See Comments below

Weekly--Hypothetical--Worldwide ETFs Portfolio

This picture carries forward from where the previous one ended on April 13, 2006, slightly past the middle of the time axis on this chart. The patterns here complete and repeat the previous ones--with differences: the Worldwide System rolling returns led the market rolling returns down during 2003 and then back up in 2004. In 2007, the roles reversed, with the market leading Worldwide down and neither yet leading the way back up. Note well that when rolling red crosses upward above the -0- line, a strong rising trend occurs in the Percent Gain curve, or is about to. We are not there yet. Where we are is normal and natural. That will be true no matter wherever we are along these curves or any similar types of curves. It's the way the universe works--in cycles--the repitition of previous phenomena. Context. The current larger multidecade environment displays a pattern bias toward increased volatility at this stage of the game. It is obvious in the chart above that now a similar pattern of increased volatility in drawdowns has now begun. The vigor of the current episode is not surprising given the unprecedented global solvency stresses massive parts of the entire system are moving through. It is also obvious, at least to me, that selling, in restrospect, when the Long-term trend indicator turned down on June 20th would have avoided 16% of the current portfolio drawdown, leaving it in cash or sold short. Further research along that line may be useful. I will let you know all details if any modifications forthcome. Meantime, Wordwide ETFs continues to roll along producing an average 37.7 % annual return over 269 rolling 52-week periods across six years from June 28, 2002 through today. Caveats. The usual: too few observations. Instead of looking at six years, I would rather have 12 or 24 to view. Time will cure that. During the trip, we have the tool of adaptivity if we need it. Methods of reducing purchase risk. Maximum real risk is at the time of purchase. The timing of peaks and drawdowns is unknown. Therefore the best method of cutting the risk is to delay purchase or spread it out across time. See Tips for Getting Started on how to delay a new purchase. Alternatively, spread partial entry positions across several weeks until the full position is completed. Written 8/27/2008 6:01 p.m. EDT Posted 8/31/2008 1:49 p.m. EDT Afterthought. In the perfect system, all trades would be gains. It doesn't exist. All systems undergo drawdowns because all systems are built on past data. In the present, there is nothing but past data. Systems select among past data. Immediately the system is therefore incomplete because the excluded data may (does!) contribute to future behavior. It is the excluded data that cause drawdowns. If the system developer knew about them before hand, he would include them in his system and build a workaround to ameliorate their negative effect. He doesn't. The best he can do is take the measure of past magnitudes to shape a range of forbearance in the present and future. The system user has two choices. Abandon the system. Use the system, with unsurprised awareness of its intermittent, undesirable episodes of negative volatility. ||||| Back | Subscribe