Wall Street Model
  • Welcome
  • Model Fundamentals
  • Blog
  • Stock Screen
  • Market Timer
  • Contact Me

I'm Out

11/3/2013

0 Comments

 
Picture
 For the first time since early this year my model has gone to a zero percent exposure to stocks.  I actually use hedging techniques in my portfolio to achieve this nex exposure.  Simply put, the conventional wisdom of continued slow earnings growth coupled with money printing in perpetuity by the Fed just seems over exposed.  Virtually everyone is bullish including individual investors, Rydex leveraged fund investors, newsletter writers, small option buyers and agressive money managers.  The risk/reward ratio just looks poor at this point.

Earnings:
Estimates for both 2013 and 2014 are now in clear downtrends but the fact that I am shifting
weight from this year to next is allowing my first earnings indicator to remain positive.
Looking at earnings 52 weeks ahead, estimates are still in an upward trend as optimistic
analysts stay very positive. Earnings expectations have gotten a little better in the past couple of weeks.
With both earnings indicators positive, my maximum earnings exposure is 100%.
Looking at the gap between last twelve month earnings and future 52 week projections,
the gap is very large and is growing but not by much.
I subtract 25% to account for this growing gap.
Total earnings factor exposure and maximum total exposure is therefore 75%, same as last week.

Sentiment: 
Odd lot investors are virtually the only group that is not wildly bullish.  They remain neutral. 
Exposure remains at 50%, same as last week.
Small option buyers remained very bullish last week.  
Exposure remains at 5%,  same as last week.
NAAIM managers became still more bullish last week and have now moved into extreme
territory.
Exposure declines to -10% this week, down from 5% last week.
When one of my sentiment indicators is maximum bearish and the other two are bearish or neutral, I assign a sentiment factor exposure of 0%.
 
Valuation:
Percentage of stock prices represented by net current assets remains at the lowest level possible.
Exposure remains at 0%, same as last week.
Comparison of stock earnings yield to ten year treasury yield remained neutral last week.
Exposure remains at 50%, same as last week.
Total valuation exposure is 25%, same as last week.

To combine these three factors, I multiply them together and then take the cube root.
This week, that number is 0%, down from 33% last week.

Technicals:
My comparison of yields on treasury bonds compared to lower quality corporates remained positive last week.
I add 10% to account for this factor.
New highs - new lows on the Nasdaq are still positive.
I add 20% to account for this factor.
My trend indicator for new highs - new lows on the Nasdaq slipped into negative position last week.
I subtract 25% to account for this factor.
Total technical adjustments this week are +5%, down from +30% last week.

After adjustments, total exposure for the week is 5% or, after rounding, 0%.
This level of exposure does not exceed the current earnings cap and is down from 75% last week.



0 Comments



Leave a Reply.

    Picture
    ​

    With my wife on Aruba
    December 2019

    Categories

    All

    RSS Feed

    Archives

    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012

Powered by Create your own unique website with customizable templates.