Investment Philospohy

Investment Philosophy for Stocks and Bonds(Liquid Portfolio)

We use a Fact-Based Strategy for investing your assets using technical analysis. Our core beliefs are:·

No one knows where the market will go·
Wherever the market goes, it will get there by trending·
Along the way, there will be outperformers and underperformers.

Armed with these three core beliefs, we are well equipped to handle whatever the market brings - all without having to make a single prediction. Using supply and demand analysis, our Fact-Based strategy concentrates on identifying market trends to determine market exposure and identifying outperformers to include in our portfolios. Together, they give us the "when" and "what" - the two essential ingredients of success.

Constructing Your Portfolio

Allocations are a result of combining relative strength rankings, current market trends, and pre-determined minimum or maximum equities exposure. Reallocation quarterly to maximum allocation when either domestic or international equity is trending up. Minimum allocation when neither domestic nor international equities are trending up. The fixed or bond equity is a broad-based bond index fund when the bond index is trending up and cash if the bond index is not trending up

Appendix

Technical Market Indicators

Bull-Bear Indicator

The Bull-Bear Indicator is constructed from specific market measurements and is intended to show the relationship between supply and demand at the longer-term timeframe of months to years. The measurements are ratios of supply and demand factors, normalized to a scale of 0 to 100. There are seven ratios in total. These ratios are then weighted, and combined into a single, statistically smoothed final Bull-Bear Indicator. When the Bull-Bear Indicator is in a Bull Market mode and then pierces the Bear Market Threshold, a new Bear Market is signaled. When the Bull-Bear Indicator is in a Bear Market mode and then pierces the Bull Market Threshold, a new Bull Market is signaled. Once a mode (Bull or Bear) is established, it is considered to remain in place until the Bull-Bear Indicator eventually pierces the opposite threshold.

Quarterly Trend Indicator -

Designed to act only at quarterly intervals, it is a quarter-by-quarter look at the probable risk environment of each quarter, using the trend status of US and International equities. The trend labeling is derived from the slope of a tangent to a curvilinear regression line going through the last “n” data points of a smoothed closing price data series. If either the US or International equities are in an uptrend, a lower-risk quarter is indicated; if neither the US nor International equities are in an uptrend, a higher-risk quarter is indicated.

The Intermediate-term Indicator

Constructed from specific market measurements within 36 sectors of the US market, and is intended to reveal the relationship between supply and demand at the intermediate-term timeframe of weeks to months. Each sector is defined by a basket of stocks. Each stock within each basket is ranked as being in supply mode or demand mode, based on recent price and volume activity. If the majority of stocks within a basket are deemed to be in demand mode, the sector is deemed to be in demand mode; if the majority of stocks within a basket are deemed to be in supply mode, the sector is deemed to be in supply mode. Each sector in demand mode is assigned the value of 1, each sector in supply mode is assigned the value of 0. The Indicator value is then the statistically-smoothed sum of these 36 assignments, which can, therefore, range from 0 to 36. A sum of 0 indicates all sectors are in supply mode and a sum of 36 indicates all sectors are in demand mode. Changes in the overall intermediate-term market outlook occur when the Indicator changes direction after reaching at least the half-way point of 18 (one half of 36). After reaching at least the half-way point, a reversal by 20% causes a change in labeling and color. When the Indicator is headed up, it is labeled as "Positive" and colored green; when the Indicator is headed down, it is labeled as "Negative" and colored red. A change from green ("Positive") to red ("Negative") occurs upon a reversal downward of at least 20% of the highest value reached. For example, a reversal from green to red after a move up that peaks at 30, will occur at 24 (20% less than 30). Similarly, a change from red to green occurs upon a reversal upward of at least 20% of the lowest value reached. For example, a reversal from red to green after a move down that bottoms at 5, will occur at 6 (20% more than 5).

Investment Ranking Methodology

The Ranking Tables are constructed by measuring performance characteristics of the candidates, aggregating the measurements, and then ranking the candidates in descending order of aggregate measurements. The performance characteristics measured include price performance over four timeframes (the past 30, 60, 120 and 240 market days), performance on "market-up" days vs. performance on "market-down" days, nearness to 52-week highs, and several other performance-based measurements. The specific measurements have been chosen to highlight those performance characteristics that are likely to persist for at least several months. These performance-based measurements are classified as "momentum" types of measurements in the academic literature, and the ranking that results from them is called a "relative strength" ordering in academic studies. The higher-ranked candidates are typically selected for inclusion in portfolios, while lower-ranked candidates are removed from portfolios, at intervals usually ranging from 1 to 4 months between such selections.