A Single System With The C/C Ratio & The Shadow A-A Decision

An Illustration of the RTC (Real-Time Controlling) in 2013 which described the main features of a dual controlling system needs to do two things: 1) another illustration in 2014 and 2) the new RTC system and its operation from 2022.

The C/C Ratio and the A-A Decision were mutually constrained: in a short term (in a couple of months), the A-A Decision would dictate by rebalancing toward a target allocation, leaving the C/C Ratio disrupted temporarily. while, in a near term (in a couple of weeks), the C/C Ratio is somewhat free to maneuver to take an advantage when any security is mis-priced, disregarding a target of the A-A Decision (i.e., a 60:40). On the other hand.

Two well-diversified ETF Portfolios, however, were replaced by two online Savings accounts in 2020, so it become no longer available that the luxury of a dual system with two controls (A-A Decision and C/C Ratio), mutually well-constrained along in a short term (Trend) and in a near term (Momentum).

The Focus

As a consequence, the system evolved to a Single (the C/C Ratio only) System with a shadow A-A Decision from a Dual System with the C/C Ratio and the A-A Decision with two ETF portfolios.

A Single Control System.

Table 1: The C/C Ratio and The Shadow A-A Decision
				“A-A D”
DATE	TRD	SAV	C/C R	“STOCK”	“BOND”
10/7/22	100.0	48.3	32.6%	67.4%	32.6%
10/6/22	101.2	47.7	32.0%	68.0%	32.0%
10/5/22	102.4	41.0	28.6%	71.4%	28.6%
10/4/22	102.8	40.9	28.5%	71.5%	28.5%
10/3/22	100.1	42.0	29.6%	70.4%	29.6%
9/30/22	98.3	42.8	30.3%	69.7%	30.3%
9/29/22	99.6	42.2	29.8%	70.2%	29.8%
9/28/22	101.6	39.5	28.0%	72.0%	28.0%
9/27/22	99.8	44.6	30.9%	69.1%	30.9%
9/26/22	99.5	44.8	31.0%	69.0%	31.0%
9/23/22	100.1	44.5	30.8%	69.2%	30.8%
9/22/22	101.4	46.4	31.4%	68.6%	31.4%
9/21/22	102.7	45.8	30.8%	69.2%	30.8%
9/20/22	103.9	45.3	30.4%	69.6%	30.4%
9/19/22	105.0	47.8	31.3%	68.7%	31.3%
9/16/22	104.9	47.8	31.3%	68.7%	31.3%
9/15/22	106.7	47.0	30.6%	69.4%	30.6%
9/14/22	107.4	47.8	30.8%	69.2%	30.8%
9/13/22	106.4	50.7	32.3%	67.7%	32.3%
9/12/22	108.9	49.5	31.2%	68.8%	31.2%
9/9/22	108.1	49.9	31.6%	68.4%	31.6%
9/8/22	107.7	50.0	31.7%	68.3%	31.7%
9/7/22	107.1	50.3	32.0%	68.0%	32.0%
9/6/22	105.8	53.3	33.5%	66.5%	33.5%
9/2/22	106.7	52.8	33.1%	66.9%	33.1%
9/1/22	107.1	52.6	32.9%	67.1%	32.9%
8/31/22	107.9	54.0	33.3%	66.7%	33.3%
8/30/22	109.6	53.1	32.6%	67.4%	32.6%
8/29/22	111.3	56.2	33.6%	66.4%	33.6%
8/26/22	109.0	57.4	34.5%	65.5%	34.5%
8/25/22	111.2	56.3	33.6%	66.4%	33.6%
8/24/22	109.9	60.1	35.4%	64.6%	35.4%
8/23/22	108.9	61.2	36.0%	64.0%	36.0%
8/22/22	109.2	61.6	36.1%	63.9%	36.1%
8/19/22	110.2	61.1	35.7%	64.3%	35.7%
8/18/22	112.4	59.8	34.7%	65.3%	34.7%
8/17/22	113.3	59.4	34.4%	65.6%	34.4%
8/16/22	114.2	58.9	34.0%	66.0%	34.0%
8/15/22	114.2	57.2	33.4%	66.6%	33.4%
8/12/22	114.1	54.0	32.1%	67.9%	32.1%
8/11/22	112.9	54.6	32.6%	67.4%	32.6%
8/10/22	112.0	54.4	32.7%	67.3%	32.7%
8/9/22	111.1	54.9	33.1%	66.9%	33.1%
8/8/22	112.7	54.1	32.4%	67.6%	32.4%
8/5/22	111.7	54.6	32.8%	67.2%	32.8%
8/4/22	111.8	54.5	32.8%	67.2%	32.8%
8/3/22	111.4	53.9	32.6%	67.4%	32.6%
8/2/22	109.4	51.5	32.0%	68.0%	32.0%
8/1/22	108.6	51.8	32.3%	67.7%	32.3%
7/29/22
	MEAN		32.2%	67.8%	32.2%
NOTE
1. TRD: Two Trading A/Cs. SAV: Two Savings A/C.
2. The figures are index, based on the $ value on Oct. 7 (100).
3. C/C R: The C/C Ratio. “A-A D”: The Shadow A-A Decision.
4. “STOCK”: The Shadow Stock Component.
5. “BOND”: The Shadow Bond (actually, C/C R) Component.

Click to enlarge

As shown in Table 1, the new system:

1) consists of two components: a) The C/C Ratio that is a single real component, and b) The shadow “A-A Decision” that has the shadow “Stock” and the shadow “Bond”: The former is the residual of the C/C ratio, and the latter is a duplicate of the C/C Ratio which is the only fixed income or bond category.

2) The single control (the C/C Ratio) has a range (i.e., 30% to 40%), which gives a room to move toward to either the target of the C/C Ratio (i.e., 40%) or the target of the shadow “A-A Decision” (i.e., “Stock”: “Bond” is 60%:40%).

3) During between Aug. 1 and Oct. 7, the C/C Ratio has moved along 32.2% (average), recording a peak (36.1%) on Aug. 22 and a trough (28.5 %) on Oct. 4). It started at 32.3% on Aug. 1 and ended at 32.6% on Oct. 7.

Table 2: ACH TRANSFER BETWEEN CHECKING & SAVINGS
				CS CHECKING
DATE	CLOSE	CH%	m / P	DEBIT	CREDIT
10/7/22	3,639.66	-2.88%	m
10/6/22	3,744.52	-1.04%	m	$10,000
10/5/22	3,783.28	-0.20%	m
10/4/22	3,790.93	2.97%	P
10/3/22	3,678.43	2.52%	P
9/30/22	3,585.62	-1.53%	m
9/29/22	3,640.47	-2.16%	m
9/28/22	3,719.04	1.93%	P	$3,500
9/27/22	3,647.29	-0.21%	m		$7,000
9/26/22	3,655.04	-1.04%	m
9/23/22	3,693.23	-1.75%	m		$4,000
9/22/22	3,757.99	-0.85%	m
9/21/22	3,789.93	-1.74%	m		$5,000
9/20/22	3,855.93	-1.14%	m
9/19/22	3,899.89	0.68%	P
9/16/22	3,873.33	-0.72%	m		$3,000
9/15/22	3,901.35	-1.14%	m
9/14/22	3,946.01	0.34%	P		$4,000
9/13/22	3,932.69	-4.52%	m
9/12/22	4,110.41	1.05%	P
9/9/22	4,067.36	1.50%	P
9/8/22	4,006.18	0.66%	P
9/7/22	3,979.87	1.80%	P
9/6/22	3,908.19	-0.41%	m		$4,000
9/2/22	3,924.26	-1.09%	m
9/1/22	3,966.85	0.30%	P		$3,000
8/31/22	3,955.00	-0.79%	m		$3,000
8/30/22	3,986.16	-1.12%	m
8/29/22	4,030.61	-0.67%	m		$9,500
8/26/22	4,057.66	-3.49%	m
8/25/22	4,199.12	1.39%	P
8/24/22	4,140.77	0.29%	P	$5,000
8/23/22	4,128.73	-0.22%	m		$7,000
8/22/22	4,137.99	-2.19%	m
8/19/22	4,228.48	-1.31%	m
8/18/22	4,283.74	0.23%	P
8/17/22	4,274.04	-0.73%	m	$3,000
8/16/22	4,305.20	0.28%	P	$6,000
8/15/22	4,293.14	0.30%	P
8/12/22	4,280.15	1.70%	P
8/11/22	4,207.37	-0.07%	m
8/10/22	4,210.24	2.08%	P
8/9/22	4,122.47	-0.43%	m
8/8/22	4,140.06	-0.12%	m
8/5/22	4,145.19	-0.16%	m	$1,500
8/4/22	4,151.94	-0.08%	m	$6,000
8/3/22	4,155.17	1.54%	P
8/2/22	4,091.19	-0.67%	m
8/1/22	4,118.63	-0.28%	m	$1,200
7/29/22	4,130.29
		SUM		$36,200	$49,500
NOTE
1. CLOSE: The S&P 500 Index’s Closing.
2. m/P: minus/PLUS. CS: Charles Schwab.
3. DEBIT: Withdrawal to Savings.
4. CREDIT: Deposit from Savings.
5. ACH: Automated Clearing House.
Data Source: Yahoo

Click to enlarge

Table 2 reveals the details of:

1) The market momentum and trend: The column, m/P (minus/plus), shows the m stretch (“MS”) and the P stretch (“PS”). We had: a) 4 MS (8/4-8/19), b) 3 PS (8/12-8/16), c) 4 PS (9/7-9/12), d) 6 MS (9/20-9/27), and e) 3 MS (10/5-10/7) which would continue towards a negative trend now. As of Friday, no trend has come up. My paper/pencil approach demonstrates that it is surely not worse than any sophisticated charting method.

2) Money transfer between Charles Schwab Checking Account and two Goldman Sachs Bank’s online Savings Accounts (Marcus.com) through ACH (Automatic Clearing House), that seems not to be known broadly, but it is the most secured, fast, and free money-transfer service, provided by the U.S. government.

3) For about 10 weeks, 9 withdrawals ($36,200) to GS and 11 deposits ($49,500) from GS. Notice some countercyclical or contrarian transfers which made withdrawals when getting gains, and deposits when having losses.

An Illustration of the Real-Time Controlling (RTC) in 2014

”During the market turmoil (October 6 through October 17) our long-term portfolio (70% of the capital) ran smoothly until October 13 (Monday), losing 4.9% from the end of third quarter. Tuesday (Oct. 14) and Wednesday (Oct. 15), however, prompt and timely adjustments were made, and Thursday (Oct. 16) and Friday (Oct. 17), a few follow-up adjustments were done…

Almost every year on October 10 (– the day happens to be my birthday –) the markets celebrate my day by presenting me with an extra joy or surprise. Last year, for example, most stocks and bond yields made their bottom exactly this day, even though the market indexes hit their troughs a couple of sessions earlier…

The A-A Decision, The C/C Ratio, & The S&P 5oo
	A-A DECISION		C/C	S&P 500 Stock
DATE	STOCKS	BONDS	RATIO	INDEX	%CH
9/30/2014	58%	42%	0.0	1,972.29
10/8/2014	58%	42%	0.0	1,968.88	-0.2%
10/9/2014	58%	42%	0.0	1,928.21	-2.1%
10/10/2014	57%	43%	0.0	1,906.13	-1.2%
10/13/2014	57%	44%	0.0	1,877.40	-1.5%
10/14/2014	71%	29%	0.0	1,877.70	0.0%
10/15/2014	73%	27%	12.1	1,860.49	-0.9%
10/16/2014	73%	27%	11.1	1,862.76	0.1%
10/17/2014	75%	25%	9.0	1,886.76	1.3%

Click to enlarge

Another Illustration of RTC in 2013 (in the previous article) didn’t have a table like above. Note that:

1) The market movement and the RTC process in 2014 are expected to be repeated similarly his year.

2) Even though the system changed to a single RTC (the C/C Ratio with the shadow “A-A Decision, and with a range (30% to 40%) from a dual system in 2020, the adjustment process would be similar.

3) Here, we also do the contrarian maneuver, by bringing in more cash when the market weakens, and by taking money out when the market rises. Every dose is very small in real time, a significant amount of money is accumulated piecemeal in several sessions, and then an ACH transfer is made.

4) The adjustment for the market expectation is also to be embedded in the new system appropriately. From the next week (starting Oct. 17), a) the possible bear trend would be scrabbled, b) a midterms rally would be expected, and c) a Santa Claus rally would be followed. For these episodes, I will build up cash as much as possible to get the 40% target of the C/C Ratio which is 32.6% as of Oct. 7 (in Table 1).

The Market of the Week from Oct. 3 (Monday) to Oct. 7 (Friday)

U.S. stocks slid Friday after a relatively strong Jobs Report, capping a roller-coaster week in which investors built up hopes for easier monetary policy – only to then give them again.

The past few days were a wild stretch for markets, as investors grappled to understand competing data about where the economy is headed, and what that might mean for the Federal Reserve’s efforts to cool inflation.

Stocks soared Monday and Tuesday, with the S&P 500 and Dow Jones Industrial Average logging their best two-day stretch since 2020. Weak data on the manufacturing sector and job opening led investors to bet that the Fed might slow its pace of interest-rate increases in the coming months.

The rally failed to last major indexes, tumbled the next two days, then headed lower again Friday after the government’s latest jobs report showed the labor market remained strong. Employers added 263,000 jobs in September…

But the unemployment rate fell to 3.5% from 3.7%, remaining at a multi-decade low…Many investors fear that the Fed’s rate increases will go beyond cooling down the economy and push the U.S. into a recession.

The Dow Jones Industrial Average fell 650.15 points or 2.1 %, to 29296.79. The S&P 500 slipped 104.86 points, or 2.8%, to 3639.66. The Nasdaq Composite shed 420.91 points, or 3.8%, to 10,652.4…

Meanwhile, government bond prices fell alongside stocks. Stubbornly high inflation and tightening monetary policy have hit the Treasury hard this year, sending yields higher. (Source: “Dow Falls More Than 600 Points Following Jobs Report”, The Wall Street Journal, Oct. 7, 2022)

The Conclusion

The current C/C Ratio on Oct. 7, 32.6%, is somewhat insufficient if the market will continue to be weak in a couple of months. The single key – the C/C Ratio for a near term and the shadow key – the shadow A-A Decision in a short term – can shield any shock from a market shakeout in the future.

I’m cautiously optimistic, as a market-neural trader, by expecting an overdue market push. The current market is overpriced? Yes, because we are still in the bull market, started 13 years ago. Cheers!

Investment Advice

If you’re younger than 60 and your investment horizon is longer than 3 years, you can start any time, with the following:

• Vanguard Total Bond Market ETF (NASDAQ:BND) (25%)
• Vanguard Corporate Bond ETF (NASDAQ:VCIT) (20%)
• Vanguard Total Int’l Bond ETF (NASDAQ:BNDX) (5%)
• Vanguard Total Stock Market ETF (NYSEARCA:VTI) (25%)
• Vanguard Extended Market ETF (NYSEARCA:VXF) (20%)
• Vanguard Total International Stock ETF (NASDAQ:VXUS) (5%)

This portfolio not only has a solid track record but also you can save a lot of money, by self-managing. All you have to do is to check the performance of your portfolio, comparing with the S&P 500, from time to time.