added because the real time data we track showed a modest pick up in wages and salaries. Meanwhile the Bureau of Labor Statistics originally estimated just 96,000 were added in August. Now, two months later, the BLS has revised August to 192,000 jobs – virtually the same as our number.
 
The BLS missed that there was a pick up in the economy during the summer. Now the BLS is estimating 171,000 October jobs and we are saying that less jobs are being created as the economy has resumed slumping. That’s the problem with government data, a pound short and a day late.
 
Biderman’s Market Picks model portfolio is positioned to not only to make money but also to preserve capital whatever happens in this volatile global financial world. And, sometimes stock prices will not go our way over the short term.
 

Charles Biderman
President & CEO, TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)


Disclosure of Potential Conflicts of Interest & Trading Rules.
Biderman’s Market Picks (“BMP”) is a newsletter offered by TrimTabs Investment Research (“TTIR”). TTIR is not an investment adviser. Charles Biderman is the CEO of TTIR and the sole source of trading ideas and portfolio holdings of BMP. He offers his general market opinions as well as some of his own investment ideas and information on his actual personal investments. Mr. Biderman does not intend to, and has no obligation, to disclose his entire portfolio in BMP, or the performance of his portfolio.This arrangement may result in several potential conflicts of interest.TTIR also provides investment research to institutional investors on supply and demand for shares of stock, and data on money flows as well as economic trends. Some of the information in BMP will be available to other TTIR customers before BMP is published each week.

Mr. Biderman is also the CEO and portfolio manager of TrimTabs Asset Management (“TTAM”), a registered investment adviser and the sub-adviser to the TrimTabs Float Shrink ETF (“TTFS”). TTIR and TTAM are therefore under common control, and they share certain employees, but TTAM does not use TTIR data and research.

As the portfolio manager of TTFS Mr. Biderman personally makes portfolio decisions for the 100 portfolio holdings of TTFS, based upon a customized TTAM formula of float reduction, free cash flow generation, and leverage reduction, rather than fundamental analysis of a company’s shares. To mitigate any conflicts of interests, BMP will not include any stocks included in the TTFS portfolio. However, this means that users of BMP will not have the benefit of Mr. Biderman’s views on companies that are included in the TTFS portfolio.

While BMP may include suggestions for investment in specific securities, including TTFS, Mr. Charles Biderman may trade in any position held by the model portfolio in his personal and family accounts at any time. He may make recommendations for the model portfolio after or before purchasing or and selling the same positions from his personal and family accounts. Charles Biderman’s personal accounts differ in size and composition from the model portfolio.

The model portfolio will consist of ETFs, both leveraged and unleveraged, and liquid stocks.

The model portfolio assumes a starting date of May 29, 2012, of $100,000 in cash invested in securities at that day’s closing price. All future transactions are assumed to occur at the closing price. The model does not include deductions for advisory, brokerage, custody or other fees and expenses which typically apply to an actual portfolio. Such fees and expenses will reduce returns, and they will have a compounded negative effect on a portfolio’s performance over time. The performance of the model will be affected by market and economic events in addition to the investment and trading decisions of Charles Biderman. The model’s performance is not indicative of future results.

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