October 19th program at Westlake Porter
Public Library• Westlake Porter Public Library
27333 Center Ridge Rd.Westlake, Ohio 44145
• Timing Equities and Bonds and Dynamic Asset Allocation.
• Dr. Gary Harloff
• recognized by Timer Digest for consistently producing results in market timing over the past 10 years, will illustrate market timing results for equities and bonds and discuss dynamic asset allocation for portfolio management.
• Timing Equity and Bonds, and Dynamic Asset Allocation
• Gary J. Harloff, Ph.D.
• October 2015
• This is not an offer or solicitation for any investment fund or strategy managed by Harloff Capital Management. An offer will occur only upon delivery of part 2a of ADV and brochure. For the incentive fee program, an offer will occur only after discussions with Harloff Capital makes a determination that the investor is an accredited purchaser under securities laws. Results presented here are actual for the global tactical strategy and net of all fees and expenses. For the hi-yield bond and the S&P500 timing strategies the results are hypothetical with inherent limitations including: (1) results do not reflect actual trading and were achieved by retroactive application of the strategy with hindsight, (2) material market and economic factors are reflected by comparison with buy-hold of S&P500 with dividends or Federated hi-yield fund FHYTX, as applicable, and (3) clients may experience materially different results going forward. Past performance does not insure future performance. Investing involves the risk of loss.
795 Sharon Dr., Suite 226
Westlake, OH 44145
440-871-7278
www.harloffcapital.com
Outline
• Bio of Gary Harloff
• What Harloff Capital does - price trend analytics
• Try to avoid large losses
• Active/passive misunderstandings
• Return vs. risk metrics
• Verified net performance of global tactical strategy ‘03-’15
• Typical portfolio
• HVI developed around 1992, newsletter and timing
• Sharp market moves
• Timing examples: bonds and S&P500, hypothetical
• Summary
Bio- Dr. Harloff held national security clearances and has integrity• Performance talk, National Assoc. of Active Investment Managers, Dallas Tx, 11-2014
• “The Intelligent Fund Investor”, monthly newsletter, editor, 1993 to 2015
• “Wage-Employment Driven Business Cycle Model”, Proceedings of the Academy of
Economics & Finance, Jacksonville FL, 2011
• Book: Active Wealth Management for High Net Worth Individuals, 2010, Xlibris, 144 pg
• Timer Digest Gold timer of the year (of at least 19), 2003
• “The highest one-year performance figure we have ever recorded, 168.56% in 1999 for their
aggressive growth program”, MoniResearch Newsletter Jan/Feb 2000
• “Dynamic Asset Allocation Beyond Buy-and-Hold”, Technical Analysis of Stocks and
Commodities, Jan. 1998
• Third place: The United States Investing Championship, mutual fund switching - year-long
of 30 with positive returns, 1993
• Fifth place: The United States Trading Championship, mutual fund switching- year-long of
20 with positive returns, 1992
• AIAA main chapter speaker (7): Washington DC, Columbus OH, St. Louis MO, Louisville
KY, Troy MI, Sarasota FL, Orlando FL
• Ph.D. Aerospace Engineering,1979, Associate Fellow American Institute of Aeronautics
and Astronautics, 1988
• Computational fluid dynamics and space vehicle research NASA 10 years, 1985-1995
• Applied computational research at large Aerospace and Energy firms, 1968-1985
• turbo machinery 2 patents: 1978,1981
• Held high-level national security clearances at DOD and DOE
• In the early 1970's a coworker at a jet engine/rocket company in S. Florida suggested
that no one can model the stock market - a personal challenge.
What Harloff Capital does- discretionary
fee-based active portfolio management• Registered Investment Advisory 1994, fee-based, fiduciary
• +9% YTD vs. -4.2%, S&P500 buy-hold, Global Tactical Aggressive, verified by Theta Research, 8-31-15
• 13.7%/yr net actual return last 3 yrs vs, 12%/yr S&P500 buy-hold, top 3% (of 57) verified by Theta Research, 8-31-15
• top 5% S&P500 timer in U.S. for 1,3,5,8, and 10 yrs, Timer Digest 1-26-15, real-time signals, Timing based on Harloff Value Indicator
• Advanced quantitative portfolio management strategies beyond common portfolios offered by planners, wealth managers, and technical analysis
• Original strategies, developed by a Ph.D. over many years, adapt with market conditions. Rocket Science helps!
• Incentive based strategies for accredited investors
• No-commission variable annuity available
• Transparent strategy: original price trend analytics: look at day-day price change rather than fundamental forecasting or graphical technical analysis
“Why have brokers been allowed to…
• evolve their services more toward advice, without registering under the Advisers Act (1940), and in direct violation of that legislation? Because the SEC has let them. And don’t ask me why; its an enduring mystery, and one at the very root of consumer confusion and the industry debate today.” Skip Schweiss, managing director of advisory advocacy and industry affairs, TD Ameritrade Institutional. Source: Rep./www.wealthmanagement.com/October 2015, p.22
• SEC regulations include a fiduciary standard- to put client interest first is not compatible with hidden commissions and kickbacks of … brokers
Stock brokers and financial planners
can’t help you sidestep a correction
or bear market, and can’t help you
outperform in a bull market
•Harloff Capital can
•Past performance does not insure future performance.
We relieve clients of managing their
portfolios so they can do what is important.
% loss incurred % needed to break even
20 25
30 42.9
40 66.7
50 100
60 150
Active/passive misunderstanding…Brokers and financial planners (sell commissioned products) tell their
clients they build “diversified portfolios” to “withstand all markets” and
say…hold on for the long haul. Can’t time the markets.
Almost 2/3 of individual investors misunderstand perceived
benefits of passive investments (MFS November 2013 Highlights):
1) "Where risk is concerned, passive investments are a safe bet."
No- will experience bear market losses as in 2008!
2) "Passive investments almost always provide greater
diversification than active investments".
No- since active asset classes change with time!
3) "A passive investment could significantly beat its benchmark".
No- not if passive invests in its benchmark!
Active management changes portfolio in response to
changing markets: passive does not
• Financial planners and brokers -sell buy-and-hold
portfolios and rebalance only at client semi-annual or
annual meeting by selling winners and buying losers
• Their incorrect assumptions are:
• Markets don’t change much
• Corrections and bear markets don’t occur
• Risk in the market never changes
Hard part is having technology that
adapts with market conditions and
doesn’t fail.
This year momentum doesn’t work.
Technical analysis fails because it
isn’t numerical and everyone has it.
We continually monitor markets to help client
portfolios navigate volatile conditions
Re
turn
Risk
9-25-15 Global Tactical Rydex Aggressive Growth return vs risk, theoretical calculations
3D var 1
3D var 2
3D var 3
3D var 4
3D var 5
3D var 6
3D var 7
13.68%/yr 36 mo. net return vs. 11.99% S&P500, top 3% of active mangers (of
57)Theta Research verified, 8-31-15, Harloff Capital Rydex aggressive strategy
9.1% net vs. S&P500 -4.2% YTD 8-31-15
Global Tactical Rydex Aggressive Growth Funds, 9-28-15
ticker fund %
RYSHX inverse x1 small cap 21
RYWYX inverse emerging market 13
RYCIX consumer products 11
RYMHX inverse mid cap 11
RYSBX strengthening $ 8
RYAWX large cap growth 8
RYBHX mid cap growth 6
RYRIX retail 5
RYHRX real estate 6
RYOCX otc x1 6
RYUIX utility 5
HVI: basis for newsletter and timer digest timing
• An index invented in early 1990’s. Same formulation as
today
• Basis is day-day price change
• High positive numbers are desirable
• Presented for a wide range of funds and indexes for
domestic and international markets
• For long and inverse funds
• For volatile funds like precious metals and nonvolatile
funds like bonds
Global momentum system, Harloff Value Index,1992, basis for “The
Intelligent Fund Investor” monthly newsletter and timing signals
We focus on capital preservation in uncertain times and strive to give
clients peace of mind so they don’t sell at the bottom and buy at the top
1800
1850
1900
1950
2000
2050
2100
2150
2200
10/18/2014 12/7/2014 1/26/2015 3/17/2015 5/6/2015 6/25/2015 8/14/2015 10/3/2015
9-25-15, S&P500 Harloff bands, 11-5-14 to 9-25-15: low 1,868 on 8-25-15 recent signals: neutral 7-27-15 at 2,068, long 9-24-15 at 1,932. Sidestepped 6.6% loss
S&P500
trend
resistance
support
Timer Digest,
1-26-16
Top 5% of national
market timers for 1, 3, 5,
8, and 10 years in Timer
Digest (of 100+ timers).
Basis is Harloff Value
Index reported in our
monthly newsletter,
“Harloff’s The Intelligent
Fund Investor”, since
1992.
Bond and equity timing strategies
• Based on day-day price changes
• Increase return/decrease volatility over buy-hold
• bond/equity fund to time & a money market fund
• Compute day-day price changes, trade into the
fund when market conditions are up, and money
market when down
• Know the complexity (level of chaos) of market
• Reasonable no. of trades/year
• Adaptable metrics change with the market
High yield strategy: 27 yrs, 12.2%/yr, volatility =
0.7 FHYTX, 78 trades; b-h 7.6%/yr
0
2
4
6
8
10
12
14
Hypothetical before fees vs. buy-hold, 10-3-88 to 9-25-15
buy-hold
active strategy
S&P500 strategy: 27 yrs,11.9%/yr,
volatility = 0.7 S&P, 18 trades; b-h 9.9%/yr
0
4
8
12
16
20
24
Hypothetical S&P500 + dividends strategy before fees vs. buy-hold, 10-3-88 to 9-25-15
buy-hold
activestrategy
Need fast response, S&P500 dropped 11% 8-18-15 to 8-25-15
1,850
1,900
1,950
2,000
2,050
2,100
2,150
10/18/2014 12/7/2014 1/26/2015 3/17/2015 5/6/2015 6/25/2015 8/14/2015 10/3/2015
S&
P5
00
, $
Upgrade, 11-5-14 to 9-25-15
S&P500
trend
Summary• Up 9% YTD net actual return vs. S&P500 buy-hold of -4.2%, Harloff
Capital Global tactical aggressive, 8-31-15, verified by Theta Research
• Up 13.7%/yr net actual return vs. S&P500 buy-hold of 11.99%/yr. last 3
yrs 8-31-15, top 3% (of 57), Harloff Capital Global tactical aggressive,
verified by Theta Research
• Timing possible: Harloff top 5% S&P500 timers in U.S. for 1,3,5,8, and
10 yrs, Timer Digest 1-26-15, real-time signals
• Timing hi-yield bonds increases b-h from 7.6% to 12.2%/yr over 27
yrs, and decreases volatility 30%, hypothetical
• Timing S&P500 increases b-h from 9.9% to 11.9%/yr, over 27 yrs,
and decreases volatility 30%, hypothetical
• Adaptive capability needed for rapidly changing markets: S&P500
dropped 11% in 5 days from 8-18-15 to 8-25-15
• Active/passive misunderstood by investors due to broker and planner
buy-hold/sales emphasis
Management• Sally Harloff, President
• Gary Harloff, Portfolio Mgr, V.P.
• Available and accessible to clients
• Do what is right for clients, fee-only, have fiduciary responsibility
• Accountable for portfolio return & risk
• We have skin in the game
• 440-871-7278
• www.harloffcapital.com
• 795 Sharon Drive, Suite 226
• Westlake, OH 44145
Dr. Gary J. Harloff