Bench-Marks

Early today I received  an email saying basically, you must feel bad being long today and how do your readers know if you are going off the deep end?  The answer to the first question is that we didn’t feel good but we didn’t have any trouble keeping breakfast down.

 The second question deserves an answer as you as readers need to know what we are using for benchmarks.  Here are internal performance measures that we use.  We look at how we compare to the raw market (S&P 500) within market swings of eight percent or more.  Why eight percent,  mainly because we have found that this period analysis works with our trading style, it is a lot more definitive than twenty percent swings that some use, yet doesn’t get us trapped in the noise of smaller five percent swings.

A little bit of history may be in order.  We started keeping our Portfolio tracking numbers in Marketocracy in June 2002.  For much of 2003 through 2007 we were biased to long gold positions , mainly because of the destablizing aspect of the Iraq war.  In November 2004 we added a short Fund to the portfolio because we were concerned  at the kinds of things that we saw as bearish that were entering the marketplace.  We were early on this factor, but we got our feet wet in that side of the market and it has served us well the past 18 months.

Up until January 2008 we sent trading / investing info through emails to a private list of friends, family and former clients from our active managemnet days. In January 2008 we started this website.  Reader numbers slowly built and then in August and September reader numbers increased at least four fold from the earlier reader average.  No doubt this was due primarily to things that were going on in markets and politics and maybe our advice to some extent.

In order to get you new readers acquainted with our style, please take some time to review the performance table below:

                                           Eureka Portfolio Benchmarks

                             (based on Minimum Eight Percent Swings in the market )     
                                            Marketocaracy Tracking Funds      
       
Swing             Mkt          S&P 500     % CHG       Eureka      % Chg      Diff
end date     Direction                                             Portfolio                    vs mkt
      
6/3/2002                        1041                                 1000

7/23/2002    down           798            (0.23)              772         (0.23)       0.01
7/31/2002         up           912              0.14               890           0.15        0.01
 8/5/2002     down           834            (0.09)              811         (0.09)     (0.00)
8/22/2002         up           963             0.15                964           0.19        0.03
10/9/2002    down           777            (0.19)               767          (0.20)     (0.01)
11/27/2002        up          939              0.21               902            0.18       (0.03)
3/11/2003     down          801             (0.15)             807           (0.11)        0.04
2/11/2004          up        1158               0.45             1192            0.48         0.03
8/12/2004     down        1063             (0.08)           1177           (0.01)        0.07
7/19/2007           up        1553               0.46            1567            0.33        (0.13)
8/15/2007      down        1407             (0.09)          1822             0.16         0.26
10/9/2007           up        1565               0.11           1590            (0.13)      (0.24)
2/29/2008     down         1273             (0.19)          2000            0.26          0.44
5/19/2008          up         1427               0.12            2048            0.02        (0.10)
9/17/2008      down         1156             (0.19)          2084             0.02         0.21
9/19/2008           up         1255              0.09           2398             0.15          0.07
10/6/2008      down         1057            (0.16)          2253            (0.06)        0.10  ( open swing)
      
comments:      
        17  Market swing periods
        Average percent Eureka differential in mkt up periods             (0.04)
        Average percent Eureka differential in mkt down periods          0.12

As you have seen in our materials we believe that we are in a Macro Bear Market that will continue in general for a couple of years from here.  On the other hand we believe there will be rallys of monumental volatility for no particular fundamental reason other than almost free Fed cash.  We focus on the swings, using technical indicators as crutches to surround the overall patterns. The fact that we have performed better in relative terms to the market declines is part of the strategy.

Have a good night.

4:46 PM CDT