Ron Miller's Portfolio Action Update is a periodic update of his technical analysis viewpoint of the financial market environment and the current portfolio management posture for his precious metals portfolio strategies. Ron Miller and Martin Truax, Managing Directors at Morgan Keegan & Co., lead the Investment Planning & Management Group (IPMG) in Atlanta . Martin and Ron moved their group from Salomon Smith Barney, where they had been for 29 years, to Morgan Keegan at the beginning of 2001.
The table below includes both Short Term (S - T) and Intermediate Term (I - T) Rating results of our technical analysis of the price direction for the Styles and Sectors we follow. The intention is to give you insight into the time frames that are involved in our portfolio management process. Short Term ratings capture more of the wiggles in the market while the Intermediate Term ratings capture more of the trending aspects of the market. If we are in a period where the market is in a trading range with little trend direction, the Short Term ratings are more useful. On the other hand, if the market is in a longer term trending mode, we put more emphasis on the Intermediate Term Rating results. Note that signals can change in between reporting periods which may be confusing at times. For example, a Green light may have changed to Red and back to Green since the last report. The Rating Table would still be Green but the signal date would have changed from that shown on the prevous report..
Industrial Sectors The Gold mining sector generated a Short Term Green light on 10/11/07 as the Philadelphia Precious mining index (XAU) broke out to the upside from the sideways consolidation that started on September 21. I believe that the key for the precious metals market continued bullish trend is that the XAU holds above the breakout level of 172, and, especially, that it does not drop below the bottom level of the recent sideways consolidation at 164. On balance, the Gold mining sector’s path of least resistance remains upward and we are back on double Green lights.
PORTFLIO ACTIONS FOR THE MARKET WEEK ENDING 10/12/07
Energy/Defense/Resources Plus - EDRP: No changes last week. The current sub-sector allocations for the EDRP portfolio are 8% Energy Services, 16% Energy Exploration & Production, 5% Alternative Energy, 14% Defense-Major, 7% Defense-Components, 6% Security Systems, 17.5% Precious Metals, 8% Natural Resources and 3% Agricultural Resources. The net market exposure is 84.5% with Money Market reserves of 15.5%.
Natural Resource Plus - NRP: No changes last week. The current allocations are 8% Gold Bullion, 27.5% Precious Metals Mining, 5% Energy Services, 15% Energy Exploration and Production and 23% Natural Resources. Net market exposure is currently 78.5% with Money Market Reserves at about 21.5%.
Gold Portfolio - GLD: No changes last week. The Gold mining sector generated a Short Term Green light on 10/11/07 as the Philadelphia Precious mining index (XAU) broke out to the upside from the sideways consolidation that started on September 21. I believe that the key for the precious metals market continued bullish trend is that the XAU holds above the breakout level of 172, and especially, that it does not drop below the bottom level of the recent sideways consolidation at 164. On balance, the Gold mining sector’s path of least resistance remains upward and we are back on double Green lights. We will likely add to our allocation over the near term if it looks like the breakout will hold. The current allocation is a 15% gold bullion position and 70% precious metals mining securities, which includes a 10% specific silver mining allocation. Money Market reserves are about 15%..
Tactical Asset Allocation Style & Sector Signals:
Ratings 60% and Above are a Green Light
Ratings 40% and Below are a Red Light
Ratings 41% to 59% are Neutral
Light Green indicates going from Green to Neutral since last Signal Date
Pink indicates going from Red to Neutral since last Signal Date
This is a reduced version of Ron Miller's Tactical Asset Allocation Style & Sector Signals table. Ron's portfolio management process includes the technical analysis of over 400 mutual funds that have been selected to represent forty four different styles and sectors that are tracked daily for both Short Term and Intermediate Term direction signals. These include the 9 Morningstar portfolio management style boxes plus 16 equity sectors, 10 international styles/sectors and 9 bond sectors. Ratings are based on the percentage of securities followed in each category that are on buy signals. Short Term (S - T) signals are based on daily price data and may be different and change more frequently than the Intermediate Term (I - T) signals that are based on price action for a trailing 5 day period. These ratings are subject to change at any time and obviously their accuracy is not guaranteed. Individual securities may perform differently from these signals. These direction signals are a useful tool in the portfolio management process but are not the sole determinate of actual portfolio style or sector weightings. They should not be interpreted as a buy or sell recommendation for any specific financial securities and do not reflect positions of Morgan Keegan. Market data used in this analysis is believed to be from reliable sources but its accuracy can not be guaranteed. Past performance is not indicative of future results.
Portfolio Action Update Explanation: I try to confine my comments to a discussion of what recent action has occurred in these portfolios and my current technical analysis posture. In general, my portfolio management approach is to determine current market conditions through technical analysis and to position the various portfolios strategies to participate in the current environment. Although I usually have an opinion of the future direction of the market, I don’t rely heavily on my opinion in the portfolio management process. Neither opinions, technical analysis or fundamental security analysis produce perfect results. There is always a degree of risk present.
These comments will usually be written on the Weekend. However, a few days may transpire from when they are written and when they are posted on the web site. Obviously, the technical analysis signals and portfolio positions could have changed in that timeframe. Therefore, this technical information and related comments should only be read from a historical perspective, and may not reflect what the current analysis and portfolio positions actually are when you read this update. You can call us for the most current update if you wish.
Although the Technical Analysis Ratings illustrated in the table below are a very useful tool in our portfolio management process, these ratings are not the sole determinate of the asset allocation positions held in our various portfolio management strategies. This information is not intended to be a solicitation of a buy or sell of any financial security. The opinions expressed herein are my own and do not reflect the position of Morgan Keegan & Co., Inc. Past performance is not a guarantee of future results.