Re: Off Topic (was Re: [CANSLIM] The Parlay (long!!))

From: "Gail Koch" <chloe2046@hotmail.com>
Subject: Re: Off Topic (was Re: [CANSLIM] The Parlay (long!!))
Date: Sat, 26 Jan 2002 20:56:58 -0500
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Hello Tom,

Thanks for your analysis.  I value your insights.  A response to your 
questions and comments follows:

1. The way I work the parlay is simple.  If the NASDAQ is up, I move all my 
401(k) funds to either of the two foreign mutual funds (JNUSX, POVSX) 
available to me.  If the NASDAQ is down I move to fixed income – a fund 
paying about 6% interest.  I don’t make a move every day.  If the NASDAQ is 
up for a few days in a row, I stay invested in the foreign market.  
Similarly, if the NASDAQ is down for consecutive days then I stay in fixed 
income.  There is no cost for these fund transfers.

2. I normally make the call to my benefits co-ordinator about 3:58 each day 
that a move is needed.  Thus, I pretty well know how the NASDAQ will close.  
The co-ordinator has a very effective automated phone system that allows 
easy fund transfer.  Also, since I’ve done this often, I have developed fast 
fingers!!  If the call isn’t finished by 4:00 then the transfer doesn’t take 
effect.

3. The 2 mutual funds have different amounts of Japanese holdings.  POVSX 
has 12% and JNUSX has 23%.  If the Nikkei is down on a parlay day then I 
lean toward moving to JNUSX.  If the Nikkei is up, then I lean toward POVSX. 
  Sometimes I move to a blend of the two funds.

4. I too was surprised that the NASDAQ was the best trigger.  The two mutual 
funds have very little tech.  Each has only about 5% of their holdings in 
tech.  However, as described in my WORD document, the NASDAQ was clearly a 
better trigger than the S&P or DOW over the five year period that I 
backtested.

5. I am worried that if many people in my company start to invest this way 
then the flexibility of the daily 4pm transfer will be eliminated.  I really 
am mum about this at work.

6. I’m becoming more aware that currency exchange rates effect the process – 
especially the value of the Yen, Euro, and Pound.  Since I’m essentially 
buying and selling foreign stocks with dollars, when the Dollars per Yen, 
Euro, or Pound are down then the NAV of the foreign funds is down a 
corresponding amount.  The opposite occurs when the currencies are up.  I 
need to factor this into my strategy.  For instance, last Friday the $/Euro 
and $/Pound were down significantly.  I opted to stay in POVSX even though 
the NASDAQ was slightly down.  I didn’t want to sell my foreign stocks at a 
depressed exchange rate.

7. A better (and much more complicated!) trigger might be the performance of 
weighted American market sectors.  I know the sector weighting of JNUSX and 
POVSX.  If I knew the performance of the corresponding American market 
sectors and weighted them properly, then I might be able to produce a better 
prediction for the next day performance of the two funds.

8. I will run some numbers using the high for the day instead of the close.  
This will be interesting.  I’ll let you know the result.

9. I was very pleased with the 22% gain for the last half of 2001.  I was 
down about 20% for the first half of 2001 because I was gambling with tech 
stock funds.


Best regards

>From: "Tom Worley" <stkguru@netside.net>
>Reply-To: canslim@lists.xmission.com
>To: <canslim@lists.xmission.com>
>Subject: Off Topic (was Re: [CANSLIM] The Parlay (long!!))
>Date: Sat, 26 Jan 2002 18:33:58 -0500
>
>Hi Gail,
>
>A most interesting post for your first one here. I read your study, and 
>have
>a few thoughts. After I read it a few more times, I may have others, but
>here goes. And I am going to check my own 401K, but don't think I am 
>offered
>any funds with heavy Asia or Europe exposure.
>
>One thing that jumps out at me is that you never mention when you would 
>sell
>the foreign funds. The implication is that you would never stay in for more
>than a day, but I infer that if the trigger remained positive on the second
>day then you would remain invested. If my inference is correct, what was 
>the
>typical or average duration of investing in the foreign fund.
>
>I assume you must place your order to buy or sell the foreign funds prior 
>to
>3:45 PM. The markets have seen considerable volatility in the final 30
>minutes, and could possibly change your trigger after your phone call.
>
>I have had a considerable global perspective for some years now, and have
>noted that the Asian markets, most notably Japan, tend to react stronger
>than does Europe. Likewise, Europe's reaction to how Asia closes tends to 
>be
>more subtle and muted.
>
>The Nikkei has been much less reliable and consistent in the past 12 to 18
>months than in years before. That is, in part, due to the tech stock
>collapse here, and in part due their own local miserable economic, banking,
>and financial problems. If the fund(s) you use have heavy Japan weighing, 
>it
>could skew your results.
>
>While daily changes in your 401(k) are permitted, constant changing can
>bring about restrictions. Your fund administrator is less likely to be
>concerned than the individual fund. Their big worry is that if someone
>develops a successful system, then others are likely to follow and soon the
>manager is faced with a daily cash inflow / outflow which is difficult to
>manage, and forces him to maintain a cash balance much higher than normal.
>This could affect the fund's performance.
>
>You might want to examine the results historically just using the high of
>the day, rather than the close. Since a heavy volume day can often dry up
>towards the end, this might give a different picture of what kind of day it
>was, rather than how it closed. This might be especially true since you
>found that the best triggering index is NASDAQ, even if it is down 
>slightly.
>
>I am not surprised to find that the Naz was the best index to use, since it
>is broader than either the DOW or S&P500, more heavily tech weighed, and
>Asia is much more tech sensitive.
>
>You mention that you have actually been using this since July. Did the 22%
>results measure up to your expectations? My VR Fund was fully invested by
>late August, and remained that way thru the 9/11 attacks and since, and
>returned 8% after commissions and charges. I am sure I could have done
>better had I not been required to remain at least 65% invested. Without any
>calculations, I was expecting that you would have had even higher returns,
>considering you were more likely to be invested on up days than down days.
>
>Best regards,
>
>Tom Worley
>stkguru@netside.net
>AIM: TexWorley
>----- Original Message -----
>From: "Gail Koch" <chloe2046@hotmail.com>
>To: <canslim@lists.xmission.com>
>Sent: Saturday, January 26, 2002 4:22 PM
>Subject: [CANSLIM] The Parlay (long!!)
>
>
> >
> > I've been a member of this list for the past 6 or so months and have
>enjoyed
> > the insightful posts by many of the members.  I haven't posted any
>messages
> > until now.  Unfortunately this is a little off the CANSLIM topic.  I 
>want
>to
> > describe an investment strategy I've been using recently with my 401(k)
>and
> > get any opinions that you may have on my strategy.
> >
> > Our company has an excellent 401(k) plan.  We have about 10 mutual funds
>we
> > can choose between including Janus, White Oak, State Street Aurora, Legg
> > Mason Value, Putnam International Growth (POVSX), JP Morgan 
>Institutional
> > Growth (JNUSX), Fidelity Growth and Income, etc.  Also, we can switch 
>our
> > investment mix every trading day before 4pm.  White Oak is largely a 
>large
> > cap tech fund.  During 1999 and early 2000 I rode White Oak up and then
> > unfortunately I rode it back down during the latter part of 2000 and 
>until
> > mid-2001.
> >
> > Early in 2001 I noticed a trend.  When the American market indices (DOW,
> > S&P, NASDAQ) are up it seemed that the international market was often up
>the
> > next day.  Thus, gains in the American market might possibly be 
>"parlayed"
> > into gains in the foreign mutual funds.  In August of last year I spent 
>a
> > solid weekend backtesting that theory.  I looked at the NAS, Dow, and 
>S&P
> > over a 5-year period (Aug 1996 to Aug 2001) which covered 1298 trading
>days
> > and then determined the gain or loss of the foreign funds the next day.
>The
> > results of my study were surprising and are summarized as follows:
> >
> > 1. When the NAS is up by any amount, the international funds (POVSX,
>JNUSX)
> > were up the next day 69% of the time.  More specifically, for the 1298
> > trading days studied, the NAS was up 701 days.  POVSX was up the next 
>day
> > 485 (69%) times, down 198 (28%) times, and unchanged 18 (3%) times.
> >
> > 2. I looked at various "triggers" to determine when to move into the
>foreign
> > funds.  I considered various percent changes in the DOW, S&P, and NAS.  
>I
> > found that the best "trigger" was simply the NAS being positive.
> >
> > 3. The average daily gain for each of the 701 days in POVSX was .379%.  
>If
> > $10,000 would have been invested in the middle of 1996 and this strategy
> > used, it would have grown to $158,300 by August 2001.
> >
> > More details on my study are provided in the attached WORD file.
> >
> > Sorry this post is so long.  I would appreciate any feedback on this
> > strategy.  I have used it exclusively since July of last year and it 
>seems
> > to work fine.  In the second half of 2001 I increased the value of my
>401(k)
> > by 22% not counting the monthly additions from my salary.  That
>performance
> > far surpasses the performance of any individual mutual fund choice in my
> > 401(k) or the performance of the overall market.
> >
> >
> > _________________________________________________________________
> > Chat with friends online, try MSN Messenger: http://messenger.msn.com
> >
>
>
>
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