Here Is My Secret for Outperforming the Market

In This Issue:

An Update on Our Performance
A New Discovery
Evaluating Our Great Recession
U.S. Markets - The Lost Decade
How Did Your Money Manager Perform?
My Secret for Outperforming the Market
Putting the Odds in Your Favor
Constructing Your Portfolio
Portfolio Performance Analysis
Dancing with My Daughters and Hitting the Slopes

What will happen to the markets in 2009?  I am projecting more of the same, but with less relative downside risk.  Volatility will ebb and flow for the next 18 months, as the market searches for the bottom.  The current corporate earnings are worse than terrible, causing the overall market fundamental valuations to be very expensive!  You are going to hear of a lot of talk about the market bottoming out in 2009.  That would be good for all of us if it did, but I think any rallies will be short lived, and that the ultimate bottom will not occur until the summer 2010.  I hope I am wrong.

If 2008 is known as the year of the financial crisis, then 2009 will be known as the year of the economic crisis.  In this letter I will explore the long term implications of the Great Recession and its effect on our domestic and worldwide economies.  The fires are still burning, so it may be difficult to see through the haze, but I will do my best to provide some transparency. 

For my long term readers, you are aware that I have been a real estate bear since the end of 2005 and became a market bear in the summer of 2006.  I knew that the drop in real estate values was going to have a negative impact on our economy, but I would be lying to you if I thought it would get this bad.  My projections were telling me that real estate was approximately 35% overvalued, but knowing how markets overact I thought a 50% drop was possible. 

I knew it was going to be bad, but until I saw the storm up close and personal, it was hard to image that it would collapse the worldwide financial system.  The sad part is how it affects real lives.  I talk a lot about percentages, statistics, and economics in this letter, but behind every failed bank or company are thousands of hard working people.  My heart aches for these fine people and their uprooted families.

I look forward to the day when I can report to you the good news about our economy.  We will work through this mess and someday, in our future, I will put on my horns and become a table-pounding bull.  Unfortunately, that time is not now.

"Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception."
George Soros   

An Update on Our Performance

At the end of February, we will be celebrating our two-year anniversary for the launch of our multi-manager portfolios.  2008 gave baptism by fire a whole new meaning.  I was hoping for a strong finish and it looks like we are about to get our wish.      

As far as months go, January 2009 was the worst January in the market since records have been kept.  In contrast, our equity portfolios enjoyed an excellent month outperforming the S&P 500 by 13.55%!  Month-to-date February our equity portfolios are also showing green across the board as we close in on our two-year anniversary.      

Below are recent performance returns on the four portfolios we currently offer:


Past 12

YTD

Jan

MTD Feb

Name

Months

2009

2009

2009

Income Builder  (IB)

-3.02%

-5.66%

-3.83%

-1.67%

The Guardian  (GRD)

-2.43%

0.24%

0.10%

0.14%

Harmony Plus  (HMY)

1.80%

3.15%

2.40%

0.68%

The Expedition  (EXP)

3.75%

6.83%

4.98%

1.79%

S&P 500  (SP500)

-37.00%

-12.71%

-8.57%

-4.53%

Important Performance Disclosure



 

 


ProfitScore provides separately-managed accounts for individuals, advisors and institutions.  If you would like to hire us to help you navigate this difficult bear market, below are three ways to contact us:

  1. Complete our Private Client Group request form by Clicking Here and submitting your contact information. (This is the most preferred method.)
  2. Call us directly at (800) 731-5690.
  3. Simply send us an email to info@profitscore.com.

Someone will contact you within 24 hours of receiving your information.

A New Discovery

I read about this recent new discovery at the blog of The Free Menesch-http://www.freemensch.com/2009/02/governmentium.html 

"Besides arsenic, lead, mercury, radon, strontium and plutonium, one more extremely deadly and pervasive element is known to exist.

This startling new discovery has been tentatively named Governmentium (Gv) but kept top secret for 50 years. The new element has no protons or electrons, thus having an atomic number of 0. It does, however, have 1 neutron, 125 deputy neutrons, 75 supervisory neutrons, and 111 team leader neutrons, giving it an atomic mass of 312.

These 312 particles are held together by a force called morons, that are surrounded by vast quantities of lepton-like particles called peons. Since it has no electrons, Governmentium is inert. However, it can be detected as it impedes every reaction with which it comes into contact.

According to the discoverers, a minute amount of Governmentium causes one reaction to take over four days to complete when it would normally take less than a second. Governmentium has a normal half-life of approximately three years. It does not decay but instead undergoes a reorganization in which a portion of the deputy neutrons, supervisory neutrons, and team leader neutrons exchange places. In fact, Governmentium mass will actually increase over time, since, with each reorganization, some of the morons inevitably become neutrons, forming new isodopes.

This characteristic of moron promotion leads some scientists to speculate that Governmentium is formed whenever morons reach a certain quantity in concentration. This hypothetical quantity is referred to as the ‘Critical Morass.'"

No one sums up the feelings of the silent majority better than CNBC's Rick Santelli as he discusses Obama's recent mortgage bailout plan:

 



Evaluating Our Great Recession

Contrary to what your mutual fund manager or broker may be telling you about the bottom being just around the next corner, the history of monster bear markets tells a different tale. At present, we are 16 months into the current bear market and a quick glance at the table outlining the worst bear markets in industrialized nations below shows just how young this bear is. (Lines highlighted in bright yellow show bear markets still in progress.)

Dates
Market
Bear Duration
Time to Bottom
Loss at Low
1929 - 1954
Dow Jones Ind Ave
301 months
34 months
-89.20%
1989 - ?
Nikkei 225
233+ months
229+ months
-81.60%
1974 - 1987
Madrid Stock Exch
145 months
74 months
-74.10%
1988 - 1995
Helsinki All Share
76 months
41 months
-73.10%
1988 - 1995
Stockholm All Share
51 months
38 months
-52.50%
2007 - ?
Dow Jones Ind Ave
16+ months
12+ months
-50.30%
1973 - 1983
Dow Jones Ind Ave
120 months
23 months
-49.20%
2000 - 2006
Dow Jones Ind Ave
81 months
33 months
-39.60%
1966 - 1972
Dow Jones Ind Ave
201 months
66 months
-33.90%

Average Bear Stats
136 months
61.1 months
-60.39%


With a drop of more than 50% to the November 20th lows for the Dow, the current bear is in the middle of the pack of the worst declines in history.  You will also notice from the table that the average bear market took 61.1 months to hit bottom and the investor who bought near the top and "stayed the course," it took an average of 136 months or 11.3 years to get back to break even point.

Comparing the current bear to those in the past, we are faced with two stark possibilities - either we have been extremely lucky as bears go and stocks did hit the bottom in late November, or the true bottom still has yet to occur. From a probability point of view, the latter is more likely. 



This chart gives a great perspective about our current bear market as compared to other major bears in our past.  In comparison, a couple of important things should jump out at you.  First, our current bear market has dropped further faster than the Great Depression.  Second, if the bear market ended today, it would be the shortest one listed in the graph above.  Given current circumstances, I don't see this bear market ending until 2010.  

U.S. Markets - The Lost Decade

Before continuing, we need to clarify the difference between a cyclical and a secular or structural bear market. A cyclical bear is a relatively short term correction lasting months to a few years. A secular bear lasts multiple years to decades. So far this millennium, we are into our second cyclical bear market. The first one lasted almost three years from 2000 through 2003.

From a secular standpoint we have been in a bear market since 2000 with a brief break when the Dow rose above its previous year 2000 high, a high that technicians call a fake breakout or fake-up, lasting a few months. For the most part, the monster bear markets in the table above were secular bears and, for the purposes of discussion, we have separated the secular bear into two cyclical bears-2000-present and 1966-1983-to compare their severity . 

What do you think the worst ten-year period has been in the U.S. stock market?  Based on a percentage basis, the answer is the Great Depression.  However, if you factor inflation into your calculation, then your answer is much different. 

To be fair, bear markets cannot be compared without considering inflation. Until now, the worst ten-year period for stocks was the period ending September, 1974. Correct for inflation and the result is a compound decline of -4.3% per year (dividend income included). This period was worse than the ten-year inflation-adjusted compound decline in the Great Depression from October 1929 through September 1939 of -2.6% per year (including dividends). 

So how did stocks do in the decade ending January 2009? As you may have guessed, it generated the worst ten-year inflation-adjusted returns in history with a compound decline of -5.1% per year according to Floyd Norris in a February 6, 2009 article entitled Off the Charts - A 10-Year Stretch That's Worse Than It Looks.

Perform the same calculation for the Dow Jones Industrials priced in gold over the last decade and the picture is even uglier. Since hitting its peak in July 1999, the mighty Dow has lost nearly 80% of its value to January 2009 when priced in gold.

How Did Your Money Manager Perform?

Since the peak in December 2007, investors around the world have learned some difficult lessons. An article entitled, "Lame Fund Managers Head for an ETF Thumping" (http://www.bloomberg.com/apps/news?pid=20601212&sid=aJ0iz9WuEfVI&refer=home), highlighted just how tough this year has been on money managers as well. According to Morningstar, 58% of all actively managed mutual funds lost more than the benchmark against which they measure themselves during 2008.  Indexes like the S&P500, Russell 1000, 2000 or 3000 outperformed most of these actively-managed mutual funds.

To add insult to injury, the S&P500 has dropped approximately 50% over the past 15 months, so most investors who had investments benchmarked to the S&P 500 paid their money managers a handsome fee to lose half their portfolio's value.   

But wait, it gets worse.  We did some research into money management performance over the long haul. According to Morningstar, of the universe of 2,812 funds that they tracked, 54% underperformed their benchmark indexes in the five years ending January 31, 2009. A little better, but not much of an improvement, is it?

Over the past ten years, 38% of the funds under-performed their benchmark indexes. This is one statistic fund managers and brokers use to encourage investors to "stay the course" and be patient, especially in bad markets.  If history repeats itself, you'll make your money back and more. But is it valid?

What the stats don't tell you is that results improve because over time, the funds that do not survive are removed from the record. According to Morningstar, over the five-year period 6,129 fund companies survived. However, there were 2,039 companies that didn't survive-making it a one-in-four chance that an investment company and their mutual fund would fold 60 months later.

Therefore, over a ten-year period, there is a one-in-three chance that any single fund would go under before the period was complete, according to this data. Not a glowing endorsement for the long-term, "stay the course," buy-and-hold approach promoted on Wall Street.

What happens when the returns are adjusted to include those that don't make it? According to the study by Index Fund Advisors entitled, "The Daunting Odds of Stock Picking," real performance is far worse. The study looked at the ten-year period ending October, 2004 and found that 97.6% of professional managers managing mutual funds underperformed the S&P500 Index when the losses from failures were factored into the equation (see chart below).

 

 

My Secret for Outperforming the Market

I get asked from time to time what I do for a living and it is a hard question to answer.  How do you explain to someone that you use quantitative mathematics to mange other people's money?  My favorite reply that seems to get the most response is: I have developed a system to take money from other people's investment accounts and put it in the accounts of clients who hire us to mange their money.  I am kidding (sort of). 

You see, the market is a zero sum game.  For every buyer there is also a seller and vice versa.  The buyer thinks that the stock is undervalued and the seller thinks it is likely to go down in value.  It is the basic premise on how markets work.  Keep that in mind the next time you buy or sell a stock.  Someone is betting that you are wrong!

What 99% of individual investors and 95% of most money mangers don't understand is that a loss is twice as important as a gain.  If you don't understand that sentence, I suggest that you read it over and over again until it is imprinted on your brain.  One of the reasons our clients perform so well in bear markets is because we know that not losing money is statistically the best way to outperform the market during a market cycle.  A market cycle would include both a bull and bear market-approximately10 years.    

Because this is such an important topic, I am going to share with you a way to determine if your mutual fund or money manger knows how to protect and grow your money in all market environments.  In institutional money manager circles, capture ratios are commonly used to help evaluate if a money manger is good at what they do or just lucky.  There are many other valuable ratios, but I believe capture ratios may be the most telling.    

To understand, I need to explain how capture ratios work.  

How Capture Ratios Can Put the Odds in Your Favor

There are a number of ways that money managers measure themselves and their peers. Perhaps you've heard the terms like the Sharpe Ratio, R-Squared or Optimal-f.

Capture ratios are a great tool to evaluate how a manager reacts to changing market environments and how they manage risk in a portfolio.  To calculate a capture ratio, a manager's performance must be measured against a benchmark index.  Since most people consider the S&P 500 to be the best proxy for the US stock market, I am going to use the word market in my capture ratio examples below to refer to the S&P 500 index (market = S&P 500 index). 

If a manager has an upside capture ratio of 60% against the market, then that manger will typically make 60% of the gains when the market increases in value.  So when the market increases by 10% in a year, a manager with a 60% upside capture ratio will capture 60% of the returns, or make 6% during that year.  A downside capture ratio measures the manger's success when the market loses value.  The smaller the loss of the manger in the down years, the lower his downside capture ratio will be.  Let me break this down for you:

Up Year:
Market increases by 20%
Upside Capture Ratio is 60%
Manager makes 20% * 60% = 12% for his clients

Down Year:
Market decrease by 40%
Downside Capture Ratio is 80%
Manager loses 40% * 80% = 32% for his clients

Which measure do you think is the most important?  If you said measuring the downside risk of a manger is twice as important as measuring the upside reward, then pat yourself on the back.  Not only is measuring the downside more important, but it increases in importance the further the market falls.  The table of pain below details why that is the case.

Table Of Pain

  

Deciles

  

Gain

Investment

Percentage

Cumulative

Required To

Principle

Loss

Loss

Break-Even

100




90

-10.00%

-10.00%

11.11%

80

-10.00%

-20.00%

25.00%

70

-10.00%

-30.00%

42.86%

60

-10.00%

-40.00%

66.67%

50

-10.00%

-50.00%

100.00%

40

-10.00%

-60.00%

150.00%

30

-10.00%

-70.00%

233.33%

20

-10.00%

-80.00%

400.00%

10

-10.00%

-90.00%

900.00%

5

-5.00%

-95.00%

1900.00%

0

-5.00%

-100.00%

You're Broke!


In the table above, please focus your attention at the midpoint where the asset value drops 50% to $50 in value.  Notice the amount required to break even.  If you own an asset and it decreases 50% in value from $100 to $50, your investment now has to increase 100% in value just to get you back to break-even.  Ouch!  To be crystal clear, a 50% loss equals a 100% gain, so focusing on how a manger protects your money in down markets is twice as important as how he grows your money in bull markets. 

Traditional managers dig themselves into such a deep hole in the bad years that it can take them years and in some cases decades to bring client accounts back to break-even.  This simple but powerful fact is how ProfitScore outperforms 99% of all money managers over a market cycle. 

One other very important point I want to bring to your attention is how getting back to break-even becomes increasingly more difficult the further your asset value falls in value.  Over the last 15 months, the current bear market has decreased the value of the market by roughly -50%.  A -50% loss requires a 100% gain to get your head back above water.  But look at what happens if your asset value drops -60% in value.  The amount required to break-even has now increased to 150%!  An additional loss of -10% in asset value now requires another 50% gain to get your portfolio back to break-even.  The further it falls the more the math works against your net worth.

During the raging bull market of the 90's, arguably the strongest bull market in our lifetime, it took from October 1995 to the market peak in March 2000 for the S&P 500 index to increase 150% in value.  During this current Great Recession, I expect the market to fall at least 60% in value.  How long do you think it will take the market to increase 150% in value after a world wide financial crisis?  Those who invested in the Dow in 1929 and hung in there to eventually lose 89.2% needed to see their portfolios increase 826% just to get back to where they started. As it turns out, it took the steadfast buy-and-hold investor 25 years to do so. 

Now is NOT the time to sell and do nothing because you will miss the bounce in the market when it comes.  Now IS the time to hire a manager who can protect and grow your hard-earned investment assets in both bull and bear markets. 

Constructing Your Portfolio

By focusing on managers that don't lose money in bear markets, you get to have your cake and eat it too.  Some managers can capture all of a market's upside and make considerable money in down markets as well.  The only catch is finding top quality money managers who can do both on a consistent basis. 

The two tables below represent several different portfolio combinations based on capture ratios of the S&P 500 from 1990 through 2008.  The first table is built by using portfolios with positive capture ratios and the second table is built using portfolios that make money or break-even in down markets.  In this simplified example, I hope to demonstrate how important it is to not lose money in down markets. 

S&P 500 Average Geometric Mean Return

1990 through 2008

Upside Positive Capture Ratios

Upside Capture

Downside Capture

Geometric

Mean

Ratio

Ratio

Return

100.00%

100.00%

7.32%

100.00%

0.00%

12.92%

90.00%

10.00%

11.19%

80.00%

20.00%

9.44%

70.00%

30.00%

7.69%

60.00%

40.00%

5.93%

55.43%

0.00%

7.32%

50.00%

50.00%

4.15%

40.00%

60.00%

2.36%

30.00%

70.00%

0.55%

20.00%

80.00%

-1.27%

10.00%

90.00%

-3.10%

0.00%

100.00%

-4.96%


Table 1 is constructed by building each portfolio with positive upside capture ratios and positive downside capture ratios.  With this table, you will make money in an up market, but lose money or break-even in down markets.

Two things need to be pointed out in Table 1 above.  First, all downside capture ratios are positive - meaning that the best any of these portfolios did in a losing market year was break-even or make a 0% return.  The second item is the break-even point highlighted in yellow.  A lot of investors think in order to outperform the market, you need to swing for the fence and make large profits in bull markets.  Actually, the exact opposite is true.  Since 1990, if you hadn't lost money in the down years, you would have only needed to capture 55.43% of the market's gains in the up years to equal a buy-and-hold strategy.  This break-even percentage will vary from decade to decade by plus or minus 10%, so it holds true over time.  They way to get ahead is simply not to give it back.   

S&P 500 Average Geometric Mean Return

1990 through 2008

Downside Negative Capture Ratios

Upside Capture

Downside Capture

Geometric

Mean

Ratio

Ratio

Return

100.00%

-100.00%

17.43%

0.00%

-100.00%

4.00%

10.00%

-90.00%

5.03%

20.00%

-80.00%

6.03%

30.00%

-70.00%

7.00%

40.00%

-60.00%

7.94%

50.00%

-50.00%

8.85%

60.00%

-40.00%

9.72%

70.00%

-30.00%

10.57%

80.00%

-20.00%

11.38%

90.00%

-10.00%

12.16%

100.00%

0.00%

12.92%


Table 2 is the reverse of Table 1 above.  All of the downside capture ratios in this table are negative.  Once again, a negative downside capture ratio means the opposite of what you think.  If the market is down -20% and you have a negative downside capture ratio of -50%, you would make 10% during that year (-20% * -50% = 10%).

I wish this wasn't so hard to explain, so stay with me a little longer.  There are some very important differences to point out about Table 2. 

  1. There are no losing years.
  2. Having a negative capture ratio (making money in down markets) makes your returns higher on average than Table 1.
  3. The majority of portfolio options significantly outperforms a traditional buy-and-hold portfolio.
  4. You would be a much happier and wealthier investor if you did not lose money in bear markets. 

A picture is worth a thousands words. 



The chart above represents the S&P 500 index (blue line), compared to a portfolio constructed using an upside capture ratio of 70% and a downside capture ratio of -20% (red line).  How do you think you money should be managed?

Portfolio Performance Analysis

Risk & Reward
Each of our portfolios is strategically allocated across one or more of the Investment Pillars of Strength discussed below.  Each Pillar is managed by multiple, uncorrelated, absolute-return investment managers to produce a return stream that is consistent, negatively correlated with the major market averages in down markets and non-correlated with each of our core Pillars of Strength. 

Managing risk is our most important consideration and it is reflected in the way our portfolios are built and managed each and every day.

The decade long secular bear market peaked 15 months ago and is in a death spiral as I write this.  The S&P 500 and the Dow are both down approximately -50%.  As of January, the Dow has fallen five straight months in a row and has also fallen 12 out of the last 15 months.  Similar to most bear markets, asset class correlations increased dramatically causing most asset classes to fall in lock step with the market.  Even balanced portfolios holding 60% equities and 40% bonds have dropped an average of -35%.  Gold, oil, grains and any other commodity you can find dropped like a safe during this period, destroying the myth of non-correlation between asset classes.  It will be interesting to see what color lip stick modern portfolio theorist put on this bear market to justify the complete and utter destruction of their asset allocated portfolios.   

Below is a performance summary for the indices we track and benchmark our portfolios to:    


Cumulative Return

  

Average Annual Return

Indexes

Mth.

YTD

1 yr

  

3 yr

5 yr

10 yr

  

  

  

  

  

  

  

  

CSFB L/S *

0.11

0.11

-16.26


0.08

4.61

7.36

CSFB Multi-St. *

1.77

1.77

-20.84


-1.56

2.21

5.76

Barclay F-of-F *

0.96

0.96

-18.85


-3.02

1.04

5.60

S&P 500

-8.43

-8.43

-38.63


-11.78

-4.24

-2.65

Barclay HY

5.99

5.99

-20.67


-4.24

-0.01

2.62

Barclay Agg.

0.88

0.88

2.54


5.19

4.30

5.46









* Note:

Estimated monthly performance



Volatility continues to remain high, so our overall equity investment allocation remains low.  We expect volatility to remain at historically high levels for some time, so overall investment allocation remains muted to normalize the market's volatility.      

Our equity traders continue to walk on water by producing positive returns in the worst performing January on record.  Our long/short equity traders lead all allocations followed by impressive gains in our Strategic Balance allocation. We continue to struggle trading the government manipulated fixed market, but are optimistic about the opportunities in this important allocation long term.  We are currently showing positive gains for February as the market moves to test November lows.       

Index Advantage:

Our long/short index traders outperformed the S&P 500 index for the month by an astounding 13.55%.  Because volatility remains so high, our overall investment allocation within this allocation remains 25% or less.  Our trading accuracy for the month exceeded 80% with no losing weeks and few losing days.  Considering our low investment allocation, our 6.97% gain for the month was once again impressive. 

For the month, this pillar gained 6.97%. 

Strategic Balance:

Having to repeat yourself about making money in down market is a nice problem to have when writing this letter.  The traders in this allocation tend to spend the majority of time invested in the safety of cash, while waiting for high probability trades to materialize.  Our 2.44% monthly return was earned while being invested fewer than 10% of the days during the month.                       

For the month, this pillar earned 2.44%.      

Dynamic Income:

In looking back over the past 12 months, trading fixed income investments has caused me more grief than equity investments.  Considering that equity investments in 2008 experienced about the same amount of volatility as they experienced during the Great Depression may seem a little odd.  The reasons vary from assets that don't track their benchmark index, to government manipulation, to limited asset trading options, etc.  January was another one of those oddities where the high yield investments that we traded actually went down in value as the benchmark index went up in value.  What we do is difficult enough in normal circumstances, so dealing with these problems has made it almost impossible.  We've learned some valuable lessons over the last 12 months, and I plan to use them to our advantage in 2009.     

For the month, this pillar earned -3.36%.

Our portfolios are built using varying distributions to the strategic allocations discussed above.  To view detailed performance and risk statistics information about our investment portfolios for the month, please click on the links below: 

 

If You Are a Client, Don't Be Confused.
Actual management and performance fees are incurred monthly but are deducted from client accounts in the first month of every quarter (January, April, July, and October).  For performance reporting purposes, we deduct fees monthly as they incur and not quarterly, as they are reflected in client statements.  It all washes out in the end, but this may cause your account performance to deviate from our published performance reports on a month-to-month basis.  To be conservative, we also deduct the maximum fees we charge from our performance reports and your actual overall fees paid may be less than our maximum. 

Dancing with My Daughters and Hitting the Slopes

Valentine's Day at the McClure house has developed into a great tradition.  For the past five years (since my oldest daughter turned five), my girls, Sarah and Annabelle, and I have attended a dance at their school called the Daddy Daughter dance.  It is truly a fun time for all of us.  Mom gets to go shopping with her girls to find them just the right dress.  The girls get dressed up, go out to a nice dinner, play with their friends, and of course dance with their dad.  I get to take it all in.  You might say I have the most fun.  It brings a smile to my face every time I think of it. 

The dance theme changes form year to year.  This year's theme was a 50's sock hop.  I have to admit, I felt pretty cool in my white t-shirt and jeans.  My wife, Leigh Ann, found my old high school jacket and to my surprise, it still fit. 

The person who puts on the dance doesn't miss a detail-cake, punch, dancing games, great music, pictures, lots of moms helping everything run smoothly, and flowers for the girls.  I was kidding Sarah on the way to the dance that she would have to take me to the dance when I was an old man.  When we met a very pleasant old man and his beautiful daughter at the dance this year, we both laughed. 

I plan to attend this dance as long as Annabelle and Sarah will let me go.  I will be disappointed when they grow out of this tradition. 

My old college roommate and his family spent President's Day weekend with our family.  Geoff and I hit the ski slopes for a couple of days to soak it all in.  Geoff originally taught me how to ski and volunteers to teach ski lessons at Mt. Hood.  Geoff skis at least twice as good as I do, so my legs are plenty sore from our big adventure.  Good snow, good friends and no broken bones.  I give it two thumbs up. 

I am already looking forward to my next letter.  Until then, take care and stay in touch.


Working to grow your wealth,


John M. McClure
President & CEO
ProfitScore Capital Management, Inc.


P.S. If you would like to hire us to help you navigate this difficult bear market, below are three ways to contact us:

  • Complete our Private Client Group request form by Click Here and submitting your contact information. (This is the most preferred method.)
  • Call us directly at (800) 731-5690.
  • Simply send us an email to info@profitscore.com.


Someone will contact you within 24 hours of receiving your information.





Posted 02-20-2009 5:27 PM by John M. McClure

Comments

MoneyTalks wrote re: Here Is My Secret for Outperforming the Market
on 02-26-2009 2:00 PM

Fantastic article John...good read.  Love Rick Santelli's rant too.

JCHarper wrote re: Here Is My Secret for Outperforming the Market
on 05-02-2009 9:27 AM

<< You see, the market is a zero sum game. ... >>

In a very narrow sense, your statement is correct - there is a seller for every share of stock bought.

But in the bigger picture, there is NOT a loser for every winner in the stock (capiatal allocation) market as there is in the dreivative (risk allocation) market.

In the stock market, wealth (useful goods and services) is created when the economy is growing and destroyed when the economy is contracting. Overall, more total wealth has been created than destroyed as evidenced by the fact that both population and living standards have risen at the same time for many generations.

Socialists are concerned with the distribution of wealth. Capitalists are concerned with the creation of wealth. They are not opposites. In fact, there is nothing to distribute if it isn't created in the first place.

The nation needs to remember that little fact.

Cordially,

John C. Harper