MrMarket port

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Qarel

To mention MrMarket on these boards may be dangerous to one's health, but I would like to start a journal for my MrMarket port nevertheless. In it I follow the trades as MrMarket posts them on this website and in his Yahoogroup. While the presentation on his homepage, with closed and open trades, has its value, to be able to see the development of the total value of the port might be an interesting addition. I will restrict myself to a weekly update of the value at the close of the last trading day that week. I will also mention any changes in the holdings. The size of the port reflects my point of view on investing, not MrMarket's. This paper port is currently up almost 100% (OK: 95.5%) since inception (1/1/2001). MrMarket's port has 14 slots; recently I decided to keep a 15th cash slot for the sake of rebalancing. Transaction fee used: $10.

Disclaimer: this is my implementation of the announcements of MrMarket's transaction in a paper port of fictitious size. I can't read MrMarket's brokerage statements, and I don't want to.

This week MrMarket sold SFCC for a 19% gain in 5 weeks and added HELE @ 24.13.

My MrMarket port starts out holding PTSI, AXL, CHKE, MDC, GRMN, WRLD, COH, WSB, AMHC, NARA, DKS, ESI, HELE and one empty stock slot (apart from the 15th rebalancing slot), total value 27,380.94

Regards,

Qarel

 
This week ESI reached MrMarket's target. There are now 2 empty slots, besides the cash slot.

Someone asked how I proposed to calculate returns. Well, in the simplest way possible. This week the port took a hit and now stands at 26,229.53. The return this week is -4.2%. QQQ and SPY dropped less than .5%.

Regards,

Qarel
 
Last Thursday, MrMarket bought PRX at 72.40, and the paper port has been updated to reflect that fact, with 1/3rd of availabele cash allocated to PRX. There is only one stock slot empty now, apart from the rebalancing slot.

The port closed the week at $ 26,501.76, up 1% for the week, down -3.2% since the start of this report. Reminder: the size of the port is fictitious, as is my way of money management. This week, SPY and QQQ were up over 1.5% and 2.1% respectively.

Regards,

Qarel
 
Quote from Qarel:

This week ESI reached MrMarket's target. There are now 2 empty slots, besides the cash slot.

Someone asked how I proposed to calculate returns. Well, in the simplest way possible. This week the port took a hit and now stands at 26,229.53. The return this week is -4.2%. QQQ and SPY dropped less than .5%.

Regards,

Qarel
More...

I pm'ed you to find out what data you used to calculate each number in your first post.

The reason I asked was that I did not understand the manner in which you drew your conclusions.

I also asked about what you felt was anormal way to calculate ROI.

Here are the reasons I asked. I am running a portfolio of four streams of money. Each one makes profits and I reinvest all the capital over and over.

Mr. Market may be doing something similar. However it looks like he keeps adding capital as he enlarges the number of stocks held.
He started with about two streams and now he has 14, I believe.

You show capital in your posts and it's rate of decline over time.

I figured out that, so far, that his capital as you calculate it, comes from new capital being put in and losses now accumulating faster than profits from transactions.

All methods of investing work according to ther ules of the investor. Mr. Market has a method where the key element is holding stocks indefinitely until they make 15% profit. This is coupled with a rule of adding new capital at a random rate that is somewhat less than 1 new stream a month.

He has advanced his method from 2 money streams to 14 money streams. Currently he is not using all of them, and the few still uses (meaning the ones that fit his selection, entry and exit criteria sucessfuly)all form a dynamic system that has gone through several successive stages.

The initial period was characterized by adding capital and doing a few cycles of trading; the second stge was a period of no selections and no profit taking (25% of the total process); nextacme a combination of dormant streams and a rapid addition of money streams and some profit taking; this was followed by moderate capital additions (on a percentage basis) to reach the maximum number of streams and rolling capital (turning 14 streams over to make one cycle of profits15%) not longer happens. Now in this stage of the investment model of Mr Market, a few streams are active (one or two) and the vast majority of the port (folio) is loosing money. The net effect of the average of 2 streams performing and the rest declining in value, is a net loss of about 1 to 2 precent per week.

If things work out as in the past, two activities will ensue. active streams will be inactiviated and go into a "long term hold" category and more streams of new capital will be added. As we have seen, the whole schema went from a start up (primary action was to add new capital) to operational (where the key activity was inactiviating streams of capital and getting to a steady state condition where losses balanced additions of capital and finally now where the inactivated streams lose more capital than the active streams make profits.

For practical purposes, your adding the element of cash to the scenerio allows us to see the net rate of decline of this investment model.

To go back over the model and show the ROI (annualized) dynamic on a month to month basis is a fun exercise especially because the expected hold periond is over a month. A quarterly analysis would be more appropriate and simpler it turns out but the disadvantage is that it shows such a short life expectancy of the approach.

It will be interesting to see if the six suggested inprovements which were offered in response to a query by Mr Market will ever be deployed to restart the model and turn it around.

It is probably not a good idea for you to figure out how you got to the place where you came up with a 95% number that compares to the old 8% number that was determined before the model peaked and went into trauma and net losses as you are now demonstrating weekly for us.

I appreciate your showing how this thing shuts down. It is one of the best demonstrations of throwing good money after bad that I have ever seen. Thee are a lot of sage inscriptions on the ivy clad walls of Penn and Wharton but I can't remember taking in one as trite as "don't throw good money after bad". Maybe it is carved in a white pine table top some where. Time to get out the swiss army knife I guess.

Thanks for your capital posts weekly, they cetainly shed a lot of light finally.
 
Dear Grob109,

First: I don't know what MrMarket is doing, apart from the picks he announces, I only know what I am doing in my portfolio. There are 15 streams now, as you call them, 14 for stocks, 1 for rebalancing. Currently, 13 of the stock streams are active. Most of the time, all 14 stock streams are active. When I started the port, not all steams became active at the same time. Every time MrMarket picked a stock, I could activate another stream. After some time, all stock streams got activated. The return of the port over this startup period is therefore rather conservative, but instead of going for ROI or something like it, I considered that the effect of the startup period would diminish with the lifetime of the port.

I don't ever add money to the port. Why should I? It is a paper port; what do I care whether it stands at 2,000 or 2,000,000? I can still paper trade it. I started the port with 14,000.

The returns I calculate are over the whole port, active streams (=current holdings), streams waiting for a new pick, and the cash stream for rebalancing all taken together. BTW, that cash stream only gets "input" from the "output" of a stock stream, and defines the input for the next stock stream:

New Allocation = (Current Cash Position / (Number of Empty Streams +1))

So with two empty stock slots, 1/3rd of cash gets allocated to a new (or rather: revived) stream/slot.

Regards,

Qarel
 
Thanks for your response. I noted some comments within you post; they are in color.


Quote from Qarel:

Dear Grob109,

First: I don't know what MrMarket is doing, apart from the picks he announces, I only know what I am doing in my portfolio.

I believe his view of his approach is at his website. He does not post much about the consequences of his rules. I know that you evaluate in some unknown manner what Mr Market is doing. that is where the 95% appears. No one Knows how it is created at this point.

There are 15 streams now, as you call them, 14 for stocks, 1 for rebalancing. Currently, 13 of the stock streams are active. Most of the time, all 14 stock streams are active.

I divide the streams into three categories using Mr Markets time zones and profitability: Two streams are presently within his expected duration of hold to make 15%; All others are not. I refer to these an inactive, meaning they are not doi9ng what he expected (toppoing out on the last 15% of their peaking performance. He sorts for this characteristic. Apparently if they do not meet it, they go into a souvenier collection based on the idea that they have an intrinsic FA value still (he speaks of it) which makes keeping them more importantthan making money, etc..


When I started the port, not all steams became active at the same time.

I did not know of this. Thank you. From what you say, they were there unseen and not "active".

Every time MrMarket picked a stock, I could activate another stream.

Okay, it looks like capital was there and not used. Maybe this unused capital might be considered, then, for financial reasons. If i knew it were there unused Imight think of is as part of a money strategy or part of his risk strategy. I know this is complicating things, but usually all the capital a person has is considered all the time vis a vis portfolio chit chat. You approach is to activate capital as Mr Market picks a stock for which, prior to the pick,this capital was not "active" and just unseen.

After some time, all stock streams got activated.

This is a neat concept. Thank you for letting us all know that we have all capital in the picture. Since we do we can use the cash you mention for calculating the common measures of performance on the port (folio).

The return of the port over this startup period is therefore rather conservative,

Good we are in a start up and in start ups the conservative view is that we have a "rather" status. it looks like we can state that more money is being activated than is being made as profits. During start up we activate money to get rolling.

By just looking at profits and formerly activated money we show how well the approach works. It works rather conservatively.

but instead of going for ROI or something like it, I considered that the effect of the startup period would diminish with the lifetime of the port.

The effect of the start up period is definitely diminishing. He must do 15 trades to roll over capital. The capital activily "working" is shrinking since you started the journal. The rather conservative performance has, at this point, turned into a negative capital performance.

I don't ever add money to the port. Why should I? It is a paper port; what do I care whether it stands at 2,000 or 2,000,000? I can still paper trade it. I started the port with 14,000.

14,000 dollars is divided over the 14 investments in a manner so that streams of capital are running side by side and entries and exits have occurred in the streams and the present total of capital has grown to the currently posted value. Thus we have the capital basis for the port (folio).

The returns I calculate are over the whole port, active streams (=current holdings), streams waiting for a new pick, and the cash stream for rebalancing all taken together. BTW, that cash stream only gets "input" from the "output" of a stock stream, and defines the input for the next stock stream:

New Allocation = (Current Cash Position / (Number of Empty Streams +1))

So with two empty stock slots, 1/3rd of cash gets allocated to a new (or rather: revived) stream/slot.

This looks like a way of doing things. you have cash from sales (2) and cash from a rebalancing source cash stream. you are going to add this and divide by 13. Where 13 is 15 less two sales slots and a slot for rebalancing. I can't figure out the Current cash position , however. No matter, you can.

My question is this: What is the cash now available for the next purchase? Once we know that finally, we have everything nailed down completely for all future transations. No more loose ends. Hooray. If you will, please post the value and correct my divisor if I am incorrect.

What I do with my four streams of money is take the proceeeds of a sale and buy my next pick. Your pooling concept and having a rebalancing source cash stream is a concept that is new to me. sounds like a neat thing to keep the accountants really on their toes.
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Hi Grob,

I can do one better, as each sell of an 'old' holding would introduce new uncertainities for the cash side. The port currently holds:

74 PTSI
57 AXL
84 CHKE
44 MDC
26 GRMN
132 WRLD
37 COH
170 WSB
48 AMHC
108 NARA
41 DKS
76 HELE
22 PRX
Cash 3,193.05

You'll notice that not all positions are equally sized ($$$ wise), because of the history of the port. Some streams have run faster, some slower. 80 streams have been closed in this port, so total turnover is just under 6 times. I could have started with a fresh port, but I am already keeping score with this port, so I just introduce it here as it is. But I will present returns since its introduction here.

Regards,

Qarel
 
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