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Biderman’s Market Picks model portfolio dropped a bit less than 0.5% last week, underperforming the S&P 500, which rallied by 3.7%.
I have been following the markets professionally ever since the early 1970’s. And beyond any doubt, this is the weirdest market I have ever seen. Up until 2009 stocks went up and down based upon supply and demand of stocks and money. Since 2009 stock prices have been held hostage by the central banks. However, now it looks as if the central banks have shot their load and are no longer the key players in determining market direction.
What is now more important then central banks is actual government decision making. From 2009 through this past September, the US Federal Reserve, the European Central Bank and the Bank of Japan, all dropped interest rates as low as they can go to a so called zero interest rate policy. So yes, dropping interest rates has doubled stock prices virtually world wide since 2009. But now that global interest rates are so low there is very little more that the central banks can do to boost stock prices.
So instead of central bank activity, we have to watch the developed world’s governments. Even in Europe before the central bank can buy up any more bad debts; approval, particularly by the German government, is needed. And that approval is not a certainty.
In the US what actions our government take regarding the fiscal cliff will control stock price direction. And this past weekend, surprise, nothing happened. Remember, even if there is a “deal” all a deal will mean is higher taxes and a slowdown, not a cut, in government spending.
The fiscal cliff, without any deal, currently would raise income taxes in 2013 by half a trillion dollar assuming the worst and would cut spending a relatively miniscule $100 billion or so.
I believe any kind of deal that raises taxes will throw the US economy into the toilet next year. As of right now US after tax income is up by something over $200 billion year over year. The minimum tax hike we can expect is $100 billion if only the payroll tax cut of two years ago is eliminated. Higher capital gains, dividend taxes and other soak the rich measures will further drain the US economy.
Last week I said I would probably add to shorts this week if the market rallied. However, given that the biggest rally day was Friday and there are plenty of momentum types out there, I will hold off adding to the model portfolios short position until this coming week end. However, if I am wrong and stock prices sell off this week, well the model portfolio is 47% short already.
Last week, our longs surged, as Salesforce.com popped over 10%, Apple rose by 8% and Amazon.com, Oxy Pete and Whole Foods each gained 5% or more.
If the longs surged, obviously the shorts went the other way. The short ETFs for the EURO, Financials, Emerging Markets and big banks went down between 3% and 4.5% each.
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.
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.