Tango5 Members Update 021509
Reflecting on 2008 Markets and What the Future Holds
In the previous Update I promised to cover: "For the next Update I will cover past Bear Markets and how Tango would have faired in those past bear markets, details on the performance of TangoETF's trading systems during 2008 and from each inception date, and more details on the new trading systems." ( the previous two Updates are posted under NEWS on the Home Page for your review). Today I don't have time for all the above but it will be coming soon. Below is a review of what I am covering over several Updates.
1. Is 2009 going to be Better, the Same, or Worse than 2008?
2. How are we doing in terms of Performance from Inception and during
the 2008 Bear Market Period?
3. Trading systems changes needed if any. I think we need the ability to
go Short at times and Expand Endurance's capability. More on this and
my research later.
First a quote from a TangoETF subscriber. Mr C just renewed his subscription and sent me a nice email:
"I actually made money in the market last year thanks to both you (TangoETF) and Mauldin, plus all the reading I've been doing since the telecom crash. Regards, C" Feedback like this is what keeps me going.
I have completed the design of the TangoETF shorting option and it is in the hands of the web site programmers. This output programming always takes longer than I would like but hopefully it will be running soon. There are a few issues to be resolved, there always is. I will keep you posted.
I have done further work and study of this shorting option and can tell you now, the Sample Portfolio will use 1/2 Cash and 1/2 MYY (S&P Mid cap Short ETF), the cash is to reduce the volatility. Even the 1x MYY is to hot to handle for me during those violent swings when the market is really accelerating down as in October 2008. I will have more to say about this when shorting is introduced. Just to quickly illustrate this volatility see the chart below. The Red line is the TangoETF Aggressive with shorting using 1/2X MYY, the Yellow line is 1X MYY, the Green line is TangoETF Aggressive w/o shorting ( Long/Cash), and the Blue line is the S&P Mid Cap for reference. Notice I have placed the poles at one down leg in the period I mentioned earlier. With 1X MYY you would have a -18.55% drawdown in 6 market days, and with 1/2X MYY you would have a -9.62% drawdown during the same period. With 3 parts cash and one part MYY this would cut the -9.62% in half, but will reduce your profits also.
Chart by www.fasttrack.net
Now MYY is the best symbol for shorting and originally 1/2 X of that will be built into the output reports. The best index to short with changes over time, so I will change this index short from time to time to reflect the best index to use for shorting.
John Mauldin's letter yesterday has some good points concerning our present crisis. The stats of the GDP decline in the developed and non-developed countries is telling. in December year over year China down -14%, USA down -9.5%, Germany down -11.8%. European Banks are in worse shape than USA Banks! They were using 50-1 leverage, we were only using 30-1 which is stupid! I think the Euro Currency and European Union will collapse over this crisis. Yes the Euro will disappear! As John points out the European Banks have no Central Bank so there is no bail out conduit for the European Banks.
The last point I want to highlight is his implication that we could hit 666 on the S&P before we see a bottom. That is where the Green line is on the chart below.
For John Mauldin's full report Time for a Reality Check
John Mauldin http://www.frontlinethoughts.com
My hope is that we get a bull rally triggering a Buy signal and we get a profitable run up before we get the next Sell signal and at that point we will be ready to initiate the short option. All the above before we take out the November 20, 2008 bottom. If we go strait down from here it will be difficult to know when to initiate the short position. We will just have to wait and see.
The NASCAR Daytona is starting, got to go!
Prepare for the worst and hope for the best, Don
Nothing in this e-mail should be considered personalized investment advice. Although our web site or representatives/employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our web site or representatives/employees to you should be deemed as personalized investment advice.