Our 4 Asset Model Portfolio continues to hold positions in gold and Treasury bonds. In addition, we have a high cash position. And yes, we are sleeping well at night as the portfolio has not had a position in equities for nearly 2 months.  In my book, investing is all about patience and waiting for that “fat pitch”.

Introduction

On the equity front, we believe we are in a NEUTRAL market environment. A neutral market environment implies little investing edge. In the 4 Asset Model Portfolio, we sold our equity positions 8 weeks ago after being bullish for 22 weeks. The SP500 was at 1797 and it is at 1865 today. Our next bull signal will come when investors turn extremely bearish on equities. This will require lower prices.

We remain bullish on gold and Treasury bonds, and we have been so for 12 weeks now. These positions have added a nice buffer as the equity markets have come off a bit in the past couple of weeks. The advantages of having a well diversified portfolio are obvious. Tactical asset portfolios, like the 4 Asset Model Portfolio, tend to under perform during equity manias, but they are your best friend when the equity markets are NOT going nuts (which is most of the time). We are not reinventing the wheel as our approach to portfolio management has stood the test of time and has undergone much academic and real world rigor. What I bring to this mix is the market timing aspect, which I feel I do better than most!

We remain neutral on crude oil.

Our portfolio rules state: 60% of the funds are allocated towards equities when there is an equity buy signal. When equities are on a buy signal, the other 40% of the portfolio is divided up equally amongst the other assets. If equities are not on a buy signal, then the other assets get no more than a 20% allocation each. We do not use leverage.

The 4 Asset Model Portfolio spreadsheet is updated through Friday.

Figure 1. 4 Asset Model Portfolio/ spreadsheet

Closed positions from the 4 Asset Model Portfolio are shown in the next spreadsheet.

Figure 2. 4 Asset Model Portfolio/ closed positions

I have put together a table of our 4 assets showing which mode I think we are currently in. As our models tend to be constructed with both fundamental and technical data, a bull signal is registered when both fundamentals and technicals are positive. A bear signal is registered when both fundamentals and technicals are negative. A neutral signal means that only 1 element of our model is positive. Neutral market signals tend to be ruled by overbought and oversold conditions; the market is range bound. We can be buyers in bear markets as conditions can be ripe for a reversal, so being bullish in a bear is acceptable.

Figure 3. 4 Assets/ Signals