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Is Your Stock Portfolio Up Over 30% This Year?

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
October 22, 2013

IN THIS ISSUE:

1. What’s Working in This Crazy Market Environment?

2. Is Your Stock Portfolio Up Over 30% This Year?

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

4. Niemann Capital Management Advisor Profile

5. Administration and Reporting

What’s Working in This Crazy Market Environment?

This is the question I get most from nervous investors who are trying to decide where to put their money in these troubled and unprecedented times. And why not? After all, we’ve got  government shutdowns, debt default risk, $17 trillion in national debt, the Fed printing trillions of dollars in new money, healthcare uncertainty, threats of war abroad, etc., etc.

No wonder investors are nervous! I don’t remember another time when there was more uncertainty in the markets. As a result, many investors are struggling to know what to do to protect and grow their money. Unfortunately, many are still on the sidelines after bailing out during the worst of the financial crisis in 2008. Now that they have missed so much of the bull market that began in early 2009, they simply don’t know what to do.

One thing we do know at this point in time is that Janet Yellen will be the next Fed Chairperson and she’s at least as dovish as Bernanke, and possibly even more so. This could mean that “tapering” of the Fed’s asset purchases may be off the table for the time being as the Fed seeks to prime the economic pump with more money. In other words, if a strategy has worked during QE3, there’s a good chance it will continue as long as the Fed keeps printing money.

So today, I’m going to answer the question of what is working in this crazy market environment. As you know, my real job is that of a Registered Investment Advisor (RIA). At Halbert Wealth Management, we continually search the financial world to find professional money managers who seek to provide attractive returns with less risk than the traditional “buy-and-hold” approach that most financial advisors recommend to you.

Today I will revisit one of our recommended money managers that is literally knocking the lights out in this crazy market environment so far this year. But before I do that, I have a simple question for you.

Is Your Stock Portfolio Up Over 30% This Year?

If your answer to this question is YES, then maybe you don’t need to read today’s E-Letter. But if your answer is NO, then I’ve got news for you. Today we will revisit a professional money manager that I have recommended for over a decade. That money manager is Niemann Capital Management.

Niemann’s “Risk Managed Program” has gained almost 33% (32.92% to be exact) this year as of September 30. This is actual performance, net of all fees and expenses. This compares favorably to the Dow Jones Industrial Average and the S&P 500 Index, which are up 17.6% and 19.8%, respectively so far this year. If you’re looking for what works in this crazy environment, you need to look no further than Niemann.

Niemann Risked Managed Program - Growth of $1000 Investment

In fact, 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, Niemann 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 Dow and the S&P. During the bear market of late 2007 to early 2009, the Dow plunged over 47% while the S&P 500 lost 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!

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.

Now is the Time to Get Niemann on Your Team

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, CFP® 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.

Stocks have been on a tear for the last several years, thanks in large part to the Fed pumping trillions of new QE money into the economy. We all know this can’t continue forever. Likewise, we all know that our government can’t keep running trillion-dollar deficits indefinitely. We all know that this party will end badly!

But that’s not to say that the party won’t continue for a few more years. As I noted above, Janet Yellen’s appointment as the new Fed Chairperson may be a sign that the easy money policy will continue, so stocks could well continue to surprise on the upside. And that’s the beauty of Niemann Capital Management.

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

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 they are OK with it because at least they’re not losing money.

This is definitely NOT OK. Many of these 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 is leading the stock market indexes so far this year.

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. While passive investment strategies simply say, “sit and take it,” Niemann’s Risk Managed strategy offers a way to move partially or 100% to cash to reduce the effects of a bear market.

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 where you can request additional information about Niemann’s investment strategies and how to invest.

Read on to learn more about Don Niemann’s background and how he developed his proprietary investment strategies.

Niemann Capital Management Advisor Profile

Don Niemann founded Niemann Capital Management in 1991. Don originally entered the investment business as a stockbroker and, over time, developed an active money management approach that worked well for his clients. After starting his own firm, Don assembled a strong team of professionals with the goal of delivering the highest quality money management service.

Niemann typically works with financial planners, attorneys, and accountants whose clients need asset management expertise. Since the firm is located near California's "Silicon Valley," a large part of their business comes from people in the technology industry. Niemann itself is also highly advanced in applying computers and the Internet to their money management business.  The firm currently manages accounts for thousands of clients across the country.

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 one of the newer additions to Niemann’s team. Alan serves as Senior Portfolio Manager and works directly with Don to analyze the markets and manage accounts. Coming to Niemann, Alan brought a wealth of experience, including serving as Senior Portfolio Manager and Director of Research at Navellier & Associates, Inc. Alan also works with HWM on our periodic Advisor webinars.  Click on the following link to listen to a recorded version of our most recent Niemann webinar.

The “Risk Managed” Program

Don 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 where money will be moving next, and position clients accordingly.

Niemann tends to move in small increments, rather than jumping from one investment to another overnight. All of Niemann’s investment programs are variations of the same basic strategy, but with different risk/reward characteristics.  This article focuses on their Fidelity-based Risk Managed Program. (For information on other Niemann programs, please contact Halbert Wealth Management.)

The proprietary methodology employed in the Niemann Risk Managed Program evaluates market data on a daily basis seeking to determine the direction and volume of investment 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 or “themes” 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 appears to be attractive, the strategy will remain all or partially in cash.

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 October 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 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 you review the information on the Risk Managed Fact Sheet, also note that Niemann’s performance is compliant with the Global Investment Performance Standards, or GIPS. In a nutshell, GIPS compliance consists of standards for performance presentations that ensure fair representation and full disclosure to potential investors.

While GIPS verification does not guarantee the accuracy of any specific presentation, it does verify that Niemann has complied with all GIPS standards on a firm-wide basis and that Niemann’s policies and procedures are designed to calculate and present performance in compliance with these standards. There is no law or regulation that requires an Advisor to be GIPS compliant, but doing so can give you confidence that Niemann strives to meet the highest standards of performance reporting.

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 and Spencer 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.

Administration and Reporting

Niemann can manage accounts for individuals, trusts, corporations, IRAs and most other entities. The Risk Managed Program is offered through the Fidelity Investments brokerage group, where Niemann has access to hundreds of ETFs. Each investor opens a brokerage account at Fidelity and grants Niemann the authority to make investment decisions for the account. (Niemann cannot withdraw assets from the account except for the quarterly management fee.)

Investors receive monthly statements and annual tax information from Fidelity. In addition, Niemann sends clients a detailed quarterly performance report. Fidelity also offers clients a special, secure web site where clients can see their account information updated daily. There will be periodic trading in your account, so it’s important to consult with your tax advisor for tax implications before making a decision to invest.

The minimum account size for Niemann is $50,000. Fidelity charges no separate fee for its custodial services, though each ETF has its own expenses (see funds’ prospectuses for more details). Niemann’s management fees are billed quarterly in arrears, based on the following annual percentages for various assets under management:

First $500,000 2.30%
Next $500,000 1.65%
Next $2 million 1.10%
Over $3 million 1.00%

(Note – All performance information quoted above is net of all fees and expenses.)

Conclusion

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 since its inception in 1996.

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 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 corrections and bear markets.

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.

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, 2012 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 Halbert Wealth Management, Inc. Gary D. Halbert is the president and CEO of Halbert Wealth Management, 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, Halbert Wealth Management, 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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