Post Modern Portfolio Theory (PMPT)

On the 21st I was over 30% in cash and planning to stay there until after elections. Nothing that I learned in 10 years of graduate school or 50 years in this mashugana business would have gotten me back in the market. But then, an Algo I know, who has none of my fears and a lot more smarts than me, or the talking heads on TV, said: Go All in. She’s not right all the time, but better than me, is good enough for me.

If you can keep your wits about you while all others are losing theirs, and blaming you. . . . The world will be yours and everything in it, and more than this…..you may be…… an algorithm my friend.

Next years capital gains taxes will be high and I’ll cry all the way to the bank.

I am currently offered three ways to lose money:

• I can buy money market funds for an average of .07% return and lose principal due to inflation.
• I can buy bonds and lose money due to increases in interest rates.
• I can buy equities and lose money due to the recession that is forecasted because of Fed tightening.

As the song goes: you got to know when to walk away…know when to run. See you after the elections.

This absolutely bad financial environment we find ourselves in, is only temporary. In a war zone, like the Ukraine, being a wounded person is a relatively good thing, that is, relative to someone who is dead. But the next bullet may end your life and there is no place to hide. Stagflation is relatively better than recession or inflation but there is no place to hide your money. Cash is a sure loser but it beat China tech that is down over 50%. Yet, today, China tech is up more than US tech… for the moment.

This world today is not the same as we had in the past period of stagflation and what worked then may result in you’re getting wounded or killed this time. In the past, the buy and hold strategy worked well. I doubt that will be true in the future. What do you do when you don’t know where you are or where you are going and you have lost confidence in your leaders? The Fed is going to solve this? Congress is going to work together to solve this?

Innovation may be the answer. A new way. A new strategy. I don’t have the answer. But I do believe someone will come up with it. I heard someone recently that offered a glimmer of hope.

Warning! Stop sifting through the ashes of the past for the answer.

That was then, now it’s Algo.

We got an UP Flag. Remember that 70% sale on Wednesday? Back in the market on Thursday morning. I know, what about the taxes. Yes, I have a lot of short term capital gains to pay in April. What about the outbreak of war and Putin hinting at using nukes if America tries to stop him. Well…the AI program of Algodynamix doesn’t care about any of that. It also has no emotions, like Italian professors have, and it has no feelings you can hurt.

Yesterday at 10:00 am PT we received two down flags from Algodynamix and sold 70% of our portfolio holdings on our R42 AI Equity Hedge Fund (Not available to the Public). That is not standard portfolio management and you will find the vast majority of portfolio managers believe in the old buy & hold practice. The AI program we use does not watch economic forecasts or listen to the talking heads on TV. But it does watch EVERY TRADE taking place in the futures market and bases its flag decisions on behavioral finance principles embedded in the code. I admit, I could not get myself to sell 70% of my portfolio, but I did sell 40% of it. Old habits die hard, as the guru said.

This is when you should have sold!

The media is scaring investors and Biden is listening to the wrong people and talking to the wrong person.

Registrations opens February 22nd for the investing class Ronjon and I will be teaching

Live online course in Stanford Continuing Studies,  Bus 104: Investing in the 2020’s – Stocks, Bonds, Venture Capital, Crypto and Beyond , starts March 28th, taught by Frank Sortino, PhD and Ronjon Nag, PhD