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Was Your Stock Portfolio Up Over 40% in 2013?

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
January 14, 2014

IN THIS ISSUE:

1. Was Your Stock Portfolio Up Over 40% Last Year?

2. The Niemann Capital Management Advantage

3. Now is the Time to Get Niemann on Your Team

4. Niemann’s Risk Managed Investment Strategy

Was Your Stock Portfolio Up Over 40% in 2013?

Editor’s Note:  There is no need to read today’s E-Letter unless you are interested in an investment opportunity that delivered the following:

  • A 2013 calendar-year gain of over 43%, net of all fees and expenses;
  • An annualized return since inception that beat most equity benchmarks;
  • Would have turned a $100,000 investment at its inception in September 1996 into a nest egg of over $577,000 by the end of 2013;
  • The flexibility to move to cash should we encounter a bear market or major downward correction; and
  • The minimum investment is only $50,000.

If you can say all of that about your portfolio, then you probably don’t need the opportunity I’ll be discussing today. Otherwise, please read on. As always, past performance is not necessarily indicative of future results.

Last October, I wrote about how  Niemann Capital Management’s “Risk Managed Program” seemed to be ignoring all of the noise about QE, tapering, government shutdowns and other distractions that were so much a part of 2013, and was outperforming the S&P 500 Index by a significant margin. This was no small feat, since the S&P had a year-to-date gain of almost 20% as of the end of September.

Now fast forward to the end of 2013 when Risk Managed finished the year with a whopping 43.79% gain, net of fees – more than 11 percentage points higher than the S&P 500’s excellent gain of 32.39% (including dividends). This difference in performance is known as “alpha,” which is often defined as the added value that a portfolio manager brings over and above a given benchmark, in this case the S&P 500 Index. 

As you might guess, positive alpha is rare in market environments in which the stock indexes go straight up, simply because it’s difficult for money managers to beat a market that seems to be defying gravity. However, Niemann’s Risk Managed Program did add significant alpha in 2013 despite the stock market’s roaring success.

Had you followed my advice in October and invested in Risk Managed, you would have enjoyed the nice gains the program made in the last two months of 2013. However, had you been invested for the entire year, you’d be sitting on a gain of over 43%!

Of course, since the large gain in 2013 has been accomplished, you may be thinking that it would be a bad time to get into the Risk Managed Program now. That’s exactly what some of our clients said in early 2013 when Risk Managed was already up more than 21% at the end of May. They chose to wait for a pullback that never happened, so they missed out on the great year as Risk Managed’s gain more than doubled by the end of 2013 to 43.79%.

This combination of the potential to add alpha while also having the flexibility to move to cash is why I strongly urged you to take action again back in October, saying:

Don’t spend another day being out of the market wondering if you should get back in, or being in the market wondering if you should get out.

I have always believed that good news bears repeating, so I’m going to review the advantages of the Niemann Risk Managed Program again in today’s E-Letter. I’ll also provide some very interesting analysis for your review as you consider this long-term performer.

As always, I must caution that, like most risk-managed strategies, the Niemann Risk Managed Program didn’t outperform the major indexes in every market environment, and that past performance is no guarantee of future results. Be sure to read the Important Disclosures at the end of this E-Letter, including the inherent risks in comparisons with indexes.

The Niemann Capital Management Advantage

As you can see in the chart below, Niemann’s Risk Managed Program has significantly outperformed the S&P 500 Index and the Nasdaq Composite Index for many years. And the program has done so with much less risk (as measured by drawdowns) during bear markets. That’s a combination that should impress any serious investor!

Growth of $1000 Investment

Niemann’s Risk Managed Program has beaten the S&P 500 Index since its inception over 17 years ago, as the above chart illustrates. Over that long period, Risk Managed has delivered annualized returns of 10.37% versus only 7.65% for the S&P 500.  That’s an advantage of over 2.7% a year on average, which has made a huge difference over the last 17 years. Again, these are actual returns in real accounts, net of all fees and expenses.

Best of all, Niemann has delivered those stellar returns with a LOT less risk than the S&P 500 Index. During the bear market of late 2007 to early 2009, the S&P 500 plunged over 50%. During that same scary period, Niemann’s Risk Managed Program lost only 28.9%.

So not only has Niemann beaten the major market indexes significantly on the upside over the last 17 years, it has done so with substantially less risk on the downside. And that’s what really matters!

Sound interesting? The best way to see if Niemann’s Risk Managed Program may be a fit for your portfolio is to talk to one of our Investment Consultants. Just give Phil Denney or Spencer Wright a call at 800-348-3601 or send an e-mail to info@halbertwealth.com. Or, keep reading to learn more about Niemann’s approach to risk-managed investing.

Now is the Time to Get Niemann on Your Team

As I see it, Niemann addresses two major concerns for investors. The first concern is for those who are out of the market and don’t know how to get back in. I recently read an article discussing how many individual investors have missed the multi-year rally we’ve enjoyed since the 2009 lows, but many are apparently OK with it because at least they’re not losing money.

This is definitely NOT OK. Many investors are sitting on the sidelines in cash investments that pay little, if any, interest. So, they are losing money to inflation each and every year they stay on the sidelines. Niemann’s Risk Managed Program addresses this concern by not only knowing when to enter the market, but also where to invest for the best potential for gain. 

This “momentum-based” strategy is a big reason why Risk Managed outperformed the S&P 500 in 2013 – and over time since its inception in 1996.

Total Returns Since Inception (1996)

A second concern that Niemann addresses is what to do when the markets head south. It’s an investing fact of life that bear markets occur regularly. When they do, the market indexes can plummet 50% or more as they did in late 2007 to early 2009. While passive investment strategies simply say, “Hold on and ride it out,” Niemann’s Risk Managed strategy offers a way to move partially or 100% to cash to reduce the effects of bear markets.

With Niemann, you have the potential to profit if the market continues to go higher, but with the goal of limiting losses whenever the next bear market unfolds.

For all of the reasons cited above, I think now is the time to get professional management for a portion of your investment portfolio. And I think Niemann Capital Management is a great place to start. The minimum investment is only $50,000. If you agree, click on the following link to access our online request form and receive additional information about Niemann’s investment strategies and how to invest.

About Niemann Capital Management

View the Niemann VideoDon Niemann founded Niemann Capital Management in 1991 after becoming disenchanted with buy-and-hold investment programs that left investors at the mercy of huge losses during bear markets. After starting his own firm, Don assembled a strong team of professionals with the goal of delivering the highest quality money management services.

One of the most impressive things about Niemann is the strong team orientation. While Don Niemann has the last word on investment decisions, he has a group of very talented people helping him. The firm has a well-organized vision and is prepared to grow larger without compromising their standards.

Alan Alpers, CFA is also an important part of the Niemann’s team. Alan serves as Senior Portfolio Manager and works directly with Don to analyze the markets and manage accounts.  Alan has a wealth of experience, including serving as Senior Portfolio Manager and Director of Research at Navellier & Associates, Inc. 

How The “Risk Managed Program” Works

Niemann’s methodology is based on the concept of “money flow.” As investors move their money between various asset classes, the relative value of each asset class fluctuates up and down. Niemann analyzes market data to try to anticipate the various themes which indicate where money is being directed and position clients accordingly.

The proprietary methodology employed in Niemann’s Risk Managed Program evaluates and invests in a broad universe of domestic equity exchange-traded funds (ETFs). Through this process, Niemann is able to gauge the overall health of the market and identify market trends that are performing well on a risk-adjusted basis.

The next step is to actively position assets in ETFs that have the potential to take advantage of the positive-trending themes. If no market sectors appear to be attractive, the strategy will remain fully or partially in cash. It is this skill in selecting the right ETFs to be in that allowed Risk Managed to significantly outperform the broad market indexes last year and over the last 17 years. You need this level of skill and experience in your portfolio, in my opinion.

Thus, Risk Managed accounts can be fully invested, partially in cash, completely in cash or even partially short as a hedge against existing long positions.  Unlike most such programs, Niemann tends to move between positions gradually. You are unlikely, for example, to see Risk Managed accounts move from fully invested to fully liquid (cash) all in one day.

Performance Evaluation

Niemann began offering the Risk Managed Program in September 1996. The results are quite impressive, as you can see on the Risk Managed Fact Sheet (including Important Disclosures).  Risk Managed has averaged double-digit annualized returns (+10.70% net of fees) since its inception while managing risk. This is impressive not only because the track record spans multiple market cycles, but also because it encountered two major bear markets since 2000.

Risk Managed has been able to reduce bear market risk through the use of its actively managed strategy. Don’t forget, however, that there is another type of risk: the possibility of not being fully invested in the market when it is going up. Each investor needs to balance the risk and reward factors in deciding whether this program fits their needs.

As I noted above, don’t spend another day being out of the market wondering if you should get back in, or being in the market wondering if you should get out. Call one of our Investment Consultants to see how you can benefit from Niemann’s long-term track record of making those decisions for you. Phil Denney and Spencer Wright are here to help you make the right decision based on your individual financial situation, so give them a call at 800-348-3601 or send an e-mail to info@halbertwealth.com.

Conclusions

Few active managers have performed as well as Niemann since they started in 1996. I am always amused at so-called “experts” who claim that actively-managed investment strategies cannot beat buy-and-hold over extended periods of time. Yet the Niemann Risk Managed Program is one of the notable exceptions to that rule, having easily outperformed the major stock market indexes both in return and risk management for the last 17 years.

If you are currently out of the stock market for fear that it’s too late to get in, then Niemann may be just what you’re looking for. Niemann’s strategy only enters the market when the potential for gain exists. After all, an active manager doesn’t provide its highest value by knowing when to get out of the market, but rather knowing when to get back in.

If you're currently in the market and are worried that the rally has gone too far, too fast, then Niemann can also be an excellent option for you. Passive buy-and-hold strategies have no way to manage the risks of a bear market, while the risk management strategy employed by Niemann seeks to rotate to higher cash allocations as it confirms major downward corrections and bear markets.

Finally, you might want to view our short video about Niemann's investment programs.

The main thing to remember is that procrastination is your enemy. Don’t wait until the market has made another major move, up or down.  Niemann’s Risk Managed strategy can only help you if you’re in position for them to manage your money. The minimum investment is $50,000.

If you want to learn more about Niemann and/or receive application forms, feel free to contact us in any of the following ways:

Wishing you profits,                                                 

Gary D. Halbert

IMPORTANT NOTES:  Halbert Wealth Management, Inc. (HWM) and Niemann Capital Management (NCM) are Investment Advisors registered with the SEC and/or their respective states.  Some Advisors are not available in all states, and this report does not constitute a solicitation to residents of such states.  Information in this report is taken from sources believed reliable but its accuracy cannot be guaranteed. Any opinions stated are intended as general observations, not specific or personal investment advice.   Please consult a competent professional and the appropriate disclosure documents before making any investment decisions.  Investments mentioned involve risk, and not all investments mentioned herein are appropriate for all investors.  HWM receives compensation from NCM in exchange for introducing client accounts.  For more information on HWM or NCM please consult HWM Form ADV Part 2, NCM Form ADV Part 2 and Niemann’s Annual Disclosure Presentation, 2013 available at no charge upon request.  Officers, employees, and affiliates of HWM may have investments managed by the Advisors discussed herein or others.

As benchmarks for comparison, the Standard & Poor’s 500 Stock Index (which includes dividends) and the NASDAQ Composite Index represent unmanaged, passive buy-and-hold approaches.  The volatility and investment characteristics of the S&P 500 and the NASDAQ Composite Index may differ materially (more or less) from that of the Niemann Risk Managed program since they are unmanaged Indexes which cannot be invested in directly.  The performance of the S & P 500 Stock Index and the NASDAQ Composite is not meant to imply that investors should consider an investment in the Niemann Risk Managed program, which is actively managed, as comparable to an investment in the “blue chip” stocks that comprise the S & P 500 Stock Index or the stocks listed on The NASDAQ Stock Market that comprise the NASDAQ Composite.

Historical performance data is provided by the Advisor and include all actual, fee-paying fully discretionary accounts managed by Niemann in this strategy.  Each composite does not accurately present the performance of any specific account, which depends on investment timing and weighting, among other factors, which vary from account to account. Each account included in the composite is added after it has been under active management for at least one full month. A closed account is included through the last full calendar month that it was actively managed.  See the Annual Disclosure Presentation, 2012 for more details.  Through April 1, 2010, the performance does not include investment in exchange traded funds.  Performance after that date may include investment in exchange traded funds and, as a result, may differ materially.  These performance numbers have not been verified by HWM, and therefore HWM is not responsible for their accuracy. Statistics for “Worst Drawdown” are calculated as of month-end.  Drawdowns within a month may have been greater.  PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.   Any investment in a mutual fund or ETF carries the risk of loss.   An account with any Advisor is not a bank account and is not guaranteed by FDIC or any other governmental agency.

When reviewing past performance records, it is important to note that different accounts, even though they are traded pursuant to the same strategy, can have varying results.  The reasons for this include: i) the period of time in which the accounts are active; ii) the timing of contributions and withdrawals; iii) the account size; iv) the minimum investment requirements and/or withdrawal restrictions; and v) the rate of brokerage commissions and transaction fees charged to an account. There can be no assurance that an account opened by any person will achieve performance returns similar to those provided herein for accounts traded pursuant to the Niemann Risk-Managed trading program.

In addition, you should be aware that (i) the Niemann Risk-Managed trading program is speculative and involves risk; (ii) the Niemann Risk-Managed trading program’s performance may be volatile; (iii) an investor could lose all or a substantial amount of his or her investment in the program; (iv) Niemann will have trading authority over an investor’s account and the use of a single advisor could mean lack of diversification and consequently higher risk; and (v) the Niemann Risk-Managed trading  program’s fees and expenses (if any) will reduce an investor’s trading profits, or increase any trading losses.

Performance results are presented net of transaction costs and Niemann’s actual management fees.  Niemann’s annual management fees may vary from 1% to 2.3%. Additionally, mutual funds (including exchange traded funds and variable annuities (collectively referred to as “Funds”) charge various fees, all of which are disclosed in the Funds’ prospectuses, along with potential trading restrictions.   Such fees are borne by shareholders and are reflected in the net asset values of the Funds.  Some Funds also charge short-term redemption fees and excess transaction fees (Special Fees) that are billed to shareholders at the time of the event causing the fee.  Clients pay these fees in addition to Niemann’s advisory fees.  In selecting Funds in which to invest client assets, Niemann considers the nature and size of the fees charged by the Funds.  Niemann selects Funds only if Niemann believes the Fund’s performance, after all fees, will meet Niemann’s performance standards. Consequently, Niemann may select Funds with higher or lower fees than similar Funds, and that charge Special Fees.  When deciding whether to liquidate a Fund position, Niemann will take into consideration any Special Fees that the Fund may charge.  Niemann may decide to sell a Fund position even though it will result in the client being required to pay Special Fees.  In addition, overall performance may be affected by the fees charged by the account custodian.   All dividends and capital gains have been reinvested.  Consult your tax advisor for tax implications. Money market funds are not bank accounts, do not carry deposit insurance, and do involve risk of loss.  “Annualized” returns take into account compounding of earnings over the course of an investment’s actual track record.  The results shown are for a limited time period and may not be representative of the results that would be achieved over a full market cycle or in different economic and market environments.

 


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Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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