Are You In The Top 5% Or Do You Invest Like Everyone Else?

www.profitscore.com

An Update on Our Performance
A Perfect Timing Model
The U.S. Dollar vs. the Printing Press
Obama's War on Wealth Goes Global
Assessing the Impact
The Corporate Conundrum
Putting Peter Out of Business to Pay Paul?
Manure... A True Story
Portfolio Performance Analysis
Jack Leaves for Birdie School

Is this a new bull market rally?  The S&P 500 index recently crossed over its 200 day moving average and has turned positive the for year.  The bad news today seems to be getting less bad than it has been over the past 12 months.  Optimism and hope about a recovery are flooding the mass media.  Are your feelings of "the worst is behind us" misguided?  I believe they are. 

I am going to point out some hard facts and ask you some painful questions to encourage outside-the-box thinking.  If I strike a nerve with you and motivate you to change your investment strategy, then I will consider this ProfitScore IQ to be one of my best. 

First, let me point out some of the hard facts: 

  • Fact #1:  If you lost money in your account in 2008, it is not the market's fault because there are ways to make money regardless of the market's direction.  Blaming the market is what most people do, but successful investors find ways to navigate the storm.    
  • Fact #2:  If the person you hired to manage your money lost money in 2008, it is not your manager's fault because you made the decision to hire the manager. 

As the Chief Financial Officer (CFO) of your investment assets, how are you doing at your job?  I evaluate managers every week at ProfitScore.  If you sent me your monthly performance track record for the past 36 months, would I hire you as a manager?  If I or someone else wouldn't hire you to manage our money, why have you hired yourself?

Based on every fundamental and longer term technical indicator I know of, there is at least a 50/50 chance that this market will soon drop like a safe.  To help bring clarity to this point, let me incorporate the 50/50 odds of this happening into a more meaningful question.

If there was a 50/50 chance that you would get killed as you drove to work over the next two years, would you change the way you got to work? 

If your answer is yes, have you changed the way your money is being managed or would you fall into the definition of insanity - doing the same thing over and over and expecting different results?  The majority of investors lost significant sums of money during this bear market and they have changed little or nothing about how their money is being managed today.  Why?

Not looking at your statement and hoping that everything will get better is not a sound financial decision.  Is that how you do your job or how you run your company?    Don't fall in love with any company, industry, or sector and don't have a strong opinion about the market.  Your job is to grow your assets every year-period!  Not achieving this goal should have you second-guessing what you are doing and adjusting your investment strategy accordingly.    

As the CFO of your net worth, I challenge you to think outside the box and not follow the crowd.  There are ways to navigate the storm and if you don't have a proven track record of doing this yourself, then I suggest that you hire a manager who has proven that they can. 

Remember, 5% of the people in America control 95% of the wealth.  In other words, 95 out of every 100 people follow the crowd and generally make poor financial decisions.  My attempt with this passionate introduction is to get you to think like the 5% of people who grew the value of their investment assets in 2008.      

"If you think nobody cares, try missing a couple of payments."
Author - Larry the Cable Guy

An Update on Our Performance

May was another solid month for all of our portfolios, showing green across the board.   Our fixed income traders produced positive gains for the second month in a row pushing our Income Builder portfolio positive for the year.  For the month, we made profits in all asset categories we trade (major U.S. indices, International indices, U.S. equity sectors, gold, energy, high yield bonds, government bonds, and the U.S. dollar).  Our trading accuracy remains positively skewed for both long and short trades.

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


Past 12

YTD

MTD May

Name

Months

2009

2009

Income Builder  (IB)

-1.93%

1.62%

2.92%

The Guardian  (GRD)

6.24%

8.32%

3.51%

Harmony Plus  (HMY)

16.06%

13.40%

4.00%

The Expedition  (EXP)

25.30%

19.85%

4.78%

S&P 500  (SP500)

-32.57%

2.96%

5.59%

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 http://profitscore.com/insight.aspx 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 Perfect Timing Model

I was speaking with a friend of mine the other day and they were inquiring about our performance returns in 2009.  They asked me how our most aggressive program was doing for 2009 and I replied about 20%.  He stated, "You must be very aggressive in your management in order to produce those kinds of returns."  Since my answer was the exact opposite of what he expected, I built the chart below to explain. 

Our investment exposure is reduced when volatility is high.  Because of recent high levels of volatility, our overall investment exposure has averaged 25% or less for the past 8 months.  So how do we generate high returns while investing such small percentages?  The answer is trading accuracy and increased opportunity.  

Compared to a traditional buy and hold investor who is held hostage by the relative direction of the market, we have roughly twice the opportunity to produce profits.  Our profits are determined by our trading accuracy and capital allocation, so regardless of whether the market is up or down, everyday is an opportunity to make money.      

This graph represents an equity curve produced by making money every single day in the S&P 500 from 1/1/2009 thru 5/29/2009.  This was done by taking the absolute percentage change in the index and compounding the returns for five months.  If the index was up 1% or down 3%, I assumed that I made the correct timing decision of being long or short and compounded the theoretical profits that were possible during this time period.  Remember, I said possible not probable. 


During that five month period, buying and holding the S&P 500 index would have made you a measly 2.96% profit while perfectly timing the S&P 500 index would have produced staggering gains of 532.79%. 

Creating the graph was a double-edged sword.  It really helped me explain to my friend how it was possible to generate 20% returns and only be exposed to the market 25% or less.  On the downside, it made me realize just how poorly we have performed compared to the opportunities to make profits in the first five months of 2009.  If anyone has created a perfect timing model that makes money everyday, please call me because you are hired! 

The U.S. Dollar vs. the Printing Press

Over the years, you have probably read some very compelling arguments about the good and the bad of eliminating the gold standard from the U.S. dollar.  There are some very smart people who present solid arguments for both sides.  If the dollar was tied to the gold standard, then 2008 probably would not have occurred.  However, being tied to the gold standard tends to limit how fast an economy can grow.    

The problem with not having the dollar tied to some kind of discipline or standard is that it allows savvy politicians to indirectly control the printing press.  Having the dollar tied to something that can't be manipulated by politicians would be healthy for any economy.  One look at our budget deficit clearly removes all doubt at how terrible our politicians are at being prudent with our very hard-earned tax dollars.  A friend of mine sent me the best graphical presentation I have ever seen displaying the effects of not having the U.S. dollar tied to the gold standard.


This log scale graph of the purchasing power of the U.S. dollar begins with an index value of 100 at the passage of the Mint Act of 1792.  The solid lines present periods when the dollar was convertible into a specific quantity of gold, and the fluctuations represent changes in the purchasing power of gold.  The dotted line presents periods when the dollar was not pegged to gold, during and after the War of 1812, the Civil War, World War I, and World War II.  There was limited convertibility from 1945 to 1971, and the dollar lost purchasing power during the period.  The last link between the U.S. currency and gold was cut in 1971 and the loss of purchasing power accelerated.  By 2004, the dollar had lost more than 92% of its original value.  This graph and its content was produced by the American Institute of Economic Research http://www.aier.org/.

The chart unfortunately ended in 2004.  I contacted the source and they are looking for an updated version.  I will include it in next month's letter if they do indeed send it to me.  The dollar has dropped like a stone since this chart was produced, so it will be much worse than above. 

Considering the $20 trillion deficits we are scheduled to owe by 2020, is it possible that the value of the U.S. dollar will be worth less than the paper it is printed on?

Obama's War on Wealth Goes Global

But just how wise is it?

"Why does a slight tax increase cost you $200 and a substantial tax cut save you thirty cents?"

Author - Peg Bracken

In our last ProfitScore IQ, we discussed the negative impact rising taxes have had on European economies. We also looked at the latest Forbes Tax Misery Index results, where the U.S. is on the scale and what we can look forward to in light of the president's plan for increasing tax revenues.

Not long after President Obama reached his first 100-day milestone, he announced another sweeping tax initiative, this one aimed squarely at multinational corporations and the wealthy, increasing tax revenues by 40% by 2013.  It was the second phase of his plan to raise money to pay for his spending initiatives.   

Here is an excerpt from the Department of Treasury (May 4, 2009) statement entitled, "Leveling the Playing Field."

Today, President Obama and Secretary Geithner are unveiling two components of the Administration's plan to reform our international tax laws and improve their enforcement. First, they are calling for reforms to ensure that our tax code does not stack the deck against job creation here on our shores. Second, they seek to reduce the amount of taxes lost to tax havens - either through unintended loopholes that allow companies to legally avoid paying billions in taxes, or through the illegal use of hidden accounts by well-off individuals.

A major part of this plan involves changing the deferral rules that allow U.S. companies to "ship jobs overseas" according to the administration. Currently U.S. companies are allowed to defer the taxes they pay on overseas income as long as the money remains invested in overseas operations. This will end as the Obama plan would eliminate deferral provisions and other "loopholes" for offshore subsidiaries. 

Is this approach realistic or even practical? Here is how the new Administration's proposals will impact multinational corporations, according to PACE coalition (Promote America's Competitive Edge) Coalition in a May 4, 2009 statement.

The current tax system permits for a temporary tax deferral until those earnings have been paid to the parent corporation. U.S. companies are still subject to taxes in the countries in which they operate. Since 95% of the world's consumers live outside the U.S., overseas operations are essential. All Organization for Economic Cooperation and Development (OECD) nations that tax worldwide earnings, permit some sort of deferral. "Leaving aside the questionable wisdom of raising taxes in the midst of a deep recession, this proposal is a job-killer for American workers," according to John Engler, President of the National Association of Manufacturers.  "U.S. corporate rates are already higher than most of the rest of the world. Deferral is essential to the competitive operation of U.S.-owned companies in foreign markets."

American multinational companies directly employ nearly 22 million U.S. workers, support the jobs of 30 million more, and pay wages that are 24% higher than average U.S. private-sector wages. Those 52 million American jobs - 44% of the U.S. workforce - depend, in part, on the competitiveness of U.S.-owned foreign affiliates.

In a nutshell, these proposals amount to a $200 billion tax hike for U.S. companies that the group calls America's most successful job creators.

Assessing the Impact

As we learned in our last newsletter, the first phase of the Obama tax plan, announced in April, is to raise taxes on those individuals and businesses making more than $250,000/year.  The second phase, announced in May, specifically targets U.S. multinationals with overseas operations and the wealthy with overseas investments.

Both initiatives are intended to help pay for Obama's spending plan.  Initiatives that Professor Michael Hoskins from Stanford University believes can in no way be limited to those making more than $250,000, since it will add $6.5 trillion to the 2010 - 2019 national budgets, not including his planned changes to Medicare or Social Security.

Here is how he explained it in an April 3, 2009 Wall Street Journal article entitled, "The $163,000 Tax Bomb."

If spread evenly over all those paying income taxes (which under Mr. Obama's plan would shrink to a little over 50% of the population), every income-tax paying family would get a tax bill for $163,000. (In ten years, interest would bring the total to well over $200,000, if paid all at once. If paid annually over the succeeding ten years, the tax hike per year would average almost $26,000.) That's in addition to his explicit tax hikes. While the future tax time-bomb is pushed beyond Mr. Obama's budget horizon, and future presidents and Congresses will decide how it will be paid, it is likely to be paid by future income tax hikes as these are general fund deficits.

We can get a rough idea of who is likely to pay them by distributing this $6.5 trillion of future taxes according to the most recent distribution of income-tax burdens. We know the top 1% or 5% of income-taxpayers pay vastly disproportionate shares of taxes, and much larger shares than their shares of income. But it also turns out that Mr. Obama's massive additional debt implies a tax hike, if paid today, of well over $100,000 for people with incomes of $150,000, far below Mr. Obama's tax-hike cut-off of $250,000 (over $130,000 in ten years and over $16,000 a year if paid annually over the following ten years). In other words, a middle-aged two-career couple in New York or California could get a future tax bill as big as their mortgage."

Therefore, hoping that additional taxes on those making in excess of $250,000 per year will pay for this plan is a fabrication according to Hoskins - it will cost all taxpayers more money.

But is it a good idea to target U.S. companies operating overseas?  Are claims by PACE and U.S. manufacturers that such a move is counterproductive valid?

The Corporate Conundrum

The following table produced by the Tax Foundation ranks nations according to corporate tax burden. As we see, the U.S. has the highest combined corporate tax rate behind Japan. (As we learned in last month's ProfitScore IQ, companies in New York City have the dubious distinction of paying the highest corporate taxes in the world at a combined rate of 46.2%.)

Rank
Country
Combined
Corporate
Income Tax
Rate 2008
1
Japan
39.54
2
United States
39.25
3
France
34.43
4
Belgium
33.99
5
Canada
33.5
6
Luxembourg
30.38
7
Germany
30.18
8
Australia
30
9
New Zealand
30
10
Spain
30
OECD 30 Average
26.60%
  
Source - Tax Foundation

U.S. corporations currently pay a tax rate that is 50% higher than the average for the OECD thirty most industrialized nations. But that isn't the whole story.

Of even greater concern is the fact that of that elite group of 30 nations, the U.S. is the only country that taxes its companies (and citizens) based on citizenship, not residency. That has created a unique problem for US companies with operations abroad and one that has required some rather imaginative solutions to keep them competitive globally.

Back in 1984, the Foreign Sales Corporation program was Congress's way of leveling the playing field for U.S. multinationals due to the fact that the U.S. is the only major industrialized nation (and one of only three countries in the world, namely the Philippines and Eritrea) that taxes based on citizenship. This puts American companies operating in foreign territories at a competitive disadvantage visa vie companies from other countries.

Subsequently, the World Trade Organization in 2000 ruled that the FSC rules were an illegal subsidy and allowed the EU to levy $4 billion in tariffs against U.S. exporters and multinationals unless the rules were replaced. In response, Congress adopted the Extraterritorial Income Exclusion (ETI) Act of 2000, but that was also successfully challenged by the EU.

In response, the ETI was replaced by the American Jobs Creation Act of 2004 signed by President Bush. It provided $140 billion of tax relief to domestic manufacturers and other producers, including several sectors that in the past, never qualified for tax relief. The corporate tax rate for domestic manufacturers dropped from 35% to 32%.

For a one-year period, U.S. multinationals were able to repatriate foreign profits at a 5.25% tax rate. This rate also applied to deemed dividends accumulated by affiliates of controlled foreign corporations that are exempt from current taxation under the Internal Revenue Code Kennedy Amendments of 1962, according to economist and international trade expert Walter Diamond.

Instead of the tax losses predicted by Democrats and even some of the Bush Administration economic advisors, the move caused a flood of overseas cash to be repatriated to the U.S. from more than 800 companies - approximately $362 billion was repatriated from foreign operations, according to the July 1, 2008 Wall Street Journal article "Corporate Tax Cut Windfall."

After the one-year period expired, companies would be taxed at the new corporate rate of 32% on repatriated income. Before the law was enacted, companies had to pay 85%, so this was an improvement. The Act also greatly reduced the double taxation of U.S. exporters and overseas manufacturers. Was it any wonder that more than $600 billion in corporate profits sat overseas?

If overseas corporate earnings had been repatriated under the tax rules Obama has proposed, as much as $510 billion would have gone to taxes.  But the reality is that corporations would have permanently kept the income abroad.
Phase two of Obama's plan was made public before the election in his Patriot Employer Act, in which he promised to address these corporate "tax breaks." Promises in a presidential campaign are not unusual and often forgotten once the candidate wins.

Unfortunately, this one wasn't.  Even more unfortunate, it is these so called tax breaks for which Congress has fought so hard keep so that U.S. multinationals could remain competitive with their global counterparts. An end to these breaks would force companies with overseas operations to pay the U.S. domestic tax rate (currently a minimum of 35%) on all income-no matter where it is earned-unlike the companies of every other industrialized nation against which American companies compete.

Taxes vs. GDP Growth from 1960 to 1996:

Government Size (Taxes/GDP)

Average Annual Growth Rate of Real GDP

Less than 25%

6.6%

25 - 30%

4.7%

30 - 40%

3.8%

40 - 50%

2.8%

50 - 60%

2.0%

Great than 60%

1.6%

Source: http://www.freetheworld.com/papers/Gwartney_Holcombe_Lawson.pdf


As we this table shows, economic growth was found to be inversely proportional to taxes as a percentage of GDP (tax burden), according to this Cato Institute study. 

Putting Peter Out of Business to Pay Paul?

Since 1990, the average tax rate for the 30 developed nations of the Organization for Economic Co-operation and Development has fallen from 40% (what the U.S. corporate tax rate was then) to an average of 26.6%, while the U.S. rate remained more or less static. And, during the 18 intervening years, Congress has been on a continual search to find ways to allow U.S. multinationals to effectively compete, given their unique international tax handicaps. If Obama's latest tax plan is approved by Congress, U.S. competitiveness would greatly diminish.

"Ironically, what the president proposes [increasing taxes for multinationals] will make it more likely that American companies will be bought by their foreign competitors," according to Dave Camp, lead Republican on the House Ways and Means Committee.

According to an article that appeared in The Wall Street Journal after Obama's plan was released in February 2008, "[Obama] has it backwards. The offshore activities of U.S. companies tend to increase rather than reduce domestic business. A 2005 National Bureau of Economic Research study by economists from Harvard and the University of Michigan found that more foreign investment by U.S. companies leads to greater domestic investment, and that U.S. firms' hiring of more offshore workers is positively, not negatively, associated with the number of American workers they hire. That's in part because often what is produced overseas by subsidiaries are component parts to final, higher-value-added products manufactured here."

In a May 6, 2009 article for Tax-News.com, U.S. Chamber of Commerce Chief Economist, Dr. Marty Regalia, warned that deferral has been "mischaracterized" as a tax break when it actually provides a "vital mechanism" for U.S. companies to claim relief from double taxation.

"The United States is the only major industrialized country which double taxes the overseas earnings of our companies. Since other countries don't subject their companies to double taxation, U.S. companies need deferral to stay competitive in the global marketplace," he said.

Who would be affected? According to a Wall Street Journal estimate in April, ten of the biggest U.S. corporations accumulated nearly $58 billion in overseas earnings during 2008, representing about $20 billion in revenue if taxed in the U.S. Since total U.S. corporate tax receipts that year were just over $300 billion, the amount is sizeable. But what would be the offsetting costs?

The challenge to taxing these companies is the type of businesses involved. For example, foreign profits are often highly portable like those in the technology or pharmaceutical sectors that rely on intellectual property, royalties or patents. Such property can easily be moved between entities or to different jurisdictions. Capital is extremely mobile. The problem is once it has moved, it rarely comes back.

Take Microsoft for example. By utilizing Irish patent income rules, the company was able to legally save an estimated $500 million in taxes annually, according to the Wall Street Journal's 2005 Round Island One report. That type of property can easily be moved.

Among the companies affected would be top tech firms such as Hewlett Packard, Cisco, Oracle and Google, as well as global icons like Coca Cola, Pepsi and most of the big pharmaceutical firms. Each of these companies has competitors from other nations that would relish the thought of seeing their U.S. competitors paying higher costs. It doesn't take an accounting genius to appreciate the benefit of buying a company with higher costs and moving it to a lower-tax cost jurisdiction especially when one considers that any other jurisdiction would have lower tax rates on multinationals than the U.S. 

"If rules are changed on tax deferral and we are taxed in the U.S. on non-U.S. profit, this significant additional U.S. tax cost would adversely impact our ability to invest and grow our business in the U.S....and to compete against our foreign competitors who are not subject to this U.S. tax," John Earnhardt, a Cisco Systems Inc. spokesman was quoted as saying in a May 4, 2009 WSJ article entitled, "Firms Face New Tax Curbs."

So tell me again how raising tax burdens on our top echelon global companies and making them less competitive is a good idea? Just how vulnerable will it make U.S. companies?  How many American jobs will it cost and how likely are they to be buy-out targets or move operations offshore? And if it turns out to be an extremely bad idea, how does the U.S. government go about bringing those companies, their jobs and investment dollars back home again?

The problem is no one, including those in the Obama Administration have provided the answers to these and other pertinent questions.

What are some other solutions? An idea put forward by economists like Nobel Prize winner Robert Lucas is to eliminate multiple taxes on capital gains, interest and dividends, as well as reduce the corporate tax rate. Taxing it once from income and then again when it's earned is not only counter-productive, but it discourages investment and job creation as well.

Isn't it about time the U.S. had a globally competitive corporate tax that encouraged business growth both domestically and abroad instead of penalizing it? Seems to me that the only ones who benefit from new taxes and anti-business regulations are the bureaucrats who create them in the first place.

Suggested Reading

Obama's $163,000 Tax Bomb
http://online.wsj.com/article/SB123871911466984927.html

Forbes 2009 International Tax Misery Index
http://www.forbes.com/global/2009/0413/034-tax-misery-reform-index.html

Obama Announces International Tax Crackdown
http://www.tax-news.com/asp/story/Obama_Announces_International_Tax_Crackdown_xxxx36605.html

Ireland Inc Is Nervous of Obama's Tax Plans
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS+FEATURES-qqqm=nav-qqqid=41325-qqqx=1.asp

Obama to Crack Down on Business Taxes
http://www.thetimesonline.com/articles/2009/05/04/ap/headlines/d97vgg581.txt

US Firms Gird For Battle On Obama Foreign Profits Tax
http://forexdaily.org.ru/Dow_Jones/page.htm?id=491499

Congress Approves Chamber-Opposed Budget
http://www.uschambermagazine.com/content/090504x.htm


Manure...A True Story

I got this in an email and then confirmed the story with Google.  The author is unknown.

Manure: In the 16th and 17th centuries, everything had to be transported by ship and it was also before commercial fertilizer's invention, so large shipments of manure were common.

It was shipped dry, because in dry form it weighed a lot less than when wet, but once water (at sea) hit it, not only did it become heavier, but the process of fermentation began again, of which a by product is methane gas. As the stuff was stored below decks in bundles you can see what could (and did) happen.

Methane began to build up below decks and the first time someone came below at night with a lantern, BOOOOM!

Several ships were destroyed in this manner before it was determined just what was happening!

After that, the bundles of manure were always stamped with the term "Ship High In Transit" on them, which meant for the sailors to stow it high enough off the lower decks so that any water that came into the hold would not touch this volatile cargo and start the production of methane.

Thus evolved the term "S.H.I.T " , (Ship High In Transport) which has come down through the centuries and is in use to this very day.

And I had always thought it was a golf term!

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 S&P 500 had another positive month in May, pushing toward, and finally crossing the highly watched and arguably over-emphasized 200 day moving average.  Since crossing the longer-term moving average on June 1st, the market has traded sideways and is either consolidating its gains for the next move higher or setting up for a tremendous fall.  Extended moves higher off of significant lows are called "climbing the wall of worry" and for good reason. 

Bear market rallies are notorious for sucking most investors back into the market because they feel they are getting left behind.  Getting left behind is an ingrained fear in all humans for the reason that the pack has traditionally meant safety.  In investing, it usually works the opposite, causing pain and anguish, but investors can't shake their carnal fear.  Once the move higher pulls most investors back into the market, it will, more often than not, crash from its own weight.  Bear market rallies are known for their fast and powerful moves higher.  Bear market declines are equally known for the ferocity of their decent. 

So which one will it be?  Another powerful move higher and the start of a new bull market or the continuation of the current bear market pushing major indexes to new market lows?  Since we make our trading decisions daily, we don't really care as long as we are winning more trades than we lose.  Like I tried to point out in the introduction to this letter, the ground is littered with dead bodies of investors and investor advisors who think otherwise.       

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 *

3.87

6.85

-15.00


1.60

5.95

7.75

CSFB Multi-St. *

2.97

9.12

-14.85


0.64

3.44

6.27

Barclay F-of-F *

2.69

3.82

-17.69


-2.75

1.57

5.25

S&P 500

5.59

2.96

-32.57


-8.24

-1.90

-1.71

Barclay HY

6.73

26.80

-7.78


1.02

4.05

4.38

Barclay Agg.

0.73

1.33

5.73


6.30

5.02

5.88









* Note:

Estimated monthly performance



Index Advantage:

The S&P 500 index rallied strongly again in May, tipping the scales with a 5.59% gain.  Our long/short traders continue to impress even me as they consistently harvest profits from the daily opportunities that present themselves.  Our trading accuracy continues to remain high for both our long and short trades.  Our upside and downside capture ratios for this allocation are off the charts.       

For the month, this pillar gained 6.13%. 

Strategic Balance:

Our overall exposure for the month in this allocation was 17.2%, yet these traders were able to produce gains of 2.91% for the month.  In other words, the total exposure to the market in during May was only 3.4 days.  Based on a risk-adjusted basis, annualized returns for this allocation would be triple digits.  May was the 7th month in a row this important allocation has made a profit.

For the month, this pillar earned 2.91%.      

Dynamic Income:

My frustration for this allocation has turned into pure satisfaction as we continue to fire on all cylinders.  The return stream for every asset we trade in this allocation has shown a drastic improvement for trading accuracy, lower volatility, and reduced correlation.  This month's performance takes us positive for the year and is now outperforming the S&P 500 for 2009 with a small fraction of the risk versus being exposed to volatile equity assets.

For the month, this pillar earned 3.17%.

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. 

Jack Leaves for Birdie School

Several months ago I wrote about my new dog, Jack.  Jack is a Pudlepointer (it is pronounced Poodlepointer) and for you manly men who are rolling their eyes thinking I have lost my mind for owning a bird dog that looks like a Poodle, Jack looks nothing like a Poodle and more like a slimmed down Chocolate Lab.  The breed is known for their intelligence, friendly demeanor and athletic ability.  I am proud to report that Jack excels in all categories.  If you are interested in learning more about the breed, here is a link to my breeder's website: http://cedarwoodgundogs.com/.

My last two dogs were English Setters and we still own both dogs as well.  Adding a young pup to our dog family has certainly stirred the pot as Jack wants to play constantly and my older Setters Maggie (11) and Bessie (13) would rather I lock Jack outside so he can't pester them anymore. 

My setters are great companions and were exceptional hunting dogs, but due to their age, they can't go bird hunting with me anymore.  I have owned a lot of dogs and I have to say that Jack is the smartest dog I have ever owned.  I trained my last two dogs and I am at best a marginal trainer.  However, Jack's intelligence makes me look like I really know what I am doing.    

I am so impressed with Jack's capabilities that I have decided to have him professionally trained.  So, yesterday Jack left for birdie school.  My Setters welcomed the peace and quiet, but I miss Jack's energy around the house.  Jack will be gone for the rest of the summer as he works with an excellent trainer honing his natural-born instincts to point and retrieve birds.  I can't wait for my dad's annual bird hunting trip to Idaho this year.  Spending time with my dad and watching my new dog work the field will be a special time shared between father and son. 

I hope I didn't make anyone mad with my slap in the face introduction to this letter.  This bear market has created many real life hardships and I have heard several stories first hand.  I just get tired of all the misleading garbage pushed out over the airways and felt I owed it to my readers to tell them like it is. 

June is already half over and I hope you are enjoying the summer with friends and family.  Talk to you next month.


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 clicking here http://profitscore.com/insight.aspx 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 06-19-2009 10:12 AM by John M. McClure