All Hands On Deck

Mid afternoon and the major averages are down approximately 1.8%.  As my son says occasionally,  " offense sells tickets, defense wins games".  Something like that anyway.  So we whiled away the afternoon being defensive and coming up with sell signals.  But there's a bit more to it than that.

A few holdings are not sold due to downward price moves.  For example, if I'm paying Michael  Cuggino to manage the Permanent Portfolio (PRPFX) on my behalf, I don't want to cut the rug out from under him.  I don't put TIPs on the chopping block because inflation is my biggest economic concern.

Many investments are either tightly linked to the basic premise of the fiat fantasy portfolio or are core to an asset class.  If these fall in price, we sell a good portion, but not all, of our investment.  If SGOL, a gold ETF, drops in price sufficiently to trigger a sell signal, we will sell about half.  During the past four months, I have sold a portion of the bond ETFs BND and EMB .  I don't want to be completely devoid of precious metals, bonds or any other asset class.  To do so would require a hubris unjustified by my track record.

Last we have the reserves.  We give each a chance to join the team, but they are sold when they take a dive.  The coal ETF KOL has done well, but when it fades we'll sell it all.  DBA, the futures based commodity ETF, seems well suited as a pinch hitter, but not the starting lineup.

Within this framework, we will sell if there is a 12% drop from the high weekly close to the current weekly close.  Despite a rough two weeks for the markets, only GXG, the Columbia ETF, is presently in this circumstance.  If GXG can't claw back above 41.90 by Friday, it will be sold.  A bad looking chart and bad looking indicators (moving averages, MACD, etc) also prompt sales.

I think of it this way.  I'm not a trader, I'm a row boat helmsman.  We have a core crew of lean and experienced rowers.  We add crew members when conditions are favorable and row like crazy with the tide.  When we encounter an incoming tide, rough seas, or strong headwinds, we lighten the load to avoid sinking the boat.