5/28/16

My new book: Easy Ways to Beat the Market with ETFs

INTRODUCTION


It took me forty years to find an investment approach that was easy to follow and producing the returns and reliability I was looking for. These results have a proven record and they can be backtested in an easy way by any investor. I will show you several ways to invest your money and each one will have different features in terms of returns and risk. You will have the opportunity to decide which one or which ones you should use to manage your money.
This book discusses how to deal with two main issues concerning your portfolio management. The first one is the issue of managing risk. The paramount objective of any investor is to minimize losses. The more money you lose the more time it takes to recover your losses. It is therefore a foregone conclusion that managing risk is an important objective.
The second issue is the need to manage returns. In order to do so you have to rely on a framework to direct your money. You need a process. This book is not going to give you some general concept or generalities difficult to apply. I am going to show you specific portfolios and the rules I used to achieve the returns. These rules are simple and easy to follow. I will show you the performance of the portfolios and the risk associated with following the methodology.
Some portfolios and strategies will outperform handsomely the market over a long period of time with low risk. Others will outperform the market and reflect higher risk. These features will be quantified. I will use these data to make some important points about diversification, choice of asset classes and performance of high risk strategies. I must confess I learned a lot preparing these data and analyzing the summary tables enclosed in the following pages.
The reason we will discuss many portfolios is because of their different features. The interesting outcome of this analysis is that you will be able to recognize very specific and important patterns you can use to your advantage.
However, before showing you the specific portfolios and their attractive historical performance I need to tell you why and how I found them. In other words, what was my mental process to find these portfolios?
In order to do so I will discuss in Chapter 1 the concept of risk. What is risk? Why is it important? What is the frame of mind needed to manage it? What are the tools needed to manage it? I will explore the important issues related to managing risk. They are important because they will assist you in your approach to managing your portfolio.
But there is another important concept I need to discuss. It is one of the few important ideas that helped me manage billions of dollars. It is the concept of business cycle. Why is it so important? Very simply, the growth of the economy determines which types of investments you should make. The growth of the business cycle drives the prices of all assets. Why does the economy go through periods of faster or slower growth? This issue will be explained briefly in Chapter 2.
In Chapter 3 you will learn to recognize whether the economy is growing rapidly or slowly. I will show simple indicators (and where to find them) to establish whether the economy is strong or weak. This simple determination will tell you what type of investments you should make. In fact, I will use these concepts to show you why some of the portfolios I will discuss in the following pages are the lowest risk and produce the best returns.
In Chapter 4 I will discuss the importance of understanding the economic environment you are currently facing and its impact on the main asset classes and ETFs. Are all market sectors attractive during a complete business cycle? If not, which ones are more attractive when the economy is growing slowly and which ones offer the best returns when the economy is strong? In this chapter I will review the major stock market sectors as represented by the most important ETFs. You will see how they perform during different phases of the business cycle. Sectors that do well during periods of weak economic growth are not attractive investments during periods of strong growth. The opposite is also true. ETFs performing well during strong growth do poorly during periods of slow economic growth. This evidence will convince you, I am sure, why you need to recognize the role the strength of the economy has on asset class performance. This idea is of paramount importance in managing risk and improving the return of your portfolio.
Fortunately I found a simple way to determine whether the economy is strong or in the process of slowing down. In Chapter 5 I will show you a few simple and yet powerful indicators to determine the strength of the economy. These gauges will tell you whether the economy is strengthening or slowing down or whether it is growing slowly or expanding at a rapid pace.  I followed the same information for many decades and it has been essential in my work when I managed $4 billion. These data and graphs are available, free of charge, from The Federal Reserve Bank of St. Louis.  Why is it important to know how the economy is doing? Because it is the basis for the development of your investment strategy. This knowledge is crucial to determine whether you are facing a bull or a bear market and which asset classes, or sectors of the market, you should favor.
And now let’s tackle an important issue in money management. Are you investing in a bull market or in a bear market? In a bull market you can make mistakes and a broad rise of prices will hide your missteps. But in a bear market your mistakes will become painful. In Chapter 6 I will discuss a method to answer this crucial question. I will show you first what is a moving average and then I will demonstrate to you an easy and yet powerful way to determine the main trend of the market. I have run several tests with different moving averages. But only one moving average shows superior performance. These tests were made using the programs supplied by etfreplay.com and by portfoliovisualizer.com
In Chapter 7 the major market sectors are studied using the model developed in Chapter 6 for the broad market. The purpose of this analysis is to determine which moving average provides the best return. Using this method it will be easy to recognize which ETF is most volatile and likely to offer the greatest risk and loss (drawdown).  The reason is that all ETFs have different returns or volatility features over long periods of time because of their relationship with the business cycle. This step is used to decide which ETFs should be included in a portfolio depending on their historical performance and volatility. It will also help to understand why some portfolios perform significantly better than others depending on which ETF you use.
Chapter 8 shows you 14 ETF portfolios. Every portfolio has been tested with the model discussed in Chapter 6 from 2003 to 2015, a period with two bull markets and a major crash as in 2007-2009. Each portfolio is ranked for its overall performance, the maximum loss during the test period, its level of risk, and the number of trades performed during the period. Each portfolio has been chosen in order to prove or disprove some general ideas such as “is diversification a good strategy?”. The important aspect of this research is that it shows which ETFs you should select if you want to maximize returns and minimize the volatility of the portfolio. What makes these portfolios particularly attractive is that the buy/sell decisions are made monthly on the last day of the month, thus making the process of tracking their performance particularly easy and convenient.
Chapter 9 will summarize the main issues raised in this book and the practical implications you should consider in the management of your money.
Good reading!

Thank you for visiting this site.

George Dagnino, PhD
Since 1977 

Author, Profiting in Bull and Bear Markets


5/25/16

The economy is still weak


The PMI composite (manufacturing and services) shows the economy remains dormant at best.

Is this the environment to force interest rates higher? 

This not the kind of growth anticipating higher inflation, bond yields or commodity prices. What about profits and equity prices?

Investment implications are discussed in depth in each issue of The Peter Dag Portfolio.

You will encourage my timely update of this blog on the economy and financial markets by entering a subscription to The Peter Dag Portfolio

Thank you for visiting this site.

George Dagnino, PhD
Since 1977 
Author, Profiting in Bull and Bear Markets

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

My ideas and strategies are discussed in detail in my new book "EASY WAYS TO BEAT THE MARKET WITH ETFs" .


5/24/16

Watch the Fed



The Fed has stopped printing money in 2015 and since then stocks have gone nowhere.

Our work, however, shows the Fed has been printing less money in the past several weeks - probably in anticipation of forcing short-term interest rates higher.

It is no coincidence, we believe, the market has been in a downward trend in the past few weeks.

June is going to be an interesting month for equities. Stay tuned.

Investment implications are discussed in depth in each issue of The Peter Dag Portfolio.

You will encourage my timely update of this blog on the economy and financial markets by entering a subscription to The Peter Dag Portfolio

Thank you for visiting this site.

George Dagnino, PhD
Since 1977 
Author, Profiting in Bull and Bear Markets

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.



My ideas and strategies are discussed in detail in my new book "EASY WAYS TO BEAT THE MARKET WITH ETFs" .


5/23/16

Difficult to be optimistic



Manufacturing is in trouble because of heavy inventory imbalances. (See previous posts).

Weak manufacturing implies weak commodities and lower yields (if history is any guide). Profits cannot improve in this environment.

The Fed wants to raise interest rates in this disappointing environment. Good luck!

Investment implications are discussed in depth in each issue of The Peter Dag Portfolio.

You will encourage my timely update of this blog on the economy and financial markets by entering a subscription to The Peter Dag Portfolio

Thank you for visiting this site.

George Dagnino, PhD
Since 1977 
Author, Profiting in Bull and Bear Markets

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

My ideas and strategies are discussed in detail in my new book "EASY WAYS TO BEAT THE MARKET WITH ETFs" .

5/21/16

Observations

 It’s done. Finished. My new book is now available and the title is EASY WAYS TO BEAT THE MARKET WITH ETFs.
The book is the outcome of my desire to tell my grandchildren what I learned in four decades of dealing with the financial markets and managing $4 billion of interest rates and currency derivatives. I knew I had to keep it simple otherwise they would not read it.
The title speaks for itself. However, I tried to put the subject in a business cycle context and show how conservative investments offer the best results over the long term. 
I need to thank Jim for participating in the group sessions I started on ETFs. He shared with us his research and a technique I was not using – but I do now. He later was gracious enough to suggest how I should go about printing the book.
Chuck was very instrumental in convincing me to look into ways of investing that could easily be duplicated. His vast knowledge and experience made me focus on several ways I could look at the issue.  His experience, Jim’s presentations and book made me look into the use of programs such as freestockcharts.com, portfoliovisualizer.com, and etfreplay.com to test model portfolios.
Every other week I met with Chuck and Lou – I still do – to keep focused on new trends, read new articles discussing new techniques and above all delve into the importance of not letting emotions take over the decision making process.
The book discusses many portfolios, their performance and risk and the rules to achieve the results presented in various tables. These are the rules any investor has to follow to achieve similar results without letting emotions obscure the process - a very difficult endeavor indeed.

What has been very rewarding for me is that I have learned several concepts while I was testing the performance of various portfolios. These lessons are spelled out at the end of the book. It is not a lengthy book. I am not a verbose writer. I like to make the point quickly and move on to the next subject.

George Dagnino, PhD
Since 1977 


Author, Profiting in Bull and Bear Markets


5/17/16

More signs of a weak economy



Freight shipments by truck and rail in the US fell 4.9% in April from the beaten-down levels of April 2015, according to the Cass Transportation Index, released on Friday. It was the worst April since 2010, which followed the worst March since 2010. In fact, shipment volume over the four months this year was the worst since 2010.

It is no surprise the transportation ETF (IYT) keeps sinking - down 18% since 2014.

Investment implications are discussed in depth in each issue of The Peter Dag Portfolio.

You will encourage my timely update of this blog on the economy and financial markets by entering a subscription to The Peter Dag Portfolio

Thank you for visiting this site.

George Dagnino, PhD
Since 1977 
Author, Profiting in Bull and Bear Markets

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.


My ideas and strategies are discussed in detail in my new book "EASY WAYS TO BEAT THE MARKET WITH ETFs" .


More signs of a weak economy



Total carloads for the week ending May. 7 were 233,047 carloads, down 14.8 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 259,876 containers and trailers, down 6.4 percent compared to 2015.
For the first 18 weeks of 2016, U.S. railroads reported cumulative volume of 4,320,667 carloads, down 14.3 percent from the same point last year; and 4,628,008 intermodal units, down 1.1 percent from last year. Total combined U.S. traffic for the first 18 weeks of 2016 was 8,948,675 carloads and intermodal units, a decrease of 8 percent compared to last year.
The transportation industry - a very important sector of the economy - is saying business is contracting. 2016 is going to be a difficult year for the economy according to these data.

Investment implications are discussed in depth in each issue of The Peter Dag Portfolio.

You will encourage my timely update of this blog on the economy and financial markets by entering a subscription to The Peter Dag Portfolio

Thank you for visiting this site.

George Dagnino, PhD
Since 1977 
Author, Profiting in Bull and Bear Markets

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.


My ideas and strategies are discussed in detail in my new bookbook "EASY WAYS TO BEAT THE MARKET WITH ETFs" .

5/5/16

In a recession?


Capital investments (blue line) keep sinking. Productivity and economic growth cannot take place without new investments in machines and plants.

Production (red line) follows capital investments. The last time we experienced these trends was in 2008-2009 (see chart).

These trends translate in a weak economy, weak commodity prices, lower yields and higher bond prices, and disappointing EPS.

Investment implications are discussed in depth in each issue of The Peter Dag Portfolio.

You will encourage my timely update of this blog on the economy and financial markets by entering a subscription to The Peter Dag Portfolio

Thank you for visiting this site.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977 
Author, Profiting in Bull and Bear Markets

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

My ideas and strategies are discussed in detail in my new bookbook "EASY WAYS TO BEAT THE MARKET WITH ETFs" .