October 19th program at Westlake Porter

Public Library• Westlake Porter Public Library

27333 Center Ridge Rd.Westlake, Ohio 44145

• Timing Equities and Bonds and Dynamic Asset Allocation.

• Dr. Gary Harloff

• recognized by Timer Digest for consistently producing results in market timing over the past 10 years, will illustrate market timing results for equities and bonds and discuss dynamic asset allocation for portfolio management.

• Timing Equity and Bonds, and Dynamic Asset Allocation

• Gary J. Harloff, Ph.D.

• October 2015

• This is not an offer or solicitation for any investment fund or strategy managed by Harloff Capital Management. An offer will occur only upon delivery of part 2a of ADV and brochure. For the incentive fee program, an offer will occur only after discussions with Harloff Capital makes a determination that the investor is an accredited purchaser under securities laws. Results presented here are actual for the global tactical strategy and net of all fees and expenses. For the hi-yield bond and the S&P500 timing strategies the results are hypothetical with inherent limitations including: (1) results do not reflect actual trading and were achieved by retroactive application of the strategy with hindsight, (2) material market and economic factors are reflected by comparison with buy-hold of S&P500 with dividends or Federated hi-yield fund FHYTX, as applicable, and (3) clients may experience materially different results going forward. Past performance does not insure future performance. Investing involves the risk of loss.

795 Sharon Dr., Suite 226

Westlake, OH 44145

440-871-7278

www.harloffcapital.com

Outline

• Bio of Gary Harloff

• What Harloff Capital does - price trend analytics

• Try to avoid large losses

• Active/passive misunderstandings

• Return vs. risk metrics

• Verified net performance of global tactical strategy ‘03-’15

• Typical portfolio

• HVI developed around 1992, newsletter and timing

• Sharp market moves

• Timing examples: bonds and S&P500, hypothetical

• Summary

Bio- Dr. Harloff held national security clearances and has integrity• Performance talk, National Assoc. of Active Investment Managers, Dallas Tx, 11-2014

• “The Intelligent Fund Investor”, monthly newsletter, editor, 1993 to 2015

• “Wage-Employment Driven Business Cycle Model”, Proceedings of the Academy of

Economics & Finance, Jacksonville FL, 2011

• Book: Active Wealth Management for High Net Worth Individuals, 2010, Xlibris, 144 pg

• Timer Digest Gold timer of the year (of at least 19), 2003

• “The highest one-year performance figure we have ever recorded, 168.56% in 1999 for their

aggressive growth program”, MoniResearch Newsletter Jan/Feb 2000

• “Dynamic Asset Allocation Beyond Buy-and-Hold”, Technical Analysis of Stocks and

Commodities, Jan. 1998

• Third place: The United States Investing Championship, mutual fund switching - year-long

of 30 with positive returns, 1993

• Fifth place: The United States Trading Championship, mutual fund switching- year-long of

20 with positive returns, 1992

• AIAA main chapter speaker (7): Washington DC, Columbus OH, St. Louis MO, Louisville

KY, Troy MI, Sarasota FL, Orlando FL

• Ph.D. Aerospace Engineering,1979, Associate Fellow American Institute of Aeronautics

and Astronautics, 1988

• Computational fluid dynamics and space vehicle research NASA 10 years, 1985-1995

• Applied computational research at large Aerospace and Energy firms, 1968-1985

• turbo machinery 2 patents: 1978,1981

• Held high-level national security clearances at DOD and DOE

• In the early 1970's a coworker at a jet engine/rocket company in S. Florida suggested

that no one can model the stock market - a personal challenge.

What Harloff Capital does- discretionary

fee-based active portfolio management• Registered Investment Advisory 1994, fee-based, fiduciary

• +9% YTD vs. -4.2%, S&P500 buy-hold, Global Tactical Aggressive, verified by Theta Research, 8-31-15

• 13.7%/yr net actual return last 3 yrs vs, 12%/yr S&P500 buy-hold, top 3% (of 57) verified by Theta Research, 8-31-15

• top 5% S&P500 timer in U.S. for 1,3,5,8, and 10 yrs, Timer Digest 1-26-15, real-time signals, Timing based on Harloff Value Indicator

• Advanced quantitative portfolio management strategies beyond common portfolios offered by planners, wealth managers, and technical analysis

• Original strategies, developed by a Ph.D. over many years, adapt with market conditions. Rocket Science helps!

• Incentive based strategies for accredited investors

• No-commission variable annuity available

• Transparent strategy: original price trend analytics: look at day-day price change rather than fundamental forecasting or graphical technical analysis

“Why have brokers been allowed to…

• evolve their services more toward advice, without registering under the Advisers Act (1940), and in direct violation of that legislation? Because the SEC has let them. And don’t ask me why; its an enduring mystery, and one at the very root of consumer confusion and the industry debate today.” Skip Schweiss, managing director of advisory advocacy and industry affairs, TD Ameritrade Institutional. Source: Rep./www.wealthmanagement.com/October 2015, p.22

• SEC regulations include a fiduciary standard- to put client interest first is not compatible with hidden commissions and kickbacks of … brokers

Stock brokers and financial planners

can’t help you sidestep a correction

or bear market, and can’t help you

outperform in a bull market

•Harloff Capital can

•Past performance does not insure future performance.

We relieve clients of managing their

portfolios so they can do what is important.

% loss incurred % needed to break even

20 25

30 42.9

40 66.7

50 100

60 150

Active/passive misunderstanding…Brokers and financial planners (sell commissioned products) tell their

clients they build “diversified portfolios” to “withstand all markets” and

say…hold on for the long haul. Can’t time the markets.

Almost 2/3 of individual investors misunderstand perceived

benefits of passive investments (MFS November 2013 Highlights):

1) "Where risk is concerned, passive investments are a safe bet."

No- will experience bear market losses as in 2008!

2) "Passive investments almost always provide greater

diversification than active investments".

No- since active asset classes change with time!

3) "A passive investment could significantly beat its benchmark".

No- not if passive invests in its benchmark!

Active management changes portfolio in response to

changing markets: passive does not

• Financial planners and brokers -sell buy-and-hold

portfolios and rebalance only at client semi-annual or

annual meeting by selling winners and buying losers

• Their incorrect assumptions are:

• Markets don’t change much

• Corrections and bear markets don’t occur

• Risk in the market never changes

Hard part is having technology that

adapts with market conditions and

doesn’t fail.

This year momentum doesn’t work.

Technical analysis fails because it

isn’t numerical and everyone has it.

We continually monitor markets to help client

portfolios navigate volatile conditions

Re

turn

Risk

9-25-15 Global Tactical Rydex Aggressive Growth return vs risk, theoretical calculations

3D var 1

3D var 2

3D var 3

3D var 4

3D var 5

3D var 6

3D var 7

13.68%/yr 36 mo. net return vs. 11.99% S&P500, top 3% of active mangers (of

57)Theta Research verified, 8-31-15, Harloff Capital Rydex aggressive strategy

9.1% net vs. S&P500 -4.2% YTD 8-31-15

Global Tactical Rydex Aggressive Growth Funds, 9-28-15

ticker fund %

RYSHX inverse x1 small cap 21

RYWYX inverse emerging market 13

RYCIX consumer products 11

RYMHX inverse mid cap 11

RYSBX strengthening $ 8

RYAWX large cap growth 8

RYBHX mid cap growth 6

RYRIX retail 5

RYHRX real estate 6

RYOCX otc x1 6

RYUIX utility 5

HVI: basis for newsletter and timer digest timing

• An index invented in early 1990’s. Same formulation as

today

• Basis is day-day price change

• High positive numbers are desirable

• Presented for a wide range of funds and indexes for

domestic and international markets

• For long and inverse funds

• For volatile funds like precious metals and nonvolatile

funds like bonds

Global momentum system, Harloff Value Index,1992, basis for “The

Intelligent Fund Investor” monthly newsletter and timing signals

We focus on capital preservation in uncertain times and strive to give

clients peace of mind so they don’t sell at the bottom and buy at the top

1800

1850

1900

1950

2000

2050

2100

2150

2200

10/18/2014 12/7/2014 1/26/2015 3/17/2015 5/6/2015 6/25/2015 8/14/2015 10/3/2015

9-25-15, S&P500 Harloff bands, 11-5-14 to 9-25-15: low 1,868 on 8-25-15 recent signals: neutral 7-27-15 at 2,068, long 9-24-15 at 1,932. Sidestepped 6.6% loss

S&P500

trend

resistance

support

Timer Digest,

1-26-16

Top 5% of national

market timers for 1, 3, 5,

8, and 10 years in Timer

Digest (of 100+ timers).

Basis is Harloff Value

Index reported in our

monthly newsletter,

“Harloff’s The Intelligent

Fund Investor”, since

1992.

Timer Digest, 1-26-15

Bond and equity timing strategies

• Based on day-day price changes

• Increase return/decrease volatility over buy-hold

• bond/equity fund to time & a money market fund

• Compute day-day price changes, trade into the

fund when market conditions are up, and money

market when down

• Know the complexity (level of chaos) of market

• Reasonable no. of trades/year

• Adaptable metrics change with the market

High yield strategy: 27 yrs, 12.2%/yr, volatility =

0.7 FHYTX, 78 trades; b-h 7.6%/yr

0

2

4

6

8

10

12

14

Hypothetical before fees vs. buy-hold, 10-3-88 to 9-25-15

buy-hold

active strategy

S&P500 strategy: 27 yrs,11.9%/yr,

volatility = 0.7 S&P, 18 trades; b-h 9.9%/yr

0

4

8

12

16

20

24

Hypothetical S&P500 + dividends strategy before fees vs. buy-hold, 10-3-88 to 9-25-15

buy-hold

activestrategy

Need fast response, S&P500 dropped 11% 8-18-15 to 8-25-15

1,850

1,900

1,950

2,000

2,050

2,100

2,150

10/18/2014 12/7/2014 1/26/2015 3/17/2015 5/6/2015 6/25/2015 8/14/2015 10/3/2015

S&

P5

00

, $

Upgrade, 11-5-14 to 9-25-15

S&P500

trend

Summary• Up 9% YTD net actual return vs. S&P500 buy-hold of -4.2%, Harloff

Capital Global tactical aggressive, 8-31-15, verified by Theta Research

• Up 13.7%/yr net actual return vs. S&P500 buy-hold of 11.99%/yr. last 3

yrs 8-31-15, top 3% (of 57), Harloff Capital Global tactical aggressive,

verified by Theta Research

• Timing possible: Harloff top 5% S&P500 timers in U.S. for 1,3,5,8, and

10 yrs, Timer Digest 1-26-15, real-time signals

• Timing hi-yield bonds increases b-h from 7.6% to 12.2%/yr over 27

yrs, and decreases volatility 30%, hypothetical

• Timing S&P500 increases b-h from 9.9% to 11.9%/yr, over 27 yrs,

and decreases volatility 30%, hypothetical

• Adaptive capability needed for rapidly changing markets: S&P500

dropped 11% in 5 days from 8-18-15 to 8-25-15

• Active/passive misunderstood by investors due to broker and planner

buy-hold/sales emphasis

Management• Sally Harloff, President

• Gary Harloff, Portfolio Mgr, V.P.

• Available and accessible to clients

• Do what is right for clients, fee-only, have fiduciary responsibility

• Accountable for portfolio return & risk

• We have skin in the game

• 440-871-7278

• www.harloffcapital.com

• 795 Sharon Drive, Suite 226

• Westlake, OH 44145

Dr. Gary J. Harloff