Wednesday, September 29, 2010

Doubleline Total Return Bond Fund vs S&P 500 Index

Doubleline Total Return Bond Fund beat the S&P 500 the last two months. It did so with a lot less drama, I might add.

(Click on chart to enlarge it for easier viewing)


Wednesday, September 22, 2010

Here’s a brief description of Emerging Markets ETF (EEM) holdings.

Here’s a brief description of EEM holdings.

The largest sector that it owned, as of Aug. 31, was financials, consisting of 25.1% of the portfolio, followed by materials, 13.72%; energy, 13.65%; information technology, 12.94%; telecommunication services, 8.57%; and industrials, 7.05%.

The countries where EEM invests the bulk of its money were: China, 18.36%; Brazil, 15.91%; South Korea, 13.09%; and Taiwan, 10.46%.

As of the same date, the largest company holdings were: Samsung Electric-GDR, 2.39%; China Mobile Ltd., 1.87%; OAO Gazprom-REG S ADS, 1.65%; Petroleo Brasileiro S.A.-ADR, 1.59%; and Banco Itau Holding Financeira SA-ADR, 1.54%.

Monday, September 20, 2010

Sunday, September 19, 2010

Saturday, September 18, 2010

Thursday, September 16, 2010

Interesting Observation

Last month, the stock market suffered its worst August decline in 9 years. September abruptly changed course and delivered a lightning fast sharp rally. What’s up with that? Just who or what is driving this volatility? I was very surprised to learn that it is the individual investor.

The retail investor, who is commonly referred to as “dumb money,” and the institutional investors, referred to as “smart money”, trade during different hours of the day. The dumb/retail money trades at the open while the smart/institutional money trades at the end of the day.

The dumb/retail money drove the market down in August with their bearish sentiment reaching an extreme not seen since March of 2009. The dumb/retail money then made a complete bi-polar turn-around and has driven the market up by about 7% so far in September, on extremely light volume I might add. The charts below provide the evidence.

August 2010

September 2010

Below are the results of the sentiment survey offered by the American Association of Individual Investors? It measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market short term; individuals are polled from the AAII Web site on a weekly basis. Only one vote per member is accepted in each weekly voting period. Notice that on August 29th only 20.74% were bullish. As of September 16th, the number has risen to 50.89% bullish. It has gone from one extreme to the other in the blink of eye.

Survey Results

These drive-by asssaults on both the downside and upside in the current range bound US market appears to be driven by daily news events and weekly economic reports rather than fundimentals or historical perspectives.

As mentioned in the August issue of The Gerritz Letter, bearish and bullish sentiment extremes can lead to market reversals. Extreme market sentiment is a contrarian indicator. Based on the current bullish sentiment readings, I would not be surprised to see the market correct fairly soon.

The GWM trend tracking style strives to invest with the wind at our backs and avoid turbulent trendless markets. We have identified some trending markets and have repositioned client portfolios to take advantage of these trends.

Wednesday, September 15, 2010

Market Comment 09 15 10

The recent stock market advance off the late August lows has started to show signs of stalling right at the top of the trading range that has contained market action for the past several months. The advance has been on declining volume and the major U.S. indexes are short-term overbought, so a correction or a reversal to the downside at this point could be expected.

(Click on chart to enlarge it for easier viewing)

Notice how the short, intermediate, and longer term moving averages are crisscrossing in the chart below. This represents uncertainty on the part of investors in the market.

We need to have the market decisively break above the trading range to remove some of the uncertainties and give longer term investors more confidence in the market. Until then it will remain a traders market.

Monday, September 13, 2010

Blog Blackout Period

Blog Blackout Period

We are in the process of adding and changing client portfolio positions. All GWM clients will be notified of portfolio position changes by email.

The Gerritz InSights blog will be reopened to the general public in a few days.

Friday, September 10, 2010

Christopher Gerritz, a GWM Employee, Presented with Auspicious Award

Billy Mitchell Award Recipient Recognized at the GAC

Author: Stephanie Miller

Published: August 23, 2010

During the 75th Grand Arch Council, Christopher Gerritz, was presented the Phi Kappa Psi Foundation’s William L. “Billy” Mitchell Award, recognizing a Phi Psi undergraduate who has courageously served our country. Brother Gerritz joined the Air Force immediately after high school and was stationed in Germany as a Cryptographic Communication-Electronics Technician for two and a half years. During his tenure at Ramstein Air Base, he was named the 435 Communication's Squadron's Airmen of the Year.

In July 2004, he was deployed as part of Operation Iraqi Freedom to Ali Al Salem Air Base, in Kuwait. After his service and upon being accepted to the Airman Scholarship and Commissioning Program he moved to Corvallis, OR to attend Oregon State University and while there joined Phi Psi’s OR Beta Chapter. Throughout his time at Oregon State he served as Chapter Treasurer and President, Vice President of Public Relations for the Inter-fraternity Council and was honored with several University wide awards.

This summer he will be commissioned into the United States Air Force as a Second Lieutenant and will be attending Pilot Training in Del Rio, Texas.

When asked why he chose to serve our country he responded, “I initially chose to serve for complicated, perhaps selfish reasons - for one, I needed it. The discipline and character I have developed through my military training is what made me who I am today. Additionally, I love my country, the principles it stands for, and the promise for the future as we work to usher in a new era of responsibility and peace for the human race.”

Thursday, September 9, 2010

Bond Yields Rising

Below is a chart that illustrates the decline in Treasury bond yields since April. We are now seeing the beginnings of a possible change in trend with yields braking through the top channel line. Bond prices run inversely to bond yields; therefore, higher yield means lower bond prices.

Investments in the low yielding US Treasury market represent a risk aversion trade. When the stock market is in rally mode investors will often times sell treasuries and buy stocks. I believe this is happening now.

Bonds have been the investor preference since April. We should know shortly if investor preference is shifting in favor of stocks longer term.

(Click on chart to enlarge it for easier viewing)

Monday, September 6, 2010

Market Comment 09 06 10

The market got a huge boost last week when the jobs report came in better than expected. Jobs are what the market wants to see. The market advance however was made on extremely light volume.

We will have to see if there is any follow-through next week when Wall Street traders return from their summer vacations.

Relative Strength of Stocks Versus Bonds

Relative Strength of Stocks Versus Bonds

The chart above displays the relative strength of the S&P 500 versus the long bond (30 year US Treasury Bond). When the line is rising, it indicates that stocks are outperforming 30 year treasury bonds, while a falling line indicates that bonds are outperforming stocks.

The relative strength chart above clearly shows that bonds have been outperforming stocks the last few months. The type of bonds we hold in our model portfolios are comprised of a diverse group of holdings, i.e., government agency bonds, corporate bonds, high yield corporate bonds, etc.

When the financial news networks, such as CNBC, refer to bonds they are generally referring to either the 10 or 30 year US treasury bonds. The long maturity bonds will fluctuate based on both interest rate changes and changes in the bullishness or bearishness of the stock market. Money will move out of safe haven treasuries and into the market as stock market rallies take hold and vice versa when stocks fall.

Unlike treasuries, high yield bonds act more like a proxy for the stock market. If the stock market rises high yield bonds tend to rise.

If the stock market rally that began late last week proves to have staying power, I will be adding to our high yield bond positions.

Thursday, September 2, 2010

The Gerritz Letter - Corrected Performance Chart

Below is a corrected performance chart for the Sept 1st 2010 issue of The Gerritz Letter. I inadvertently posted the one month rate of return figures rather than the full quarter rates of return. I will update the chart in The Gerritz Letter posted on our website as soon as possible.

The corrected quarterly rates of return should read as follow:

DBLTX =  6.41%

PTTAX = 4.66%

PDVYX = 3.94%

MWHYX = 4.19%

SPY = -3.25% (Spy is our benchmark - We do not current have a position in SPY)

(Click on chart to enlarge it for easier viewing)

I will also send out an email notification and update of the chart correction.

I think you will agree that the quarterly performance of our Low Volatility portfolio is very good, especially when compared to the S&P 500 results.