Thread: Tsunami's Account Talk

It came in a little lower than I expected but still within Elliott wave rules; the bottom was near a 78% retracement, deep enough to scare a lot of folks which is what wave 2's are meant to do...now comes wave 3 up which should last several months.

For anyone in the F fund, this chart might change your mind. Bonds are very overbought, in a similar position as when stocks bottomed in mid-October:
http://i.imgur.com/vtKEWx7.png

Oil should be bottoming soon. I loaded up on some ERX today....
Time and Cycles Crude Oil Review and Forecast | Ian Thijm | Safehaven.com

Spikes over 20 in this indicator usually indicate important stock market bottoms,:
$VIX - SharpCharts Workbench - StockCharts.com
VIX Rate of Change More Important Than Its Level - Free Weekly Technical Analysis Chart - McClellan Financial

I thought I’d share this follow-up on my research into the “Seasonal Strategy” for investing. I’ve researched the idea further with an eye on how to use this in retirement. Using theTSP funds, the seasonal strategy demolishes a simple buy and hold approach. So I was wondering, if Itransfer out of the TSP and into a traditional IRA account upon retirement, can I do even better using carefully selected ETFs?

The short answer appears to be a resounding yes.Here’s my initial results…

First, a recap…the seasonal strategy is that in general small caps do better in winter months, and bonds in summer and fall months, and the large caps the rest of the year and for whatever reason during the month of July as well. So after optimizing it tomaximize long-term returns (going back to 1988), it looks like this:

Jan – S fund
Feb – S fund
Mar – C fund
Apr – C fund
May – C fund
June – F fund
July – C fund
Aug – F fund
Sep – F fund
Oct – C fund
Nov – C fund
Dec – S fund

For the retirement version of this strategy outside of the TSP, I have a long list of ETFs that I’ve been narrowing down as candidates to invest induring retirement. Many of them include the 100 ETFs that TD Ameritrade lets you trade with no commissions (if you hold them for 90 days) since I’m leaning toward that brokerage for my IRA (others are probably as good or better, that’s just where I have my accounts now). If one wanted to emulate the TSP, you could use Vanguard’s “VOO” to replace the C fund, and AGG to replace the F fund, but I wanted to try to do even better and I selected the following for my initial back testing:

PKW – PowerShares Buyback Achievers ETF to replace the C fund
VXF – Vanguard Extended Market ETF to replace the S fund. This ETF includes small and mid-cap stocks.
BLV – Vanguard Long-Term Bond ETF to replace the F fund.

There’s a whole universe of other ETFs to consider and play with for this strategy (and I'd welcome input from others), but using these three (with the exception of 2006 when BLV didn’t exist yet so I used AGG), here are the bottom line cumulative return results. I went back to 2006 so that I would include the last bear market in its entirety. These are the cumulative returns over the last nine years….

C fund – 100.5%
TSP Seasonal Strategy – 206.4%
ETF Seasonal Strategy – 313.8%

That’s a real eye opener for me. Just six trades per year, blindly done on the last day of the month (and that could probably be improved upon using TA), would have returned over 300% over the last nine years?! Wow. I plan to research this more of the next couple years before I retire, but I sure like this simple but powerful strategy for at least a portion of my TSP money.

Originally Posted by Tsunami

First, a recap…the seasonal strategy is that in general small caps do better in winter months, and bonds in summer and fall months, and the large caps the rest of the year and for whatever reason during the month of July as well. So after optimizing it tomaximize long-term returns (going back to 1988), it looks like this:

Jan – S fund
Feb – S fund
Mar – C fund
Apr – C fund
May – C fund
June – F fund
July – C fund
Aug – F fund
Sep – F fund
Oct – C fund
Nov – C fund
Dec – S fund

Could you expound on how you came to these results?

Look back to my posts on 12/31 and 1/1. I wish I could recreate the calculator myself but I'm not that ambitious. It would be a big spreadsheet project. Also, until the big year in 2013 in the S fund, the F fund held the edge in January. And after 2014 January may have flipped back to the F fund holding the edge in the long term. Either way, January is very close between S and F, and at the rate this month is going this may turn out to be another F fund year for January. I still think the market will turn up soon, but if 1972 breaks I'll change my stance on that.

Go Seahawks!

Interesting as I'm getting into the rationale behind it. I need to look at the data a bit more closely, though.

Originally Posted by OBGibby

Could you expound on how you came to these results?

I don't know how Tsunami came up with his ranking, but here is a simple arithmetic mean of the TSP Monthlies for 2001 - 2014. That's as far back as we have data for all 5 TSP funds. You will note that the best funds don't match, so I don't know if this means anything. At least you can look at some numbers.

	G Fund	F Fund	C Fund	S Fund	I Fund	Best
Jan	0.30%	0.61%	(0.46%)	0.57%	(1.44%)	F
Feb	0.28%	0.51%	(0.57%)	(0.52%)	(0.03%)	F
Mar	0.30%	(0.07%)	1.42%	1.83%	0.94%	S
Apr	0.30%	0.51%	2.39%	2.75%	3.38%	I
May	0.31%	0.40%	0.48%	0.96%	(0.76%)	S
Jun	0.29%	0.18%	(1.30%)	(0.59%)	(0.53%)	G
Jul	0.32%	0.56%	0.57%	(0.22%)	0.54%	C
Aug	0.31%	1.06%	(0.13%)	0.07%	(0.27%)	F
Sep	0.29%	0.54%	(0.77%)	(0.89%)	(0.65%)	F
Oct	0.29%	0.22%	1.59%	1.52%	1.22%	C
Nov	0.27%	0.43%	1.78%	2.01%	0.78%	S
Dec	0.30%	0.41%	1.31%	2.32%	2.24%	S

Cactus - My "best" funds for each month use data going back to 1988 but do not include the I fund, only G, F, C, and S or it's equivalent. In more recent times your seasonal mix is the best and in fact I might consider the I fund instead of C in April, or at least a 50/50 mix, especially if the dollar is finally correcting down. With the dollar going parabolic, that dollar correction down could happen any day now and I see some people like Felix are anticipating that by moving into I today. Might be a very good move indeed.

Once again a very nice post here. I like this Fund tally Cactus. If I just use persistence, often an under utilized concept, the I fund will continue to outperform especially in the environment of QE Europe, overbought Dollar Rally (Dollar correction coming here...look at that RSI of 80+ over the last decade...always followed by big correction), and like I said...until this low interest rate environment is reversed...the only place to put money to work is in equities? You could go safe...but then we have seen where going safe has absolutely decimated returns over the last several years.

Whoosh, SPX down to 2045...odds are getting high that the bull market has peaked. A break of the previous low near 2040 would just about confirm it. Looking for a wave 2 bounce here though first before 2040 is taken out.

Looks like sell in May and go away came early this year. Ultimately I'm expecting a 35-40% bear market, with a big bounce in the middle somewhere, and the final bottom some time in 2016.

Originally Posted by Tsunami

Whoosh, SPX down to 2045...odds are getting high that the bull market has peaked. A break of the previous low near 2040 would just about confirm it. Looking for a wave 2 bounce here though first before 2040 is taken out.

Looks like sell in May and go away came early this year. Ultimately I'm expecting a 35-40% bear market, with a big bounce in the middle somewhere, and the final bottom some time in 2016.

Wow, you think the S&P will head down to ~1300? That's a bold call!

Originally Posted by bmneveu

Wow, you think the S&P will head down to ~1300? That's a bold call!

Yep, once 2040 is broken (tomorrow?) then in my opinion the odds are high that the 3rd bear market of this century has begun. It won't be quite as bad as the last two hopefully, but bad enough to do a lot of damage.

There are tons of people hoping to retire in my agency (and all others) in the next few years (including me, and 7 out of 8 people in my office plan to go by 2017) and this could change a lot of people's plans. I'm playing it safe and trying not to get caught up in it. The underlying cause of this one is simple demographics. This is the result of the tsunami of Baby Boomers retiring and reducing their spending...and try as they might there's NOTHING the Fed can do about it...I expect this panic to end next year before the elections when the Treasury will start sending out checks directly to tax payers to stem the bleeding...in a few more years the next spending wave of the Millenials will take over and we'll be moving into the next economic boom. The 2020's and well beyond should be great for the markets, but until then we have this plunge and maybe one more lasting to about 2023 to get through.