It is a well-known fact that the big asset management firms and large mutual funds do a lot of "Window Dressing" at the end of each quarter. You know what "Window Dressing" is... right? Well, if you don't, it is the rather nefarious routine where these firms/funds look at what equities (that they did not have in their client accounts) moved up nicely in the quarter and those equities (that they DID have in their client accounts) that tanked. Then, they sell all their bad trades and buy all the equities that have great looking, up-trending charts to put into their client quarterly reports. Of course, these firms do not call this process "Window Dressing"... no... they call it "Re-balancing". Doesn't that sound so much more sophisticated and intelligent?
But... at the end of the day, it is still just a way to obfuscate their management mistakes to make themselves look better than they really are. Their clients do not know when the trades were made; they only know what they own at the end of the quarter. These firms/funds can point proudly to how good a job that they have done for their clients... "Why, just look at how smart we are! Look at all the great companies that you own in your portfolio!" Never-mind the fact that their clients only owned them for a few days. Never-mind that their clients lost money during the quarter (or didn't make as much as they could have). That's not the fault of the manager. After all, look at how brilliant they are at stock picking.
This game of window dressing goes on every quarter and for reasons the totally escape me, investors never seem to catch on to these bait-and-switch tactics.
I don't do any window dressing. My clients get to see every trade (the good ones and the ones that didn't work out) that we make. I do not try to 'fool' my clients into thinking that they are doing better than they are. Our approach is market-directional, where we do our best to be bullish in our investments when the market is in a bullish trend; and, bearish in our investments when the market is in a bearish trend.
Today was a perfect example of how this strategy works. Today, the S&P 500 dropped nearly 4%. I could be like most advisors and tell my clients, "Wasn't my fault... It's the market's fault... Don't blame me for your losses." I read a number of letters other advisors send to their clients. I know where their letter is headed when the first sentence says, "As you already know, it's another bad day for the stock market." And then goes on to explain why their holdings are not to be blamed for dropping in share price.
Yes, the market dropped 4% today. My ULTRA-MAX clients were already 70% in 2x inverse ETFs to start the day and I put the balance to work at the market open in those same 2x inverse ETFs. The result? ULTRA-MAX gained over +8% today. And, that puts us up almost +24% for the year. And while my other strategies are far less aggressive than UMAX, they all gained nicely today. And, before you think I'm just bragging... I'm not. I am sharing with you how a smart, rules-based, disciplined approach to the stock market can work in any market (bull or bear); not every hour or every day or sometimes, not every week, but the key is staying in sync with the overall trend of the market.
That is our goal and our primary objective for client accounts.
And now to my point... Without the window dressing shenanigans of the big asset management firms and mutual funds, there was no buying floor in today's market. That, coupled with the continually growing bad news about the virus and our great country on lock-down, the market moved appreciably lower. And unlike the past few weeks, it will not surprise me to see this sell-off continue.
Will the market test the recent lows? I can only hazard a guess, but my guess would be, "yes". Will the market move appreciably lower than the recent lows? Again... no one knows, but it would not surprise me for a whole host of reasons that I cannot go into detail about in this blog.
Today's Trading Actions: I brought ULTRA-MAX up to 100% invested in 2x inverse ETFs. In Tactical Growth, I put about 16% of capital to work in 4 different 1x inverse ETFs. In Total Market, I put about 20% to work in 1x inverse ETFs. In ULTRA, I put 20% to work in one 2x inverse ETF. In Diversified Income, I let our naked put run on a 2x inverse ETF that expires on Friday. Right now, it is very nicely positive.
Stay safe... avoid the crowds... hunker down, as they say in Texas.