Blocking and Tackling

We’re three weeks into the football season so it’s time to break out the tired sports metaphors. Today’s column is titled, “Blocking and Tackling,” which I’m using as a new and interesting way to announce that this is a good time to review the fundamentals of Pinnacle’s investment philosophy. With luck, we’ll soon have an opportunity to write about how to invest without being “blind-sided,” how avoiding a bear market allows us to not have to “drop back ten yards and punt,” and how looking at trailing returns is an exercise in “Monday morning quarterbacking.” But for now, let’s concentrate on blocking and tackling.

The Quantitative Models Are Singing in Unison

Over the past several weeks we have seen some positive developments come out of the quant department. Our proprietary quant model, which officially went live in the spring of this year (but was extensively back-tested through the rocky 2007-2011 period), gave its first bullish signal on 6/8/2012. Since then, the model has stationed in a tight range in the upper half of the mildly bullish bracket, briefly touching the bullish bracket in a few occasions. In the meantime, one after the other, the quant models of our independent research providers joined the chorus. As a result, our quant model scorecard (see below) is currently showing a whole lot of green (bullish) and no red (bearish).

OMG, the SMP is Now OMT

Let me admit that in the world of texting I am woefully behind the curve. While relatives and friends punch out acronyms for every day words, I would rather simply email or get on the phone to communicate. But getting past my reluctance to fully embrace the Attention Deficit Disorder-like world of texting, it’s fair to say that I do embrace technology that helps us manage money for our clients. One form of technology that I love is our Bloomberg machine. It keeps us informed with news from around the globe, and this morning it allowed me to watch every word of the European Central Bank (ECB) press conference.

How to Evaluate Return Targets

Every Pinnacle client signs an Investment Policy Statement that spells out the long-term targets for risk and reward for each Pinnacle strategy. Risk is presented in absolute terms as a fixed range of returns based on back-testing a five asset-class portfolio from 1972 to the present. The range of expected annual returns (risk or volatility) in the IPS is based on the standard deviation, or the dispersion of returns, from the very long-term average return presented to clients in our now famous (or infamous) Red and Gray charts.

Ominous Signs from Jackson Hole?

With the Jackson Hole symposium set to begin tomorrow, let’s take a look at the technical state of the U.S. Treasury market. The question remains as to whether Ben Bernanke will begin Quantitative Easing Part 3, and perhaps the bond market can suggest an answer. (I’m focusing here on the Generic 30 Year Treasury yield, as some interesting price movement has occurred.)

Dipping a Toe in the Water

Over the past couple of weeks, we have executed several portfolio transactions in line with our belief that the second half of the year may be a good one for stock investors. Most of the trades have been relative in nature; for example, we’ve swapped defensive U.S. sector holdings for late cyclical sectors. We also traded “up” within our international holdings, by swapping a fairly conservative actively managed fund for an ETF targeting mainland Europe (the iShares MSCI EMU Index Fund; symbol EZU). In our two most aggressive policies, we purchased the iShares MSCI Italy Index Fund (symbol EWI).

Three Ways to Receive by Giving to Charity

Our primary mission at Pinnacle Advisory Group is to give our clients the peace of mind to enjoy the things in life they find most fulfilling, including not only relationships, activities, and hobbies, but also philanthropic endeavors. Contrary to popular belief, support for charities and causes isn’t a one-way financial street – there are several charitable giving instruments that will actually help you streamline your cash flow and reduce your taxes. By using them, you can experience the joy of giving while also receiving a financial benefit.

Why We’re Invested in Home Construction

Prior to the 2007 crash, very few investors thought that housing prices could fall, and even fewer believed that a decline in housing prices could be as long in duration or vicious in price as they’ve turned out to be. The silver lining to that cloud is that the crash brought the homebuilding shares down about 90 percent from peak to trough. In our opinion, that opened up a pocket of value at a time when there aren’t many fat pitches in the investment universe. Since we’re always on the hunt for good value, that caught our eye.