Performance Tracking October 2016


For calculation methodology see earlier post

Passive Portfolio

Benchmark SPY declined by 1.73% in October while AGG also declined 0.82%. In fact, the rise in interest rates probably precipitated the decline in equities. My passive portfolio sans PMs declined by 1.26%, slightly better than benchmarks. Including PMs, the decline was 1.76% slightly worse. Putting the majority of my fixed income in stable value funds continue to pay off. Indeed, I’m contemplating moving out of the total bond fund entirely. I’ll likely do that as part of my annual review and rebalance. Otherwise, not change in target allocation.

Active Portfolio

The active portfolio had a very poor month, losing 5.57%. PM stocks, muni closed end funds and my company stock all had significant losses. For PMs, the miners were weaker than the physical, indication another leg down. The COT is still quite negative despite the $80 drop. I expect another leg down, possibly into January. The losses in my company stock is likely tied with the annual RSU vesting cycle, assume many sold portions to pay taxes or even entirely. I’ll also be looking to sell but at a more opportune time. Closed end muni funds had a very good run this year and the pay out is probably not sustainable in this low rate environment. This is not unexpected. However, I’m a long term holder and 5.5% fed/state tax free yield is equivalent to almost 10% tax free yield to me. If Hilary gets elected, I expect muni’s to get a bid since taxes will likely go up.

My DGI portfolio at -0.71% performed better than the market. In October, short puts in Nike were exercised. They were intended as a long term hold. Short puts in United Technologies expired worthless.

Plan and Forecast

The year end rally has so far been elusive. I continue to expect a correction of 10-15% but not much more into Q1. Per my long term model, by the middle of next year we’d be rip roaring upwards. I know it’s difficult to envision given the current political climate but those are the scenarios where big money is made.

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