Bear Market Declines and Durations

Here is a table that illustrates the historical duration and depth of bear markets since 1929. On average, it takes five years to until the market surpasses it's previous peak.

Week of 1-27-2008

Timing Model = .5
60% long, 40% cash
10 day moving average: 56% long, 44% cash

Global allocation of long positions
MSCI EAFE Index 40%
MCCI Emerging Markets Index 10%
Russell 3000 Index - U.S. 50%

Top U.S. Sectors
U.S. Basic Materials 5.0
Precious Metals 4.5
U.S. Oil & Gas 4.5
U.S. Biotechnology 3.5
U.S. Health Care 3.5
U.S. Oil Equipment, Services & Distribution 3.5

Top Intl. ETFs
MSCI Brazil Index Fund 3
MSCI Malaysia Index Fund 3
MSCI Hong Kong Index Fund 2
S&P Latin America 40 Index Fund 2
FTSE/Xinhua China 25 Index Fund 2

Strategy 3
Money Market 33.3%
Agriculture 33.3%
Precious Metals 33.3%
Emerging Markets 0.0%
Industrial Materials 0.0%
EAFE 0.0%
U.S. Large Cap 0.0%
U.S. Small Cap 0.0%
U.S. Long Bonds 0.0%
U.S. REITs 0.0%

I appologize for the week gap in posting updates. I was on a winter campout over last weekend and didn't have the time this week to run updates.

The sentiment indicators alone have pushed my timing model above zero and thus my long exposure now hovers around 60%. Emerging Markets is now underweight but surprisingly I haven't seen any huge shifts in U.S. markets sector rotation (except the financials and real estate sectors have been gaining relative strength).

As I mentioned a couple weeks ago, I think we are near a short/intermediate term bottom, however I do not believe the bear market is over. A rally from here would not be surprising.

Strategy 3 allocation is now getting interesting. There are only 2 asset classes above their 200 day moving average resulting in a 3-way allocation between cash, precious metals, and agriculture.

Week of 1-13-2008

Timing Model = -1.0

30% long, 70% cash

10 day moving average: 9% long, 91% cash

Global allocation of long positions

MSCI EAFE Index 30%

MCCI Emerging Markets Index 30%

Russell 3000 Index - U.S. 40%

Top U.S. Sectors

U.S. Oil & Gas 5.5

U.S. Health Care 5.5

Precious Metals 4.5

U.S. Oil Equipment, Services & Distribution 4.0

U.S. Basic Materials 4.0

U.S. Utilities 4.0

Top Intl. ETFs

MSCI Brazil Index Fund 3

MSCI Malaysia Index Fund 3

MSCI Hong Kong Index Fund 2

S&P Latin America 40 Index Fund 2

MSCI Emerging Markets Index Fund 2

Strategy 3

Emerging Markets 20.0%

Money Market 20.0%

Industrial Materials 20.0%

Agriculture 20.0%

Precious Metals 20.0%

EAFE 0.0%

U.S. Large Cap 0.0%

U.S. Small Cap 0.0%

U.S. Long Bonds 0.0%

U.S. REITs 0.0%

Given the state of the sentiment indicators I follow, I believe we are very close to some sort of bottom (short or intermediate term). My model has just ticked up to -1.0 and is very close to gaining more points via the sentiment components.

Week of 1-6-2008

Timing Model = -2.0
10% long, 90% cash
10 day MA = 14% long, 86% cash

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

Top U.S. Sectors
U.S. Oil & Gas 5.5
U.S. Basic Materials 5.0
Precious Metals 4.5
U.S. Technology 4.5
U.S. Oil Equipment, Services & Distribution 4.5
Composite Internet 3.0

Top Intl ETFs
MSCI Brazil Index Fund 3
MSCI Hong Kong Index Fund 3
MSCI Malaysia Index Fund 3
S&P Latin America 40 Index Fund 2
MSCI Emerging Markets Index Fund 2

Strategy 3
Emerging Markets 20.0%
Money Market 20.0%
Industrial Materials 20.0%
Agriculture 20.0%
Precious Metals 20.0%
EAFE 0.0%
U.S. Large Cap 0.0%
U.S. Small Cap 0.0%
U.S. Long Bonds 0.0%
U.S. REITs 0.0%

Week of 12-30-2007

Timing Model= -2.0
10% long, 90% cash
10 day moving average: 14% long, 86% cash

Global Allocation of long positions
MSCI EAFE Index 30%
MCCI Emerging Markets Index 30%
Russell 3000 Index - U.S. 40%

Top U.S. Sectors
U.S. Oil & Gas 5.5
U.S. Oil Equipment, Services & Distribution 5.5
U.S. Technology 5.5
U.S. Basic Materials 4.5
Precious Metals 4.0
U.S. Leisure Goods 3.5
Composite Internet 3.0
U.S. Utilities 3.0

Top Intl. ETFs
MSCI Brazil Index Fund 3
MSCI Hong Kong Index Fund 3
MSCI Malaysia Index Fund 3
S&P Latin America 40 Index Fund 2
FTSE/Xinhua China 25 Index Fund 2
MSCI Emerging Markets Index Fund 2
MSCI Spain Index Fund 2

Strategy 3
Emerging Markets 16.7%
Money Market 16.7%
Industrial Materials 16.7%
Agriculture 16.7%
Precious Metals 16.7%
EAFE 16.7%
U.S. Large Cap 0.0%
U.S. Small Cap 0.0%
U.S. Long Bonds 0.0%
U.S. REITs 0.0%