The Greek debt debacle this week caps the warnings I have been giving about the Eurozone since I began writing this blog. European markets reacted badly to the tragedy, as you might expect. As a result, world stocks (EFA) turned south and tripped the SELL signal. Meanwhile, the US government bond market has finally priced in a rate increase for when the FOMC meets later in the year. There is no place for government bond yields to go except up. And rising rates for new bonds sends the value of existing bonds down. In reaction to this, US government bonds (IEF) tripped the SELL signal as well. Going into July, the only position that we still hold is the S&P 500.
The Pro-Folio USA model evaluates its holdings on a monthly basis. There are two trades this month. As of the last trading day of June (30th), we have the following trade signals:
- SPY – HOLD
- EFA – *** SELL *** Threshold: 64.24 Price: 63.49
- IYR – AVOID
- DJP – AVOID
- IEF – *** SELL *** Threshold: 106.23 Price: 105.01
For existing investors:
You should have spent the month of June invested in the holdings above that are marked HOLD or SELL. You should have kept the cash equivalent of the positions marked AVOID, ready to invest when those segment signals turn positive. You should now sell the positions that are marked SELL.
For new investors:
If you are new to Pro-Folio USA this month, you should divide your portfolio into 5 equal parts, and invest an equal amount of money in each of the securities shown above, marked as “HOLD” or “BUY.” Because you didn’t invest in the “HOLD” components of the model at the time when the buy signal first turned positive, your return on these initial trades may not be reflective of the model’s typical expected returns.
My heart goes out to the people of Greece and Puerto Rico where the economies are in shambles and the idea of prosperity is but a dream to the many jobless and working poor. It has been proven time and time again that too much government debt can destroy a country’s economic engine. Unfortunately, the operational horizon for most politicians is only a blink of an eye, and few politicians have the strength of will to say no to easy credit, when it can create jobs in the short term and quite possibly improve their chances of getting re-elected. The lure of debt-fueled growth is difficult to resist.
Fortunately for us, the Pro-Folio USA model lost less than 1% of value in 2008, the worst year in recent memory and the only year on record that Pro-Folio USA lost value. As shown in the 2014 performance numbers that I posted recently, the long term average growth of the model is north of 8% per year. We can continue to follow the model with confidence that our assets will be protected.
If you want to get the PDF booklet showing you how to implement the Pro-Folio USA trading model on your own, click here.
If you want to learn more about the Pro-Folio Global upgrade portfolio, click here.
Dear reader, thank you for your interest in Pro-Folio. I wish you a safe and happy Fourth of July!