Author: Brendan Ruchert-Dixon
Covestor models: Alpha Trapper and Beta Blocker
When bad news is good, watch out.
August was a fairly strong month for both the Alpha Trapper and Beta blocker models. As First Solar (FSLR) continued its dramatic rebound through most of the month, both models sold off more than half of those holdings. In recent days the stock has once again taken a dive. If that continues (and the company’s fundamentals remain strong relative to the price), the value might once again drive me to increase my holdings.
As for as my Macro/ETF holdings, I became more cautious as the S&P 500 Index (SPX) crept above 1400. More and more lately, bad news has been treated like good news because of increased expectations that the US and other central banks will soon embark on further monetary easing.
If they do institute QE3 soon, it may be a short term positive, but it will not solve or even hide all the problems that drove them to do it. At some point, the bill will be due.
I’ll become more bullish when I start to see signs that the developed world, and in particular the US, is really starting to solve its balance-sheet problems instead of just delaying them. I am hopeful that this could start to happen next year when all the election-year grandstanding is over.
