Finally, an UP-tick for a month end. Notwithstanding a 15% hit in Merck today (because one of their big-selling beta-blocker drug Zocor perhaps doesn’t work as advertised), the portfolio came in at -24.8% (since inception Mar07) vs -25.9% last month. That’s +1.1%. Drinks on me!
Not only that, REAP beat the S&P500 by 6.5% in the quarter. I was down 3.0% – it was down 9.5%. (I’d make a great mutual fund manager – I’m going broke slower than the S&P500!) You know, for getting hammered in Thornburg Mortgage, Accuray, and now Merck in this quarter, being down just 3% is not bad at all. The defensive part of REAP seems to be really kicking in. (Before I was blogging, in the up markets of 2005 and 2006 it did great - up 25% each year).
As for Merck, I’ve seen this movie before. When I started REAP 3 years ago, Merck was one of the “founding” stocks. I bought then at $42, then (immediately) came Vioxx, and I watched it go down to $26 (buying along the way), and then ever so sloooowly rise back to about $42 again where I ultimately switched it out for something else, Abbott Labs I think. (It did make money by the way) Now we get this Zocor thing a few weeks after I buy back in at $45, and once again I’m getting “Hi, I’m Merck. Good of you to come. Let me show you my basement.”
But, I’m in a good mood today, so I’m not going to be deterred. Because other things are working just fine. Check out the movement on these commodity ETFs - and this is just today …
Short Grains +8.1%
Long Grains -3.1% (this is what is called an inefficient market) 
Short Gold +3.9%
Short Nat Gas -4.4%
Long Nat Gas +6.6%
Short Crude Oil +6.3%
These ETFs could well become the high-performance engine of the portfolio, generating signals fast and furiously. Already, including today’s trade, the short gold ETF alone has generated 4 buys and 4 sells since last October, and is now finally about 3% over its cost base – after a big bull run in gold against it. Those 4 sales created cash to increase other holdings, which is where REAP’s compounding comes from.
For U.S. Investors, here is a great synopsis of U.S. Commodity ETFs put together by Tim Iacono at seekingalpha.com.
Look for the 2008 Q1 portfolio update in the blogroll.
JESSE’S CORNER
Method and signals described under “My Portfolio” in the blogroll to the right.
FORMFACTOR (FORM) $19.10 +10.0% (in $C)
5 Mar 08 Bought at $17.82 (full allocation)
Holding
REAP (RELATIONAL EQUITY ALLOCATION PROGRAM)
Methodology fully described under “My Portfolio” in the blogroll to the right.
GROUP #2
#31 Sold 30% of HBP Nat Gas Bull+ ETF (HNU) at $28.69.
#31 Bought HBP Gold Bear+ ETF (HGD) @$9.73 with the proceeds.
Yesterday I reviewed all my REAP trades from by brokerage statements and updated them into my master spreadsheet (with which I plan to take over the world.) Today’s re-allocation was the 31st bona-fide REAP signal since re-establishing the portfolio in October 2007. The normal shedule would have called for 12 to this point. With signals at almost 3x the “nominal” rate, I expect the compounding to accelerate significantly. We’ll see. It’s not obvious now because we’re in a really brutal market, and I’ve been fussing with the portfolio quite a bit to get it to this configuration. But I can already tell the internal share compounding is working.
Cheers,
Allocator
a.k.a George Parkanyi
gparkanyi@hotmail.com
