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The Logical-Invest monthly newsletter for September 2018

Logical Invest Investment Outlook September 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +14.54% return.   The 3x Universal Investment strategy with +12.06% return.  The BUG Leveraged strategy with +2.62% return SPY, the S&P500 ETF, returned +9.71%. Market comment: Despite tariffs, a flattening yield curve, Turkey’s currency collapse and the fear of contagion across emerging markets, the S&P 500 is yet again making new highs. The U.S. equity market has outperformed most other markets and asset classes. Part of this performance is due to real economic strength and solid corporate earnings but another part is due to U.S. dollar strength. As we have mentioned in the past, rising short term interest rates create fund flows from negative yielding currencies (Euro, Swiss franc) into U.S. assets.  Taking a world view, most developed (SPDW: -0.37%) and emerging equity markets (EEM: -7.78%), international bonds (PCY: -5.03%, IBND: -3.62%) and even Gold (GLD: -8.2%) are either flat or negative for the year. In contrast the dollar index is up (UUP: +4.82%). ETF Symbol SPY TLT EPP GLD EFA EEM FEZ ILF UUP YTD Return 9.71% -3.15% -1.96% -8.20% -2.30% -7.78% -3.65% -10.14% 4.82% Major ETF returns Year-to-date The yield curve has continued to flatten with the 2-year Treasury yield at 2.67%. Adding 28 years to maturity will only squeeze out an additional 0.35% yield, at 3.02%. Many analysts see this as a sign of a coming recession but as we have discussed in the past even after having an inverted yield curve it may take years for a recession to materialize. Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr 08/29/18 1.97 2.13 2.28 2.48 2.67 2.75 2.78 2.85 2.89 2.96 3.02 Daily Treasury Yield Curve Rates, U.S. Department of the Treasury In [...]

2018-09-01T08:00:23+00:00By |0 Comments

The Logical-Invest monthly newsletter for August 2018

Logical Invest Investment Outlook August 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +8.56% return.   The 3x Universal Investment strategy with +5.99% return.  The Universal Investment strategy with +1.34% return SPY, the S&P500 ETF, returned +6.32%. Market comment: August starts with very much the same market preoccupations as the previous summer months: Fear of a trade wars and questions about central bank policy. The possibility of additional tariffs is holding back international growth and is keeping foreign markets weak, although there were some notable exceptions. The expectation the Fed will further increase rates has been replaced by fear of foreign central banks tightening policy. The Japanese central bank decided against a hike at this time but the possibility of such a move in the near future does raise the question about the Fed's hand being forced. Further short-term rate hikes could eventually lead to a flattening or even inversion of the interest-rate curve which in turn brings closer the possibility of a future recession. Emerging markets and Latin America have been hit hard these past months and in July we saw a bounce from oversold conditions: Brazil (EWZ) returned +12.6% while the broad Latin America ETF (ILF) was up +11.2.%. Emerging markets (EEM) was up +3.53%. On the safe-heaven assets side, Gold fell  by -2.24% while TLT, the 30 year Treasury ETF showed weakness at -1.43% for the month. ZIV, which we use at our MYRS strategy, was up +5.86%. This month most of our strategy were slightly positive or remained flat. The leveraged Universal Investment strategy (3x UIS) returned +2.87, the Maximum Yield strategy +1.57% while the U.S. sector strategy +1.05%. The biggest loser was the Nasdaq 100 strategy at -4% being particularly affected by losses in NFLX and FOXA. Cryptocurrencies bounced up from the critical 6000 levels and touched 8400, [...]

2018-08-01T13:20:34+00:00By |2 Comments

The Logical-Invest monthly newsletter for July 2018

Logical Invest Investment Outlook July 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +13.13% return.   The 3x Universal Investment strategy with +3.03% return.  The Universal Investment strategy with +0.72% return SPY, the S&P500 ETF, returned +2.52%. Market comment: General investor sentiment is quite bearish. The most recent AAII Investor Sentiment survey shows only 28% of investors believe the markets will do well in the next 6 months, while 40% are bearish and 30% are neutral.  No wonder, as the topic of upcoming tariffs and trade wars dominated media. Furthermore, the Federal Reserve raised its target for the federal funds rate to a range of 1.75%-2.00% and upgraded the anticipated number of future rate hikes to four for 2018, reflecting a hawkish bias. Both events caused the dollar to surge further as investors fled emerging markets for the safety of interesting bearing U.S. cash. It was not a good month for foreign markets. Current central bank interest rates. Anyone tracking pre and post crisis rates will find this picture quite odd with Australia and New Zealand offering lower returns than the dollar. Table courtesy of China (FXI) fell by -6.7%, Brazil (EWZ) by -8.5% while the broad emerging markets ETF (EEM) was down -4.53%. Gold fell again this month by -3.6% while TLT, the 30 year Treasury ETF was slightly up at +0.64%. The big winner for this month was Mexico at +6.8% probably due to positive expectation for the newly elected president. ZIV, which we use at our MYRS strategy, was up +6.9 percent by June 15th only to loose as much in the second half, finishing the month at -0.56%. SPY was slightly up at +0.56%. The month's best strategy was the Nasdaq 100 which held two winners, namely NTFLX (+11%) and Amazon (+4%). The two Universal Strategies, did not track each other [...]

2018-07-01T06:02:50+00:00By |0 Comments

The Logical-Invest monthly newsletter for June 2018

Logical Invest Investment Outlook June 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +9.81% return.   The Universal Investment strategy with +3.15% return.  The Global Sector Rotation strategy with +2.73% return SPY, the S&P500 ETF, returned +1.93%. Market comment: In May we saw both U.S. equities and U.S. Treasuries rise,  returning +2.43% (SPY)  and +2.01% (TLT) respectively. This was partly due to investors running away from Europe and into the safety of Treasuries, as Italy is once again in a political crisis. The dollar index (ETF:UUP) rose +2.6%, which partly explains why Gold, even though a safe heaven, lost 1.2% for the month. Same for emerging markets: Strong dollar causes weak foreign equity and the Emerging market ETF (EEM) lost 2.6%. Those affected the most were the southern Europeans: Spain -8.2%, Greece -14.1%. Some Latin American countries also went into crisis mode:  Mexico -13.4% on fear of tariffs and Brazil -15.7% on a continued union strike. Volatility on the other hand behaved as expected and ZIV gained +6.74% for the month. The Euro, lost another -3.2%. Most notable for this month is the continued flattening of the Treasury Yield.  In other words interest rates on short term Treasuries are rising faster than longer dated ones. This does not mean a recession is imminent. Historically an inverted curve (ie, a shorter term treasury bill/note  yielding more than longer dated one) may signal a recession, but when it has, it has taken an average of 12 months* for it to materialize. Date 1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 05/01/18 1.68 1.85 2.05 2.26 2.50 2.66 2.82 2.93 2.97 3.03 3.13 The SP500 (blue line)  vs the 10 Year - 2 Year Treasury yield  spread (red line). Shaded areas [...]

2018-06-01T07:43:14+00:00By |0 Comments

The Logical-Invest monthly newsletter for May 2018

Logical Invest Investment Outlook May 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +6.49% return.   The Global Sector Rotation strategy with +1.28% return  The Universal Investment strategy with +1.04% return. SPY, the S&P500 ETF, returned -0.48%. Market comment: Spring is coming and so is the beginning of the challenging part of the investing year. There is a reason people say "Sell in May and go away". Historically, on average,  it has been easier to make money investing from November to April than from May to October. Seasonality does not predict price action but it does reveal a historical tendency of the market to underperform during the spring and summer months. Of course this applies to U.S. equities while the opposite holds for treasury returns. A revival of volatility is also pointing to a choppy market. After the unprecedented February spike in VIX, volatility has bounced back and forth a few times. It seems to want to settle in the 14-20 mid-range range rather than the 9-14 extreme low-levels of 2017. There is a wide-spread expectation that this levels will be the new norm going forward. Yields are up. Expectations are that the Fed will hike interest rates 3 more times this year. Unemployment is down at the 4.1% level for the 6th consecutive month. Wages are rising but at a slower pace than expected, meaning there is room to grow. Official (i.e., underestimated) inflation is at 2.4%. The 10-year Treasury touched the 2.96% mark, while the curve has flatten considerably. A 2-year note will give you a worry-free 2.49% yield while a 30-year 3.13%. Interestingly, just next door in Europe, the 2-Y German Government Bond will yield 0.58%, while investing in Bulgarian Gov. bonds will pay you less (1.25%) than the U.S. full-faith-and-credit backed 2Y Note. Surprisingly the EUR/USD rate has not [...]

2018-05-01T05:38:09+00:00By |1 Comment

The Logical-Invest monthly newsletter for April 2018

Logical Invest Investment Outlook April 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +8.02% return.   The Universal Investment strategy with +2.64% return.  The Global Sector Rotation strategy with +2.01% return. SPY, the S&P500 ETF, returned -1.00%. Market comment: In the beginning of March, most of our strategies allocated large amounts to TLT,  the Treasury ETF. Subscribers using multiple combined strategies ended up with Treasury exposure north of 70%. This was quite difficult to digest considering the current sentiment towards rising rates. And yet TLT was one of the few assets that were positive for the month returning +2.86% vs SPY at -2.74%. To the right you can see the performance table sorted by 1-month return as all strategies outperformed SPY due to the treasury hedge. The biggest winners for the month were the 3x UIS, adding 5% and the Nasdaq 100 adding 3.32% to reach a respectable 8% for the year. Worst performers were the two BUG strategies losing -0.58% and -0.79% and the MYRS losing -1.50% and remaining at a large drawdown year-to-date. We wish you a happy Easter and a healthy and prosperous 2018. Logical Invest, April 1, 2018 Strategy performance overview: Visit our site for daily updated performance tables. Symbols: BRS - Bond Rotation Strategy BUGST - A conservative Permanent Portfolio Strategy BUGLEV - A leveraged Permanent Portfolio Strategy GMRS - Global Market Rotation Strategy GMRSE - Global Market Rotation Strategy Enhanced GSRLV - Global Sector Rotation low volatility NASDAQ100 - Nasdaq 100 strategy WORLD-TOP4 - The Top 4 World Country Strategy UIS - Universal Investment Strategy UIS-SPXL-TMF - 3x leveraged Universal Investment Strategy AGG - iShares Core Total US Bond (4-5yr) SPY - SPDR S&P 500 Index TLT - iShares Barclays Long-Term Trsry (15-18yr) Follow my blog with Bloglovin

2018-03-31T09:29:18+00:00By |4 Comments

The Logical-Invest monthly newsletter for March 2018

Logical Invest Investment Outlook March 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +4.55% return.   The Universal Investment strategy with +1.45% return.  The Global Sector Rotation strategy with +0.58% return. SPY, the S&P500 ETF, returned +1.79%. News: Strategy update: Our updated hedge now allocates to Treasuries, Gold or to a short US sector position. The hedge does not use currency ETFs anymore, which were conflicting with common 401k / IRA guidelines. Market comment: February proved to be a difficult month. Although our last newsletter started with a word of caution, we were surprised by the unprecedented move that followed: The volatility index spiked in such a way that caused massive losses to some of the industry's most popular volatility ETFs. Three major volatility ETFs were halted and two of them (XIV and SVXY) were permanently de-listed. We experienced the move first hand as we were trading VIX futures at the time. Our MYRS strategy, which is based on the ZIV ETF (VIX mid-term futures, 4th-7th month) took a large hit at -25%. The more popular XIV ETF (VIX front-term futures) lost more than 80% of it's value and was withdrawn from the market (see Frank 2013 article : Why we invest in ZIV and not in XIV). The SP500 experienced a quick 10% fall but has partially recovered. Our strategies, except MYRS, have somewhat recovered, the worst showing a year-to-date performance of -3.92%. This number of course does not reflect what happened in reality as many investors considered exiting the market. And for good reason: UIS 3x saw a -25% drawdown from it's all time high (-11.8% for the month) on February 8th. Today's -3.92% YTD number seems manageable but only in hindsight. The return (with a vengeance) of volatility has somewhat obscured the continued weakness of the most important [...]

2018-03-01T05:54:29+00:00By |4 Comments

The Logical-Invest monthly newsletter for February 2018

Logical Invest Investment Outlook February 2018 Our top 2018 investment strategies, year-to-date : The Leveraged Universal strategy with +8.93% return.   The NASDAQ 100 strategy with +8.59% return.  The U.S. sector strategy with +4.39% return. SPY, the S&P500 ETF, returned +5.64%. News: QuantTrader Light is available to all subscribers, even to single strategy ones. Just download a copy and login with your LI username/password. Depending on your subscription level you will be able to access the corresponding strategies. This gives you the opportunity to update your portfolio during the last day of the month. Major strategy update: Leveraging on our multi-strategy framework, Frank created a new Hedge strategy that includes Gold. The new Hedge is included in most of our strategies and helps decrease Treasury exposure. Read more in our detailed article. QuantTrader version 510S has a new backtester build into the consolidation tool. You can now check how a portfolio of strategies would have performed in the past. 4 new videos will guide you on how to use the portfolio builder and the QuantTrader consolidation tool to issue signals as well as use the Interactive Brokers portfolio rebalancing tool. We hope to publish more videos in the coming months. Feel free to tell us your preferences. Market comment: This month's newsletter comes with a word for caution. The S&P 500 has risen in a parabolic fashion this past month. Sentiment has turned highly positive and most market players are sitting on profits. This is all good but we think we need to prepare for a new, slightly inflationary environment that may prove challenging to navigate through. Rising inflation is already reflected in the 10-year Treasury yield reaching 2.7% . The question is how will higher borrowing costs affect small to medium businesses, some of which rely on cheap credit. Loss of profitability for these companies could trigger a correction [...]

2018-02-01T10:42:15+00:00By |3 Comments

The Logical-Invest monthly newsletter for January 2018

Logical Invest Investment Outlook January 2018 Our top 2017 investment strategies: The Maximum Yield strategy with 64.84% return. The Leveraged Universal strategy with 49.13% return.   The NASDAQ 100 strategy with 28.30% return. SPY, the S&P500 ETF, returned 21.70%. News: All-Strategy subscribers will be able to use QuantTrader 'Light' at no additional charge. Market comment: As we mentioned in our year-end review, the past year was characterized by large returns in U.S. and foreign markets and sustained low volatility despite an increase in geopolitical risk. The S&P 500 (ETF: SPY) returned 21%, Europe (ETF: FEZ) 24% and emerging markets (ETF: EEM) 37%, It is also the year where the U.S. Federal reserve stopped it’s 10-year balance sheet and increased short-term interest rates. Long term treasuries (ETF: TLT) as well as emerging bonds (ETF: PCY) managed a +9% while U.S. corporate bonds (ETF: AGG) barely touched 4%. Despite the announced tightening, the U.S. dollar lost ground: -13% against the Euro and -12% against gold. The most exciting financial event of the year is the attempt to include cryptocurrencies as a new asset class into the mainstream financial system. Looking at our strategies, our top performers were our riskier strategies: MYRS, UIS 3X and the Nasdaq 100. This is in line with the market being almost ‘perfect’ for 2017 and having very few corrections which benefits pure risk taking. This may or may not continue in 2018 as there are signs of caution: Central banks are slowing down or reversing stimulus programs and real world costs of goods, especially outside the U.S., are rising. 2017 was characterized by the astounding rise of cryptocurrencies, which we have been tracking since May. Bitcoin futures are now available to mainstream traders through Interactive Brokers (via CBOE and CME). Interestingly you need a whopping $50,000 margin to short 1 Bitcoin. For longs, the margin is [...]

2018-01-02T04:16:16+00:00By |0 Comments

The Logical-Invest Year End Review – 2017

Logical Invest 2017 Year In Review Overview: 2017 was another excellent year for our strategies with double digit returns and very low volatility. Although world economic data are positive, central bank tightening and possible rate increases may warrant more conservative approaches. We provide a basket of strategies to accommodate. Here are some of the best for this year: The Maximum Yield Investment strategy (+64%) The maximum yield was our very first quantitative strategy. It was first traded using VIX futures in order to collect mid-term volatility premium. It was then adapted to use ETFs. In the chart below you can see the theoretical backtested results before 2013 (left of the first line) and the live results to the right of the first line. The strategy was again improved in 2014 adding a variable Treasury component. It has performed in line with expectations. 2017 was an exceptional year with +64% return. MYRS History to 2108 The Universal Investment Strategy (+14.34%, Leveraged version: +49.13%) The strategy is an intelligent and dymamic version of the 60/40 equity/bond strategy. It was built with the 2008 crisis in mind where a  shift into bonds would have limited any catastrophic portfolio losses. As you can see from the graph, the live performance (after 2014) is in line with the backtested results. In 2015, where most investors lost money, it remained flat. It has yet to be tested in an extreme bear market. In 2017 we improved the strategy so as to dynamic allocate to TIPs (inflation protected Treasuries) in case interest rates start rising (causing Treasuries to underperform). 2017 performance was 14.34%. The  leveraged version of this strategy using 3x ETFs returned 49.13%. Logical Invest The Universal Investment Strategy 2017 Bond Substitution Strategies Many investors prefer the security and safety of [...]

2018-01-01T05:31:53+00:00By |4 Comments