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Money Management Agreement
Economic Leads uses demographics,
valuation, a measure of honesty, and other variables to select
countries with the least chance of downside risk and the
greatest chance of upside potential. Investments are chosen from
countries in blue on the map below. The strategy is designed to
work over five year periods. The strategy is designed and
intended to be prudent for all funds with an investment horizon
of at least 5 years. Any stock investment with an expected
holding period of less than 5 years should be considered
speculative. We do not attempt to limit week to week or quarter
to quarter fluctuations in portfolio value. We attempt to out
perform the the broad stock market averages over five year
periods. Check our
Investment
Performance
since 2000 when we developed the EL Country Model.
We manage money on a fee only discretionary
basis in a separate account in the name and ownership of client.
We do not attempt to match investments to individual preferences
for risk and return. In fact, we believe such attempts to
accommodate individual risk preference is usually done on the
false premise that past volatility and return indicate future
volatility and return. Clients and potential clients should
recognize that individual preferences for risk and other
personal information such as net worth have no influence on
whether a particular security is undervalued or overvalued.
The three main strategies for outperforming the
market are:
We keep expenses low by:
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Using exchange traded funds, where possible,
which typically have much lower expenses than mutual funds,
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Using a low cost internet broker as the
custodian of the account.
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Having a strategy that results in infrequent
trades.
There are oceans of data, but perhaps only a few
buckets full of data that are predictive. Our research focus on
finding data that has a leading, logical historical correlation
to what we predict. Our analysis and research is described in
the EL Country Model. Our focus is long term. We have not proven
to have any consistent ability to identify short term
opportunities.
When our indicators show the markets to be
substantially overvalued, we play defense by lightening up our
equity exposure and for some clients take short positions to
hedge against loss. While we do not have a demonstrated ability
to time tops and bottoms in the market, this defense based on
valuation appears to improve long term returns for clients.
Form ADV Part
II
contains disclosure information investment advisors that we are
required to give to prospective clients.
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