Fourth Sunday After Epiphany Part 2

The last screen was interesting, but I tightened up the market cap criteria and loosened the return criteria to find some larger companies. Here's what popped up in addition to CARR, DT and HOOD from the prior screen.

8 Lives Lost

This CAT beat earnings but hasn't escaped the downtrend.

Chart Review

These are some charts I've posted here in the past few weeks.

Gaps Away

China A-shares haven't broken down yet, but CAT and DE gapped past support this morning.

From Pfizer to Cat

Sold some of my Sept Pfizer puts for October CAT puts.

Sea went against me, but still like it long-term. Happy to get short again at much higher prices once the rally completes.

Caterpillar (CAT) Succumbs

ZeroHedge has been running articles on Caterpillar for years, with increasing frequency. Two of the most recent, from August and three days ago.

For Caterpillar, This Is What The "Second Great Depression" Looks Like
and
What On Earth Is Going On With Caterpillar Sales?

Below we show the latest monthly data from CAT which is once again in negative territory across the board, but more importantly, the global headline retail drop (down another 11% in August) has been contracting for 33 consecutive months! This is not a recession; in fact the nearly 3 year constant contraction - the longest negative stretch in company history - is beyond what most economists would deem a depression.

The stock market is to a large degree a reflection of social mood. When invetors are in a good mood, they ignore fundamental problems in the economy. When mood is negative, they ignore positive developments and cheap valuations.

Caterpillar has been whistling past the graveyard for years, but only last summer, coinciding with the U.S. dollar rally and drop in oil prices, did CAT stock fall. Now the stock is almost in free fall. The latest "news" is here: Caterpillar Shocker: Industrial Bellweather To Fire Up to 10,000; Slashes Revenue Outlook. There's no shocker though, things have been the same for almost 3 years.

Economists are frequently wrong about things such as China contagion because they ignore social mood and psychological factors. The broader market today is telling you nothing about China because the overall confidence is high. The Brazilian currency, high-yield debt (especially the distressed debt market) and copper? They're telling you another story. Eventually, these prices are going to synchronize. It could be that these weaker sectors will bounce and converge with equity prices, but I'm betting the opposite will happen. One day investors will decide these problems matter, will price it in accordingly, and economists will scream "contagion!"

January Fund Performance

Here's the January performance of my Marketocracy funds. The orange line is my fund, the purple line is the M100, the Marketocracy mutual fund, green is the S&P 500 Index, brown is the DJIA, and blue is the Nasdaq.

First up is my short fund. I've loaded up on financials, newspapers and solar. A surprise winner was FXP. The double short China fund from ProShares, even though the Chinese market has fallen, the inverse ETF went down as well. It's easy to make money shorting in this market though, and if you look at the chart since inception, the performance was bad during the bull market.












Next is my Entertainment fund, which is mostly consumer discretionary. I haven't traded this hardly at all in the past year. A chart from inception shows the gains from holding Marvel Comics (MVL) was slowly bled away over time. Now that this is one of the worst sectors in the market, the fund continues to underperform. Also, I haven't sold losers, with several holdings down 80- and even 90-plus percent.












Here's my Software Security fund. The turnover in this fund has never been much due to the limitation of the sector. Even then, I've had to branch into Indian outsourcing, Chinese gaming, and defense contractors.












Next is the Pharma & Dogs. I've maintained the pharmaceutical allocation, with about 50% in healthcare. My Dow stocks aren't Dogs though, I have Caterpillar and Johnson & Johnson. One holding that delivered big gains is Tesoro (TSO), which I have in several funds. It's up 127% since purchase on December 5.












This is my high-yield fund. This portfolio also has Tesoro, which is up almost 100%. It yields 2.3% now, but was over 4% at the time of purchase. The biggest loser in the portfolio is HTE, down 44% and yielding 33% (although I don't expect that to last).












Next up is the Green Dragon. If I read about a stock in someplace such as Barron's and I think it looks good, I'll add it to this fund. Thus, this is my "gut check" fund. Little portfolio management. At the moment, over 50% of the fund is in U.S. dollars (cash) and Japanese yen (FXY).












This is my Best of Funds. It has also performed the best of all my long funds. I trade this fund heavily (turnover was 31% in January) because I move in and out of double short stock and commodity funds.












Finally, the fund that fits with this blog's title, the China fund. Over 60% of the fund is defensively positioned in currency positions and gold. The largest Chinese equity position is currently Netease (NTES). The fund lost 4.06% last month, compared to more than 13% for iShares FTSE/Xinhua China 25 (FXI).