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Quarterly Journal of the National Association of Active Investment ManagersVol. 15 Issue 4, September 2018INDEXPresident’s LetterTRADING TECHNIQUEST’S BEEN A GOOD SUMMER, BUTextremely busy both with respect toNAAIM and business.At NAAIM, we have a number ofprojects underway in our ongoing effortto find value-add opportunities for themembership. In addition to the upcomingOUTLOOK 2018 conference in Chicago, aSteve Williamsonseries of Regional Meetings are taking shapefor Cleveland, Denver and Phoenix, a new enhanced forumboard is available complete with a mobile app, there’s a newincentive to be a part of Shark Tank, and more to announce asfall gets underway.Matt Spangler and his agenda team have an outstandingline up of speakers for OUTLOOK 2018. I think it may be ourstrongest conference yet. Check out the speakers and panelson the following pages and make certain you set time asideto be in Chicago November 5 and 6. Ned Davis Research, topbond expert Marilyn Cohen, Trade Ideas’ artificial intelligenceHOLLY, more great speakers, panelists and member participation sessions are just part of what you can look forward to atOUTLOOK 2018.I am particularly interested in hearing Ned Davis Researchand the My Market Outlook panel’s perspectives on the financial market for 2019. Personally, I think the market is near ashort-term high and going to pull off going into the elections.With the two parties going at each other, the negative politicalenvironment is bound to impact investor confidence. Oncethe election is behind us, I am anticipating a major rally intothe end of the year, giving funds and investment managers anopportunity to make up money they haven’t made this year.I’m even going to go out on a limb and say once tariffs areresolved, watch for emerging markets to spring back.As a big fan of the Regional Meetings, I am lookingforward to the upcoming Cleveland meeting. Ohio has longhad a good core group of NAAIM advisers who get together ona regular basis and it has been a pleasure to join them in thepast. Dave Traucher has taken the lead on that location, whileDave Moenning is working on the Denver regional meetingand Dave Daugherty has agreed to spearhead the Phoenixgroup. If you would like to lend your assistance to setting upa meeting in your area, or assisting with the planned sessions,just give any of us a call.As an organization of volunteers, we are always lookingfor help from the membership along with your ideas. Potentialspeakers, sponsors, new members, cool benefits for themembership are all welcome ideas, but don’t stop there. If youhave thoughts on how we can enhance NAAIM, I would liketo talk with you.continued on page 7Leveraging the Nasdaq-100 .8On Your Mark, Get Set, Go CO .MMODITIES . 11A Stock Market Crash by 2020? Yes, According to “Experts” .16Beating the S&P 500 Is Very Difficult,Even for the Best Professionals .18NAAIM NEWSNAAIM Returns to Chicago for Outlook 2018 .1President’s Letter .1Two Days of Information and Ideas That Will ChangeYour Advisory Business .2Outlook 2018 Agenda . 6New Distribution Opportunity for Shark Tank Winners . 7NAAIM Forum Goes Mobile . 16New Member Welcome . 16NAAIM Returns to ChicagoNov. 5-6 for OUTLOOK 2018Two Days of Information andIdeas that Will Change YourAdvisory BusinessWELCOME TO NAAIM’S OUTLOOK 2018conference, a unique two-day sharing of ideas andinsights into building your advisory business. TheOUTLOOK agenda offers industry experts, member discussions, networking with fellow advisors and the sponsors, andtopics that affect you every day. To make certain you don’t missOUTLOOK 2018’s many takeaways, you need to start planningnow to attend. Register online or download a registration format http://www.naaim.org/events/outlook/. Don’t forget to makeyour hotel reservation at the NAAIM group rate. There are limited rooms available under the discounted rate.continued on page 2The views and opinions of the authors are not necessarilythose of NAAIM, its officers or Board of Directors.6732 W. Coal Mine Ave., #446Littleton, CO 80123888-261-0787info@naaim.orgwww.naaim.orgI
OUTLOOK 2018 ConferenceCONTINUED FROM PAGE 1It all takes place from 8 a.m. Monday November 5ththrough 3:30 p.m. on Tuesday, November 6th at the ChicagoMarriott O’Hare, a short distance from O’Hare InternationalAirport. The hotel has the perfect look for a conference onthe future of our industry with a front entry reminiscent ofCaptain James T. Kirk’s USS Enterprise spacecraft. To bookyour room for the conference at NAAIM’s 159 per night (plusfees and taxes) contact the Marriott directly at (773) 693-4444and mention NAAIM or visit the dedicated hotel reservation like at NAAIM’s website. The hotel’s address is ChicagoMarriott O’Hare, 8535 W. Higgins Road, Chicago, IL.Two Days of Information and Ideas thatWill Change Your Advisory BusinessFeatured SpeakersWill Geisdorf, NedDavis ResearchMarilyn Cohen,Envision CapitalManagement, Inc.David Aferiat,Trade Ideas, LLCNed Davis Research Group Offers Insightson Today’s Financial MarketsWhat type of market leadership can we expect in 2019?What are the biggest risks to the current bull market? Whatwill finally bring this expansion to an end?In Climbing the Wall of Worry, Will Geisdorf, CMT, ETFStrategist for Ned Davis Research, offers answers to these andother questions in a data-filled analysis of the coming year.Founded in 1980, Ned Davis Research Group is one of thelargest independent providers of comprehensive institutionalresearch. The company prides itself on helping investors makebetter decisions with unbiased, insightful and risk appropriatemarket and global economic data and analysis.Will has been a member of Ned Davis Research since2007 and previously worked under Chief Global InvestmentStrategist, Tim Hayes - a frequent speaker at NAAIM conferences - and others to develop the firm’s U.S. and GlobalEquities/Asset Allocation services. Will started his career at2Wayne Townsend,Platinum AdvisorStrategiesNDR working in the Custom Research Solutions Department,performing a variety of research projects for NDR clients.Before joining NDR, he was a Senior Currency Trader forPremiereFx, where he hosted a daily radio program, providedmarket commentary, and traded the firm’s in-house foreigncurrency account.Will received his Bachelor of Science degree in Financefrom the University of Central Florida and is a CharteredMarket Technician (CMT), designated a Subject Matter Expertby the CMT Association and sits on the CMT Curriculum andTest Committee. He brings a wealth of personal and professional knowledge to OUTLOOK 2018.Bond Market Facts & Fiction Information That Will Surprise YouFor investment advisors who wish to grow fixed incomeassets under management, raw bonds rule, says MarilynCohen, President of Envision Capital Management, Inc. andcontinued on page 3September 2018
OUTLOOK 2018 ConferenceCONTINUED FROM PAGE 2one of the country’s top Bond managers. Marilyn promisesto surprise OUTLOOK attendees and take them out of theirtraditional comfort zone in her presentation: Bond MarketFacts & Fiction Information That Will Surprise You.Among the alternative fixed income structures she discussesare bonds with moving parts: LIBOR floaters, CPI floaters,corporates that trade as a percent of specific Treasuries andmuch more.Marilyn began her 39-year financial services career asa securities analyst at William O’Neil & Co. before movinginto bond brokerage at Cantor Fitzgerald, Inc. She foundedEnvision Capital Management in Los Angeles 23 years ago tospecialize in managing bond portfolios for individuals. If hername and face look familiar, there’s several good reasons why.For 23 years, Marilyn has written the bond column appearingin Forbes magazine, as well as four books teaching individualshow to profitably invest in bonds. She is a popular guest onCNBC, Fox Business News, PBS, and each of the major broadcast networks.Beyond bonds, Marilyn’s life has a different twist - she isinvolved in canine pet therapy at the VA Hospital and at theUSO, bringing four-legged cheer and smiles to active duty andretired veterans.If fixed income assets are part of your investmentstrategies, you don’t want to miss this presentation atOUTLOOK 2018.Market Impact of Securing Alphawith Artificial IntelligenceMove over HAL, it’s HOLLY’s time for the spotlight.Trade Ideas LLC’s HOLLY is an artificial intelligence toolthat generates active strategies each trading day optimized andtested to produce alpha. For 2017, HOLLY’s performance was56% after commissions in Risk-On mode. The portfolio’s grossreturn, before commissions and fees, measured 85%. Theseresults compare to the S&P 500, measured by the SPY index,which earned a 21.7% return over the same period.OUTLOOK 2018 presenter David Aferiat is co-founderand Managing Partner of Trade Ideas and has put his years ofexperience in trading, consulting, software, utilities, capitalmarkets, and consumer product industries to work over thelast decade growing Trade Ideas’ AI software as a premieridea generation, risk management, and decision support tool.Today, Trade Ideas serves over 15 thousand clients in morethan 75 countries, catering to investors, traders, and marketprofessionals. Scottrade and E*TRADE license Trade Ideasproprietary technology for their premium trading platforms.Trade Ideas has fully automated trading available throughLightspeed and Interactive Brokers. In 2018, Trade Ideas waswww.naaim.orgnamed Best Technology for Programmatic Trading by FundTechnology and WSL in their annual 2018 Awards.David brings HOLLY’s capabilities and future potential toOUTLOOK attendees in a presentation that is both futuristicand very present day. Will AI change your advisory practice?There’s no time like OUTLOOK 2018 to find out.Stop Asking for Referrals andStart Earning ThemThe traditional approach of asking for referrals simplydoes not work, explains presenter Wayne Townsend. In itsplace, Wayne offers: A proven and repeatable process for increasing referralbusiness Procedures and practices for creating WOW experiencesfor clients and prospects Key insights and tools for systematizing your practiceThe key is for advisors to be referable and make it easy forclients to refer them. To make that happen, Wayne focuses onthe strategies of Thomas Fross and Robert Fross, Co-Foundersof Fross & Fross Wealth Management and Platinum AdvisorStrategies. These are specific action steps that they used totransform their business and that Platinum has used to transform thousands of other financial practices. Wayne explainsthe strategies and shows advisors the easiest ways to implement the process and transform their businesses.Wayne brings a wealth of business and leadership experience to his role as General Manager at Platinum AdvisorStrategies. After serving as an Airborne Ranger and Officer inthe U. S. Army, he worked with several Fortune 500 companies, holding management roles ranging from sales andmarketing to talent management and process-improvementengineering. Today, Wayne helps Platinum’s employees andclients achieve their highest potential. He believes continuedinnovation and growth is key to professional success andpersonal satisfaction.Wayne is a certified StrengthsFinder coach, and trainedin Lean processes and is Six Sigma Black Belt certified. Heearned his Bachelor of Science degree in engineering fromthe U. S. Military Academy at West Point and has receivedthree Master’s degrees: one in human resources from CapellaUniversity; another in education from Troy University; and athird in ministry from Tennessee Temple University.Wayne combines his business experiences and robusteducation to help financial advisors find the support they needto more effectively operate and grow their firms and developclear strategies for the future.continued on page 43
OUTLOOK 2018 ConferenceCONTINUED FROM PAGE 3Ron Rough,Financial ServicesAdvisoryJeffrey Cribbs CFP ,Chicago WealthManagement, Inc.Solve the Share Class Dilemma andTake on the Challenges of Running aTactical Allocation Portfolioat NAAIM’s OUTLOOK 2018Two critical issues faced by every investment adviser firminclude staying out of trouble with the regulators and efficiently managing the challenges of tactical allocation in clientportfolios.The concept of Fiduciary may have lost its priority on thebrokerage side of the financial industry, but it is alive and wellon the investment advisory side, which makes it essential thatyour mutual fund share class selections uphold your fiduciaryobligation to clients. Do you have policies and procedures inplace to satisfy the regulators?In Solving the Share Class Dilemma, Ron Rough walksattendees through the issues of fiduciary and the proceduresFinancial Services Advisory has put in place to solve the newregulatory focus on the share class dilemma.Ron joined FSA in 2006 and as Director of PortfolioManagement is responsible for the day-to-day managementof client portfolios. This includes portfolio construction, fundselection, and risk management. With more than 25 years ofexperience in the investment management business, Ron is arespected authority on a wide range of investment topics andwrites a monthly market commentary for FSA and developspresentations for clients and prospects.Prior to joining FSA, Ron was director of portfoliomanagement for Genworth Financial Asset Management(GFAM), a Los Angeles-based subsidiary of GenworthFinancial, managing nearly 13 billion of client assets. Ron’stenure with GFAM spanned 11 years and included nearly allaspects of investment management, including asset allocation,portfolio construction, manager selection and due diligence,and risk management.Prior to his career with GFAM, Ronspent nine years with Schabacker Investment Management.His first job after graduating from college was serving onthe White House Task Force on Private Sector Initiativesunder President Ronald Reagan. He holds a Bachelor of Arts4degree from Miami University in Ohio with a double major ineconomics and diplomacy and foreign affairs.After 17 years in the financial planning industry, JeffreyCribbs, CFP , incorporated Chicago Wealth Management,Inc. in 2004 with the commitment to build better investment models for clients that would increase the probability ofsuccessfully sustaining portfolio distributions over long timeframes. In Challenges of Running a Tactical AllocationPortfolio, Jeff explores the challenges he encountered structuring portfolios for tactical allocation and how those challenges were overcome.Jeff has more than 20 years of experience providinginvestment and wealth management advice to high networth individuals and institutions. As Managing Principal ofChicago Wealth Management, he partners with individualand institutional clients, provides advice and manages assetsto build wealth, using investment strategies which allow forsustainable distributions. The process involves providingadvice and expertise on all aspects of financial planning,including focusing on investment for retirement, retirementincome planning and inter-generational wealth transfers. Jeffholds a Bachelor’s Degree from Johns Hopkins Universitywith a concentration in Economics. After a short stint at theUniversity of Pittsburgh pursuing a PhD in Economics, hegraduated with honors from Carnegie Mellon University’sTepper School of Business MBA Program in Pittsburgh, PA.The NAAIM Membership Sharesa Wide Range of Information atOUTLOOK 2018Sharing information and experiences with fellow advisersmakes NAAIM’s OUTLOOK 2018 a truly unique conferenceopportunity. NAAIM members have faced many of the sameissues, solved the same challenges and typically taken on thesame goals. At Outlook 2018, attendees will encounter paneldiscussions and attendee participation events that bring theinsights of fellow active managers to the forefront:My Market OutlookPANELISTS: Dave Moenning, Heritage Capital Research; PaulSchatz, Heritage Capital; and Michael Gayed, Pension PartnersWhile many active managers strive to react to what themarket is doing, rather than forecast near term direction,there’s always a framework of expectations against which oneadvises clients and monitors the markets. From three NAAIMmembers come their outlooks for the market and the data onwhich they develop their views of the future.continued on page 15September 2018
KEEP THE BONDS,LOSE THE DURATIONBOND ETFS FOR RISING RATESThe longer the duration of yourbond fund, the more it will be hurtas rates rise. Even moving to ashort-term bond fund leaves youexposed to significant interest raterisk. Consider IGHG and HYHGinstead—investment grade and highyield bond ETFs with built-in hedgesthat target a duration of zero.PROSHARES INTEREST RATEHEDGED BOND ETFSIGHGInvestment Grade—Interest Rate HedgedHYHGHigh Yield—Interest Rate HedgedVisit RisingRateSolutions.comInvesting involves risk, including the possible loss of principal. These ProShares ETFs entail certain risks, which include the use of derivatives (futurescontracts), imperfect benchmark correlation, leverage and market price variance, all of which can increase volatility and decrease performance. Bonds willgenerally decrease in value as interest rates rise. High yield bonds may involve greater levels of credit, liquidity and valuation risk than higher-rated instruments.Short positions in a security lose value as that security’s price increases. Narrowly focused investments typically exhibit higher volatility. Please see summaryand full prospectuses for a more complete description of risks. There is no guarantee any ProShares ETF will achieve its investment objective.HYHG and IGHG do not attempt to mitigate factors other than rising Treasury interest rates that impact the price and yield of corporate bonds, such aschanges to the market’s perceived underlying credit risk of the corporate entity. HYHG and IGHG seek to hedge high yield bonds and investment gradebonds, respectively, against the negative impact of rising rates by taking short positions in Treasury futures. The short positions are not intended to mitigatecredit risk or other factors influencing the price of the bonds, which may have a greater impact than rising or falling interest rates. These positions losevalue as Treasury prices increase. Investors may be better off in a long-only high yield or investment grade investment than investing in HYHG or IGHGwhen interest rates remain unchanged or fall, as hedging may limit potential gains or increase losses. No hedge is perfect. Because the duration hedge isreset on a monthly basis, interest rate risk can develop intra-month, and there is no guarantee the short positions will completely eliminate interest rate risk.Furthermore, while HYHG and IGHG seek to achieve an effective duration (interest rate sensitivity) of zero, the hedges cannot fully account for changes in theshape of the Treasury interest rate (yield) curve. HYHG and IGHG may be more volatile than a long-only investment in high yield or investment grade bonds.Performance of HYHG and IGHG could be particularly poor if high yield or investment grade credit deteriorates at the same time that Treasury interest ratesfall. There is no guarantee the fund will have positive returns.Carefully consider the investment objectives, risks, charges and expenses of ProSharesbefore investing. This and other information can be found in summary and full prospectuses.Read them carefully before investing. Obtain them at ProShares.com.ProShares are distributed by SEI Investments Distrib
professionals. Scottrade and E*TRADE license Trade Ideas proprietary technology for their premium trading platforms. Trade Ideas has fully automated trading available through Lightspeed and Interactive Brokers. In 2018, Trade Ideas was named Best Technology for Programmatic Tradin
