LMP Aug 2013

The 5 IVY portfolio components are 

• SP 500 (Risk ON) 
• MSCI EAFE (The Most Famous International Index) (Risk off)
• U.S. 10-Year Government Bonds (Risk off) / USD (Risk off)
• NAREIT (U.S. Real Estate Index) (Risk ON)
• SP GSCI (Goldman Sachs Commodity Index) (Risk off) / GLD (Risk off)
• US Dollars / UUP (Risk ON)  

There is no change from last month. In the charts below, the lighter color Moving Average is 200 Day, which is very close to the IVY Portfolio setup. 
In my last post, I posted a quick note from GS on bond yield. There is no doubt the FED is going to tape the money flow very soon. In the near future, they can reduce bond purchase and increase interest rate. Currently in the market, it is widely expected September is the month it will start.
Nevertheless, USD is going to go up, and everything priced in USD will have a hit. Bond and commodity are obvious. Real Estate is a hidden one. International market maybe slightly different. If they can grow faster than USD appreciation, the stock will advance. I however do not see that at this moment. In the CFA book club, I was keeping on talking about China data and commodity correlation. China growth rate will not go lower, but it is just nominal. Screw it. The real situation is not good. They need at least another couple years to figure out what to do and fix the damage on negligence from last administration. 
 
What should we do? Again this is a million dollar question. This is what I do:

• 20% in cash, (if USD is going up, things will be cheaper in the future. I want to keep some cash to buy things later. Does this one smell like the problem in Japan? I will follow the 12 month signal on this one.)
• 20% in gold and silver miners, (refer to earlier posts of my view on precious metals. It's cheap now. It will be stabilized. )
• 20% in SPLV the SP500 low volatility ETF, (Refer to my view on volatility. It has return of only 15% YTD but good enough for me.)
• and the rest 40% in short term trading. (It's chasing Alpha time. Let's do it.)