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« ETF Update: A Focus on Health | Main | Government, Crises, and Time Frames »

July 27, 2008




The MER news is pretty disappointing -- mostly because they were supposed to have some good controls. We are long MER in some accounts. I am pretty open about mistakes - -not just success stories.

There is more to say about what went wrong here.




Tim and Vermont -- Good questions. No system of exits is perfect. Every trader grumbles when his stop is hit and the stock immediately bounces. The locals in the Chicago pits love to "run the stops" whenever there is a quiet day. They are looking at the same charts as everyone else.

The questions deserve a more complete answer, so I'll put it on the agenda. Let us just say that it depends on how fast a sector is moving and what is happening everywhere else. Whatever our method is, it has the benefit of extensive testing over plenty of years with a lot of out-of-sample data. This is not like your average five-year backtest.

Thanks again.



Merrill, mother to all, took their hit. Based on that sale price to Lone Star, looks to be 18-19 cents on the dollar. So that's what many of the inhabitants of the XLF have to do as well.

Vermont Trader

"the model does not predict tops in sectors, the exits come when other sectors show more strength."

I'd be interested to hear more about how you do this.



Jeff, taking a little vacation this month. Missing your posts.

I am having an interesting time watching how fast sectors can move from the top to the bottom, and vice-versa, in your ratings. Regional banks were on the very bottom just a couple of weeks ago and energy near the top. Does your model trade you out soon enough when the the market make rapid reversals?

As a contrarian indicator, I now see a bunch of international sectors near the bottom of your score card. That will now be my area to watch. I was considering the other day, if we end up with a Democratic President, House and Senate, will foreign stocks be the place to be until we see the consequences of that much consolidated power?

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