June 2010 COP Report                                        7/11/2010

Investment Gang

About the only good news in the June time frame was that bonds have remained in the leading investment classes for two months now.  Bear market funds and precious metals have also done well in the last two months.  Keep in mind that last week’s stocks rally does not show in this report, however, bonds did stay stable last week.  Real estate and Utilities dropped substantially in June. Similarly, emerging markets, particularly Asian, have done well for the last two months in spite of the US market sell-off.  There are a large number of negative derivatives and 3-month results among emerging markets and they are volatile. Gas continues to do well as a commodity.

Maybe I should publish the COP Model as a model portfolio (I am not going to) because it continues to do well (See attachment) in spite of market conditions that are not really well suited for a momentum strategy.  As you should remember if you have read the remainder of this web site, the COP strategy is for you to pick a balanced set of asset classes from the top performing 10 or 15 from each months report.  For me, I have picked very conservatively in the current market. That has meant an almost total focus on bonds (this year) -- and in this market I am able to beat the model, but not by much.  This year the model is beating the S&P500 YTD even though it does show a small loss.  (See attachment or in the revised Appendix E for results as of the end of June), which is not so great, however, I am willing to bet that a great number of my readers are not doing that well.  To be objective, however, you have to note that the model has not held any asset classes very long recently.  (Over the long term, as shown below, the model keeps assets more than three months on average.) This churning would cost an individual with a small or modest portfolio size a lot of money in trading costs.  This is, of course, because there are no consistent trends in the recent markets and as such they are not suitable for momentum based strategies. I wish I had an alternate strategy in my back pocket that we could just switch to for this climate, however, I am not aware of any that work any better and I am not aware of any that are particularly suited to this trendless, de-leveraging market cycle that we will probably be in for a few years more at least.  This is not the type of market that most investors, and gurus, have any experience with.  In fact, one experienced investor tells me that when looking at past performance for evaluating a fund you should throw out all pre 2008 data as it has no applicability to the current environment.

There will be no COP Report published in August covering the results from July since I will be out of town for most of August when the data comes out.

Best, Mal