|Years ago, Marty Unterreiner, founder of Proactive Money Management and ProActiveMoney.com, was at a financial conference when he heard one of the leading market technicians of the day say the kind of thing that sends chills down traders' spines: "Technical analysis will help you only 20% of the time." |
Now, most technicians take this kind of talk with a grain of salt, but coming from One of Their Own, it would not have been surprising if more than a few technical analysts took that warning to heart.
Marty Unterreiner certainly did.
"I use a lot of technical analysis, but I include my own education and experience," he said.
And that's experience with a capital "EXP." Unterreiner has been involved in the financial world for nearly 39 years, and has been running the Proactive Money Management firm ever since launching the company in 1980. The firm has increasingly become a family affair, with Marty's son, Jeff, managing some of the company's money management strategies. Today, Proactive Money Management is completely the son's operation, with Marty Unterreiner stepping out on his own to found and lead a separate money management and financial planning firm, ProActiveMoney.com.
Of his new firm, Unterreiner says, "ProActiveMoney.com was really founded in May 2000." But it was not until recently he was able to devote his undivided attention to the new firm. "I like to wear two hats," he explains, "both as a money manager and as a financial advisor." In this capacity, Unterreiner has not only managed client money but also spent a great deal of time recommending the programs and investment models of other money managers whose performance has impressed him. "What's best is often a combination of unrelated programs," Unterreiner adds, "as opposed to investing or speculating all in one program."
REELIN' IN THE YEARS
Thinking back to those wild and woolly days when he first got into the financial business, Unterreiner remarks about how the investing climate of the early and mid-1960s was actually quite positive compared to the fear and loathing that followed in the late 1960s and the malaise — social and financial — of the mid- and late 1970s. "The years 196768 [were] quite dramatic on the upside," Unterreiner adds, rattling off the names of a number of then high-flying mutual funds such as the Enterprise Fund (founded by the infamous Fred Carr) that stoked the hopes (and greed) of many an investor.
But "quite dramatic" on the upside also meant "quite dramatic" on the downside back in those days. Unterreiner recalls how the market soared and swooned: up in 196768, down in 196970, back up through the end of 1972 and into 1973, and then as 1973 got going down into what Unterreiner describes as "a decline as sharp as the one in 1937. A lot of OTC [over-the-counter] stocks were totally devastated."
He adds, joking, that was where modern portfolio theory decided to start the clock. "All their models [began] in December 1974!" In stocks as with real estate, apparently, it is all about location.
Even as the market rallied in the wake of the virtual crash in 1974, stock investors were increasingly hard to come by. Unterreiner, who has always kept at least one foot in the door of the insurance business, switched his focus toward selling annuities, which were booming by the late 1970s. Recalls Unterreiner, "In 198081 you could get a guaranteed annuity for 15.75% with a bail out at 15%." In the climate of growing inflation and rising interest rates, investors flocked to these products, all but abandoning equities.
Asked what it was that brought investors back to the stock markets, Unterreiner's reply suggested that it depended on which investors you were talking about. "The masses didn't shrug off their bearishness until the mid-1990s," he said. But there were plenty of veteran investors still sticking around to get batted about by the early years of a new bull market, particularly the sharp runup from the 1982 lows and the sharp selloff during the bear market of 1983 into 1984.
How did Unterreiner make the transition from conservative, focus on returns, annuity sales to growth-first, dividend-second equity investing? Says Unterreiner, "Clients held me responsible for what happened to their money, whether I had anything to do with it or not." It was this conundrum that led to his development of his own methods and models for successfully making money in the markets.
THE PROACTIVEMONEY APPROACH
That credo in mind, Unterreiner applies five different market timing strategies to the various Potomac, ProFunds, and Rydex Variable Index funds. These funds allow him to take both bullish and bearish positions vis-à-vis the market as well as magnify returns by incrementally higher beta strategies. For example, ProActive's most speculative or aggressive market timing strategy, ProActive Variable Index I, is geared to exceed the return of the NASDAQ 100, Dow Jones Industrial Average, or Standard & Poor's 500 (depending on the fund invested) by up to 200%. Because of the risk involved with this strategy, ProActive insists on a minimum investment of $40,000.
Compare this to ProActive's Rydex Dual Index V strategy. This strategy tracks and seeks to outperform the Russell 2000 small-cap and S&P 400 mid-cap indexes by as much as 150% (again, using a fund specifically geared toward a 1.5 beta vis-à-vis these indexes). Or even better, compare the Variable Index I to the ProActive Value Index IV strategy that looks to keep pace with the modest returns available through a money market fund or certificate of deposit. With a tamer beta of 1.25, ProActive recommends this option for both beginning investors and veteran investors who are looking more to conserve capital than to create it.
The market timing strategies range from conservative and moderate to aggressive and ultra-aggressive. The range of investment minimums from $3,000 to $100,000 means that investors of virtually every capacity would be able to take advantage of ProActivemoney.com's market timing strategies. This underscores the notion that market timing services may be for the average investor what hedge funds are for the rich: opportunities to make money, as ProActiveMoney.com puts it, "on a calendar basis, whether the stock markets go up or down or sideways."
And if their prominently displayed "Investment Results" section is to be believed (all ProActive results are verified by Timer Trac, an independent market timing and money management tracking firm), those opportunities have been abundant over the past year or so. Since tracking began in May 2004, all four of ProActiveMoney.com's Variable Index strategies for Rydex funds and its Variable Index strategies using ProFunds and Potomac Funds are all up at least 27% (average annual return). Compared to an average annual total return in the S&P 500 of just over 9%, ProActiveMoney.com's market timing has bested the "buy and hold" bunch.
BEING A BETTER CLIENT
So what does being a good client to a market timing service — or in any financial-advisory relationship — mean, exactly? Top on the list for Marty Unterreiner is "expectations." He notes that it is vital for the investor to discuss reasonable performance expectations in terms of long-term performance and volatility.
That last point seems especially key, particularly as it relates to drawdowns. Says Unterreiner, "Everybody says a 10% drawdown doesn't matter, but a 20% [drawdown] matters to almost everybody." When investors and clients know what they are getting into in terms of performance, volatility, and drawdowns, then they'll be far better able to deal with the inevitably confusing times when they arrive.
Investors and clients should also understand the risks involved in a given market timing strategy. Adds Unterreiner: "A lot of engineers and computer geeks came into the market. People who can play with the computer and make a bunch of numbers come up that tell them what would have worked for the past few years." They build a system based on those numbers, he explains, and "then they sell the system until it doesn't work anymore."
Black box systems, he suggests, are particularly prone to this syndrome. Unterreiner believes that investors and clients following black box systems need to understand at least some of the principles involved, whether or not they work in certain types of markets. Again, performance over time is important for Unterreiner: "There needs to be a long-enough history to see which markets [the system] works best in."
That said, the "client approach" has its advantages for those who don't feel as if they have the aptitude, time, or interest to manage their own investment dollars. Says Unterreiner, "If you have a good manager, then you don't really need to know a lot about finance." That, of course, begs the question: How do you choose a good manager?
Ready with a response, Unterreiner points to three things: performance consistency over time, the ability to manage the inevitable drawdowns, and the capacity of a manager "to help steer clients toward appropriate strategies" — such as keeping them from being too aggressive at the wrong time.
This is the kind of guidance and wisdom that Marty Unterreiner has provided clients and investors for years, most recently through ProActiveMoney.com. The daily newsletter he sends out to subscribers and clients, for example, is efficient, entertaining, and insightful — ranging from the psychology of investors as witnessed by the whopping jury verdict against Merck in August 2005, to the straightforward battle of supply and demand in the Dow industrials.
Aspects of seasonality also appear in his newsletter comments, though these references tend to be geared toward alerting investors to what other investors — not necessarily ProActiveMoney.com — might be using to trigger new positions or liquidate old ones, and how ProActiveMoney.com will be preparing for and reacting to those developments as they come.
The newsletter not only brings readers up to speed on how the various strategies have been performing, but also assists investors and clients in learning how to read ProActiveMoney.com's performance from the rankings and tracking graphs available at the Timer Trac website.
In addition to the performance graphs that allow both those who are ProActiveMoney.com clients and those who are still shopping for a market timer the opportunity to make apples-to-apples comparisons between services, Timer Trac provides money managers like Marty Unterreiner with something else: a glimpse at the man behind the method and the method behind the man. Says Unterreiner — who, as an investor, is nothing if not a synthesizer, equally comfortable with analyzing market psychology as technical support levels — Timer Trac is also a great opportunity to explain to clients and prospective clients just what his style of managing money is like. "It lets people get a flavor," he says. "My money management style can't be explained in a few words."
David Penn may be reached at DPenn@Traders.com.
Current and past articles from Working Money, The Investors' Magazine, can be found at Working-Money.com.
|Title:||Traders.com Technical Writer|
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