April Portfolio Results

The model portfolios all rebounded in April. All three finished the month in positive territory for the year, still handily outdistancing the major market averages.
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Following are the year-to-date returns through April 30:
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NoTouch Portfolio: +1.7%.
OOP Portfolio: +1.3%.
Dividend Portfolio: +1.3%.
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Those numbers compare favorably to the market indices:
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Dow: -3.4%.
S&P 500: -5.6%.
Nasdaq Composite: -9.0%.
Wilshire Composite: -5.6%.
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Dividend Portfolio change: As announced beforehand (see the 4/7 blog entry), MIC was sold at the 4/7 closing price. The proceeds from the sale were used to buy PBT at the 4/8 opening price. When the Dividend Portfolio was set up, I did not intend to make changes to it. I wanted to set it and forget it the same as the NoTouch and OOP Portfolios. But when the MIC position got to a 24% loss, I decided to move on. In real life trading, I would never let a position go against me by that much - at least not intentionally. (I did have one drop 50% overnight one time years ago. What a feeling that was when I turned on the computer to start the next day's trading and saw that.)
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Commodities have been getting tossed about in choppy seas for the past several weeks. That hurt my real-life numbers this past month, but overall still doing well, better than the model portfolios and, of course, much better than the negative returns in the stock market.
...My contention has been that as long as the powers that be are able to hold things together, then commodities should do well, too. On one of CNBC's morning shows this past week, the anchor was absolutely trashing Jim Rogers, a legendary investor who is heavily into commodities and pretty much negative on the the U.S. markets in general. This anchor was vehement, even opining that Mr. Rogers likely made all his money when he was with Mr. Soros all those many years ago and hasn't made anything since.
...It seems sometimes there is an endless supply of cheerleaders on the financial channels touting techs and financials. That has been going on for months, no matter how badly they perform. The cheerleaders are so quick to point out bubbles in commodities - mostly because they hate them, I think. Money that goes into commodities is money that could have gone into something they might make a market in, perhaps. At least that's the way it seems. Mr. Kudlow was ranting recently about gold on his program recently, too. He wants the central bankers of the world to unite and crush the gold prices. Gold is still viewed as a safe haven refuge by many people, and holding it is seen in some circles as a repudiation of the current fiat financial system.
...I don't see gold in that light so much any more. The world is never going back on a gold standard. That ship has sailed. Instead, we are moving inexorably toward an electronic commerce system, where all buying and selling will be done within a central system that requires biometric identification from all participants. More than anything, I do think that gold does still serve somewhat as inflation protection. As our leaders continue to debase our currency, then tangible assets tend to reflect a higher price. In that light, I still favor commodities in general over gold due to their practical uses in the world economy.
...The Asian economies, China in particular, are on the rise. China is bent on becoming the world's superpower. As they rise, they exhibit a voracious appetite for natural resources that tends to increase demand on somewhat inelastic resources. When you hear about a company or nation making a major oil discovery that could end up solving all our woes, if you believe the oracles, that oil won't be on the market tomorrow, next week, next month or next year.
...If the markets and world economies do go totally into the dumper, as in a depression, that will be deflationary for the metals and natural resource stocks. They will get trashed right along with everything else - and there have been a couple of times in the past two months where I thought that might be starting. But the deepest pockets and most powerful people in the world are working together to hold things together. As long as they are able to do so, then I still expect natural resource stocks to outperform the markets in general, subject to some violent corrections in the process, though.
...With all the publicity about Exxon's $11 billion profit and the politicians pandering for votes as a result with plans that will not work, there was little notice about the fact that XOM's worldwide oil production fell 10%. Even excluding the situation in Venezuela, their production was down 3%. And there are more than a few people that think that some of our supposed friends in the Middle East haven't increased production much because they can't, not because they won't.
...If I were still a chartist, I would have to note that the S&P and Nasdaq are both sitting at critical points. Both cleared their 200 day ema's last week, but painted negative patterns in Friday's trading action. The S&P painted the second leg of an evening star candlestick pattern. Down action Monday and Tuesday would be discouraging to bulls. The Nasdaq had a lower close than open Friday. Both indices are showing negative divergences in their MACD patterns, and their stochastics are overbought. However, the weekly charts still look solid.
...Having said all that, I don't pay much attention to charts. I use them these days as secondary indicators. Charts are too easy to paint in order to set traps for small fry. And negative divergences can stay negative without a corresponding price drop longer than you can believe sometimes, especially if you are in a short position.
...One indicator that I have been using as a tool in deciding whether to ride out corrections in the resource stocks or to lighten up, is to check and see how the financial and housing stocks are doing. When I see housing stocks being jammed upward, I am of the opinion that the rally won't have legs and equilibrium will soon be restored. The housing crisis is nowhere near over, and it is going to be quite a while before the home builders are again prospering. So when I see them being bought and profitable resource companies being trashed, that doesn't compute. To me, that is either hedge funds or their ilk trying to cover short positions in financials and homebuilders and having to sell off some of their good holdings to raise the cash to do so. Or it could just be blatant market manipulation for no other good reason. If you don't think that happens, look at some intraday charts for your favorite stocks and watch them go up and down all day long. Many times you will see relentless buying for a couple of hours, then the action turns on a dime, and the corresponding selling pressure is just as unrelenting.
...I am also starting to hear grumblings from co-workers about poor 401k performances. That could be significant going forward. 401k money that is deducted automatically from workers' paychecks provides a significant support to the markets. If people get scared enough to stop making their contributions, or have to start cashing in their funds in order to make ends meet, that will add to the problems going forward. There are already reports about folks having to part with prized possessions online and at flea markets to make ends meet.
...As always, nothing I write is to be construed as advice. We are sailing into some times that will prove to be unique in the history of man as the return of Jesus Christ draws nearer. There are major decisions to be made. We each own our decisions. May the Lord give us wisdom and strength for what lies ahead.

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