Couching Lizards, Hidden Performance

One week to month end, and quarter end.

They do protest too much

Notorious rain-dancing bear, Nomura strategist Bob Janjuah confesses to being “four S&P closes away from being stopped out on the bearish call outlined in my August note.”
Doug Kass went on the record yesterday, telling Bloomberg that he has “been short for two months and not lost money.” He provided information on how he selects short positions, but the question is this: how many stocks actually fit the criteria? Listen to [wpaudio url=”″ text=”or download the podcast” dl=”″].
Louise “Skinny Lady” Yamada made an appearance for a bullish case, stating, “from a technical perspective, the areas that look best are health care, consumer, telecommunications and technology.” Once again, she mentioned a triangle formation not found in Edwards & Magee, but did say something useful about how to draw trendlines. Listen to [wpaudio url=”″ text=”or download the podcast” dl=”″].
They seem to be very, very careful to qualify their statements these days. In the past, they were pretty glib, sort of like supermodels posing in front of the camera with a wind machine blowing at their hair.

The Spin Cycle

We must be getting close to some kind of mamximum pain point. The excuses for lack of performance are building up, but at least Janjuah, Kass and Yamada are smart enough to not leave a public track record.
The alternative is to spin the numbers like this:

Since inception in May 2007, the Bespoke Model Stock Portfolio is up 20%, while the S&P 500 is down 7.5% over the same time period. This means our portfolio is outperforming the market by 27.5 percentage points over the last 5+ years. Had you invested $100 in the portfolio at inception and followed all of the buy and sell recommendations, you would have $120 today. If you’ve made money in the stock market over the past five years, you’re doing pretty well!

Well, that’s almost correct. Enter Trick of the Trade #5. The fly in the ointment is the S&P Total Return Index which stood at 2,377.75 on May 29, 2007 and closed at 2,269.48 on September 4, 2012. That is no great shakes, but it is a 4.55% loss — not -7.5% — not to mention the investor would have incurred zero commission costs over the 5-year period.
Our most unexciting, 4 ETF, all-weather U.S. Dollar Core strategy was up 11.7% over the same amount of time, even if a member had stayed fully invested during the 2008/2009 crash when it was down 8.76% on the year.