Market Update 2.14.11

This time last year our model was heavy in favor of the emerging markets. Our portfolio was about 80-90% emerging market exposure in addition to markets such as Taiwan and Israel, etc.

There has been a turnaround in the portfolio. We now hold very little emerging markets. The only market considered emerging we like is Russia. For now we plan on holding developed market equity, REITs, Energy, and High Yield Corporate Bonds until we see any changes in the model. Our short measures are still indicating that certain emerging markets are good short plays including India, Indonesia, Malaysia, Thailand, and Chile. Below are the following markets we have in our portfolio.

Agriculture
Australia
Canada
Energy
Europe
Japan
Real Estate
Russia
US
USHY

We still predict some pullback in the global markets. We do not see any immediate pullback but predict one this year. Our agent-based indicator for the US is over 1 meaning that it is fairly to slightly over valued. After the tech bust in 2000 and the bottom in 2002 it took 4 years for the US measure to hit 1. After the global financial crisis in 2008 and the bottom in early 2009 it took only two years. The summer of 2006 was difficult. We predict something similar. Once we see our measures change in a significant fashion we will apply a full hedge to our portfolio. We will keep you updated once that occurs.