Week of 3-7-2010

Timing Model = 3.5

100% long, 0% cash

Global allocation of long positions

MSCI EAFE Index 20%

MCCI Emerging Markets Index 35%

Russell 3000 Index - U.S. 45%

Top U.S. Sectors

U.S. Real Estate 5.0

U.S. Basic Materials 4.5

Small Cap Value 4.0

Mid Cap Value 2.5

U.S. Micro Cap 2.5

Precious Metals 2.0

Top Intl. ETFs

MSCI Brazil Index Fund 2

S&P Latin America 40 Index Fund 2

Strategy 3

Money Markets 10%

U.S. REITs 10%

Industrial Materials 10%

U.S. Small Caps 10%

Internatiional Real Estate 10%

U.S. Large Cap 10%

Emerging Markets 10%

Energy 10%

Precious Metals 10%

EAFE 10%

Strategy 4

Money Markets 20%

U.S. REITs 20%

Industrial Materials 20%

U.S. Small Caps 20%

Internatiional Real Estate 20%

Week of 2-28-2010

Timing Model = 2.0

100% long, 0% cash

Global allocation of long positions

MSCI EAFE Index 15%

MCCI Emerging Markets Index 30%

Russell 3000 Index - U.S. 55%

Top U.S. Sectors

U.S. Real Estate 5.5

U.S. Consumer Services 3.5

Mid Cap Value 2.5

U.S. Leisure Goods 2.5

U.S. Biotechnology 2.0

U.S. Health Care 2.0

U.S. Semiconductor 2.0

Composite Internet 2.0

U.S. Oil Equipment, Services & Distribution 2.0

Top Intl. ETFs

MSCI Mexico Index Fund 2

MSCI Brazil Index Fund 2

S&P Latin America 40 Index Fund 2

Strategy 3

Money Markets 9%

U.S. REITs 9%

U.S. Small Caps 9%

International Real Estate 9%

U.S. Large Cap 9%

Industrial Materials 9%

Emerging Markets 9%

U.S. Long Bonds 9%

Energy 9%

Precious Metals 9%

EAFE 9%

Strategy 4

Money Markets 20%

U.S. REITs 20%

U.S. Small Caps 20%

International Real Estate 20%

U.S. Large Cap 20%

Week of 2-21-2010

Timing Model = 3.0

100% long, 0% cash

Global allocation of long positions

MSCI EAFE Index 15%

MCCI Emerging Markets Index 30%

Russell 3000 Index - U.S. 55%

Top U.S. Sectors

U.S. Real Estate 4.5

U.S. Semiconductor 3.0

U.S. Leisure Goods 3.0

U.S. Basic Materials 3.0

Mid Cap Value 2.5

U.S. Biotechnology 2.5

U.S. Consumer Services 2.5

Composite Internet 2.5

Top Intl. ETFs

MSCI South Korea Index Fund 3

MSCI Mexico Index Fund 3

Strategy 3

Money Markets 10%

Industrial Materials 10%

U.S. REITs 10%

International Real Estate 10%

Energy 10%

U.S. Small Caps 10%

U.S. Large Cap 10%

Emerging Markets 10%

EAFE 10%

Precious Metals 10%

Strategy 4

Money Markets 20%

U.S. REITs 20%

U.S. Small Caps 20%

Industrial Materials 20%

Emerging Markets 20%

Strategy 3 Explained

This strategy is a variation of Mebane Faber's Quantitative Approach to Tactical Asset Allocation.

Like strategy 4, I start with a universe of 12 asset classes (I include money markets as an asset class):

1. Money Markets
2. Industrial Materials
3. U.S. REITs
4. International Real Estate
5. U.S. Small Caps
6. U.S. Large Cap
7. Emerging Markets
8. EAFE
9. Precious Metals
10. U.S. Long Bonds
11. Energy
12. Agriculture

Every asset class that is above it's 200 day moving average earns a position in the portfolio. Money Markets is alway considered to be above it's 200 day moving average.

Position size is determined by the number of asset classes that are above their 200 day moving average. For example, if all 12 asset classes are above their 200 dma, the position size for each is 8.3%. If no asset classes (except money markets) is above their 200 day moving average, the portfolio will be 100% in cash (money markets).

The portfolio should be adjusted on a weekly basis, which from an execution standpoint, is quite difficult. Currently I do not use this strategy.

Keep in mind both Strategy 3 and strategy 4 only makes sense in tax deferred accounts like IRAs or a 401K plan that provides a brokerage option.

Strategy 4 Explained

The strategy is based on two principles:

1. Asset classes that show the greatest momentum over 3 to 12 months tend to outperform asset classes that exhibit less momentum. This anomaly has been documented in several research papers.
2. Prices tend to move in trends. and investing in asset classes that are in uptrends vs. those that are falling will, over the long term, perform about the same as buy in hold but with a lot less volatility. Refer to Mebane Faber's Quantitative Approach to Tactical Asset Allocation.

I start with a universe of 12 asset classes (I include money markets as an asset class):

1. Money Markets
2. Industrial Materials
3. U.S. REITs
4. International Real Estate
5. U.S. Small Caps
6. U.S. Large Cap
7. Emerging Markets
8. EAFE
9. Precious Metals
10. U.S. Long Bonds
11. Energy
12. Agriculture

The model is based on a simple point system.

• The top 4 performing asset classes over the past 90 days each get a point.
• The top 4 performing asset classes over the past 180 days each get a point.
• The top 4 performing asset classes over the past year each gets a point.
• Every asset class that is above it's TRIX (15,9) signal line gets a point.
• Every asset class that is above it's 75 day moving average gets a point.
• Every asset class that is above it's 200 day moving average gets a point.

The portfolio always holds 5 positions with an allocation of 20% per position. Money Markets are always one of those positions, so the portfolio is always 80% long.

The 4 asset classes in the model with the highest point totals are included in the portfolio. In case of a tie, asset classes with the best momentum scores win. If there's still a tie, I'll defer to the asset classes in uptrends, from short term to long term.

That's it. If you still have questions, feel free to leave a question.

Week of 2-14-2010

Timing Model = 0.0

50% long, 50% cash

Global allocation of long positions

MSCI EAFE Index 20%

MCCI Emerging Markets Index 30%

Russell 3000 Index - U.S. 50%

Top U.S. Sectors

U.S. Semiconductor 4.5

U.S. Oil Equipment, Services & Distribution 4.0

U.S. Basic Materials 4.0

U.S. Biotechnology 2.5

U.S. Leisure Goods 2.5

Composite Internet 2.5

Mid Cap Value 2.0

U.S. Health Care 2.0

U.S. Real Estate 2.0

U.S. Technology 2.0

Top Intl. ETFs

MSCI South Korea Index Fund 2

MSCI Brazil Index Fund 2

S&P Latin America 40 Index Fund 2

MSCI Mexico Index Fund 2

Strategy 3

Money Markets 11%

Industrial Materials 11%

U.S. REITs 11%

International Real Estate 11%

U.S. Small Caps 11%

U.S. Large Cap 11%

Emerging Markets 11%

EAFE 11%

Precious Metals 11%

Strategy 4

Money Markets 20%

Industrial Materials 20%

U.S. REITs 20%

International Real Estate 20%

U.S. Small Caps 20%

Week of 2-7-2010

Timing Model = 0.0
50% long, 50% cash

Global allocation of long positions
MSCI EAFE Index 20%
MCCI Emerging Markets Index 30%
Russell 3000 Index - U.S. 50%

Top U.S. Sectors
U.S. Technology 3.5
Mid Cap Value 2.0
U.S. Banks 2.0
U.S. Health Care 2.0
U.S. Real Estate 2.0
U.S. Biotechnology 2.0
U.S. Leisure Goods 2.0
U.S. Pharmaceuticals 2.0
U.S. Semiconductor 2.0
Composite Internet 2.0

Top Intl. ETFs
MSCI Australia Index Fund 1
MSCI South Korea Index Fund 1
MSCI Brazil Index Fund 1
S&P Latin America 40 Index Fund 1
MSCI Pacific ex-Japan Index Fund 1
MSCI Sweden Index Fund 1
MSCI Mexico Index Fund 1
MSCI Taiwan Index Fund 1
MSCI Austria Index Fund 1
MSCI All Country Asia ex Japan Index Fund 1
MSCI Emerging Markets Index Fund 1
MSCI Singapore Index Fund 1
MSCI South Africa Index Fund 1

Strategy 3
Money Markets 11%
Industrial Materials 11%
U.S. REITs 11%
Internatiional Real Estate 11%
U.S. Large Cap 11%
U.S. Long Bonds 11%
Emerging Markets 11%
EAFE 11%
U.S. Small Caps 11%

Strategy 4
Money Markets 20%
Industrial Materials 20%
U.S. REITs 20%
U.S. Large Cap 20%
U.S. Long Bonds 20%