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Good Timing
Peter MautheSpectrum Financial Inc.
May 15, 2004
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OBJECTIVE
IS to Make Money!
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OBJECTIVE is NOT to be right
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APPROACH: Find or make price streams that are
smooth and offer superior performance.
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Baskets Pros:
enhanced betas, enhanced
performance, trade all day, unique
price stream, smooth price
stream, can easily target market hot spots
Cons: trade all day, transaction costs
need to be managed,
slippage needs to be managed,
trading and tracking of baskets
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Biotech Holders vs. Equal Weighted BasketBasket equals or betters the performance of the Holders
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Industrials vs. Equal Weighted Dow BasketBasket equals or betters the performance of the Holders
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IBD 100 Basket vs. NASDAQ CompositeBasket far outperforms the NASDAQ Composite
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Lowry's Power Bank basket vs. NASDAQ Composite.(vs. BKX which was +46.29%)
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Lowry's Power Oil basket vs. NASDAQ Composite.(vs. OIH which was +26.89%)
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Lowry's Power REIT basket vs. NASDAQ Composite.(vs. IYR Real Estate ETF which was +45.05%)
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Top small cap growth fund picks vs. Rydex Mekros (1.5x enhanced beta)Mekros outperforms the average of our favorite small cap growth fundsFOCUS ON STYLE SECTOR RATHER THAN SPECIFIC FUNDS
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CRUSH basket 1/14/03 – 3/11/03 vs. NASDAQ CompositeThose that go down the most in a correction tend to go up the
most in the following rally.
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CRUSH Basket 7/14/03 – 8/8/03 vs. NASDAQ Composite Those that go down the most in a correction tend to go up the
most in the following rally.
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Lowry's “Power” REIT basket vs. NASDAQ Composite.(vs. IYR Real Estate ETF which was +45.05%)
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Position Sizing Dollar loss stops Percent loss stops % of Capital stops – dependent on
where trade stop is.
Dynamic stops to keep positions from getting too large.
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Trading by ExposureHedge Fund Start of Day % Long vs. NASDAQ
Composite
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
1200
1300
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
NASDAQ Comp.
Hedge % Long
Average % Long:
2003 = 69%
2003 post March low = 78%
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Hedge Fund Formula Return using Russell 2000 vs. Russell 2000
300
400
500
600
700
800
900
Russell 2000
Hypothetical return assuming invested
in the Russell 2000
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Profile ForecastingS&P 500 vs. 4 Prior Periods of the S&P 500
as of the Close 05/05/04
100.00
110.00
120.00
130.00
140.00
150.00
160.00
9-Oct-02 6-Jan-03 2-Apr-03 27-Jun-03 23-Sep-03 17-Dec-03 16-Mar-04 0-Jan-00 0-Jan-00
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Behavioral Finance More errors are made when a
trader has a forecast. Objectivity is compromised since subconsciously the trader tends to interpret indicators to fit the forecast.
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Good News / Bad News Discount Model
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Trend line anchoring
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Discretionary vs. Systematic Discretionary: + Performance
- Repeatability
Systematic: + Repeatability - Performance
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Moving average / New High Strategy
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PIMCO High Yield Institutional