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Hurricane Irene has left the building. The power is back on in Cape Cod and Don is working his way back to normal. It has been one thing after the other. Once the power came back on, we found the servers were down. I guess they must be located on the east coast also. One of our most volatile markets of all time now heads into September, one of the most volatile months. This could get interesting. The briefing was written prior to the storm. You will find it enlightening. Please check it out.
Have a great day!!
John Norquay CEO PivotPoint Advisors |
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Saturday, August 20, 2011
Hurricane Irene
Monday, August 8, 2011
Meaningful Risk vs. Reward Measurement
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With today's market volatility mirroring the volatility around the great depression, I thought I would re-cover our thoughts on risk. Many Advisors and Brokers use the standard measuring tools, such as Sharpe Ratio, Alpha, Beta, Standard Deviation and such. The problem with these measuring sticks, is that normal people don't understand them, rendering them useless to the normal human being. I have found that what keeps people up at night, is when their current portfolio value is less than the value it once was. It seems that most people know what their portfolio value was at its high and they know about where it is today. The difference between the high and today's value is called Draw Down. When draw down becomes too large, people become uncomfortable. Max Draw Down is measured from your portfolio's highest point, to its lowest point within the time period being assessed. This tells you how much the person who started on the absolute worst day (the high) would have lost on the day the portfolio hit its lowest low. Current Draw Down tells you how far from the portfolio high you are at today. The following table gives you these statistics for our Moderately Aggressive Model.
These figures shouldn't be confused with return. This does NOT tell you that we are currently down 3.01% from where we started. What it DOES tell you is that we are down 3.01% from the portfolio HIGH. Another table will help explain this.
First of all, Normalized Return is simply making the beginning point of the portfolio and S&P Index equal to make a simple comparison. You can see I normalized them to $100. This simply means that if you had invested $100 in the model, the numbers in the table would depict what actually happened to your portfolio. You can see that the portfolio went from $100 to $103.04 before our current draw down of 3.01% which puts us almost at where we started. Had you been able to invest in the S&P 500 index, your $100 would have only gained to $101.53 before it Drew Down to $83.66 which represents a Current Draw Down of 17.61%.
I hope this helps you understand why we manage money in the way we do. We don't care how much the market goes down, we want to limit the draw downs within our portfolios. However, we want to do this without limiting the portfolio's upside when the market turns around. If we do this effectively, we won't have very far to go before we break even and begin to reach new portfolio highs in the next market recovery.
For Chris' sake, I've updated and have embedded the current Moderately Aggressive Model's chart. This is a nice picture of the information in the above tables. Our value proposition is the blue space between the S&P 500 and our portfolio value. As of yesterday, Friday August 19th, our value over the S&P 500 index is 16.29%.
VISIT THE BRIEFING ROOM!
Everything we do is designed to give you the comfort of having your money in the market, without worrying about losing it in the next recession. To that end, we intend to be as transparent as possible about what we are doing with YOUR money and why we are doing it. The briefing room this week shows you one of the many email conversations Don and I have each week. He warned of a significant "trap" that was occurring the day before the market gave up another 6%. Reading this briefing each week should give you comfort knowing that someone is watching over your portfolio EVERY market day and acting according to your Risk Profile. Please visit the Briefing Roomand enjoy!
Have a great day!!
John Norquay CEO PivotPoint Advisors |
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Thursday, August 4, 2011
Special Video Update due to Market Crash
Hello all,
Most of you may know that the market has been on a major slide this week culminating in today's 512 point loss in the Dow.
First of all, I would like to reassure you that we are not participating in this market slide. Our first priority is to protect you from large market downturns.
In the spirit of transparency, we thought you would appreciate a word from our Chief Investment Officer, Don Miller. You can watch a 14 minute video Don prepared this evening to inform you of our position in the market right now and give you some insight into what we are thinking may happen next. The video can be seen by clicking this link: http://tinyurl.com/8-4-
We appreciate your trust and will keep you posted as this market develops.
John Norquay
John Norquay
