|
Issue 28 • JUNE 10, 2009 The Next Financial Storm and an All-Weather Portfolio
Today, some see the skies clearing and a quick recovery ahead. But regular readers of Weiss Advice know all too well that I still see several dark clouds brewing on the horizon. On a brighter note, in every dark storm cloud you can find silver lining — and in every crisis you can also find new opportunities. That’s what this week’s special issue of Weiss Advice is all about… One week ago today, I had the privilege of joining my colleagues: Sherri Daniels, President of Weiss Capital Management, and our Chief Investment Officer, Sebastian Leburn, CFA, to host a special and very timely Webinar: The Weiss Wealth Event. This exclusive online briefing was all about seizing new opportunities to help better secure your wealth, and potentially earn realistic investment returns in today’s challenging climate. If you didn’t have a chance to attend the Weiss Wealth Event, you can still go here to see a replay of the Webinar for a limited time. In this issue, I’ve included an edited transcript of this event, with a special introduction by Martin D. Weiss, president of the Weiss Group, LLC the parent company of Weiss Capital Management, Inc. Enjoy!
Never before have we seen so many large companies come so close to the brink of bankruptcy! Never before have we seen the government spend or commit such huge amounts of money to bail them out! And yet, never before have we seen so much complacency regarding what we believe will be the next financial storm!
Based on Dad's writings, it is clear that Dad not only advised investors during the Great Depression, he actually predicted it. Along with his friend, presidential advisor Bernard Baruch, he was among the few advisors in the 1930s that saw it coming. That’s how, even as almost everyone else around him was losing fortunes, he was able to survive and THRIVE during the great bear market of 1929-32, during the great banking crisis of the early 1930s, and during the Great Depression that ensued. That’s why, throughout his entire lifetime, Dad always sought all-weather investment approaches, why he always favored prudent strategies that could endure in both good times AND bad times, in the calmest of seas and in the worst of financial storms. And that’s also why, a long time ago, while my wife Elisabeth and I were away in Japan for two years, Dad decided we should create this investment advisory company, Weiss Capital Management, formerly Weiss Money Management. This company is separate from its affiliate, Weiss Research, which publishes services like the Safe Money Report and the Million-Dollar Contrarian Portfolio. So, before we talk about the next likely financial storm, or about how to manage your all-weather portfolio, let me tell you why this company is separate and why it’s so important that you understand the differences. Weiss Research is an investment publisher. Weiss Capital Management is an investment adviser. Weiss Research, as an investment publisher, provides the same information to all of its subscribers to a particular publication. In contrast, Weiss Capital Management, as an adviser, manages investment portfolios on a discretionary basis tailored to your individual goals and circumstances. The writers and editors at Weiss Research, like the author of a book or a newspaper article, have no information about your personal financial situation. So, when you read Weiss Research’s publications, only you can decide whether or not to act on the investment recommendations they contain, when or with how much money. In contrast, an investment adviser like Weiss Capital Management not only can know more about you, but has to know more about you in order to make appropriate recommendations that fit your needs and goals. This is why we take great care to keep these two companies — Weiss Research and Weiss Capital Management — separate and the information private. I am the owner and president of the parent company, the Weiss Group, LLC. But the two subsidiaries, Weiss Research and Weiss Capital Management each have separate management, separate offices and separate customer service. We share a similar vision and similar philosophy — to help investors preserve and grow their money in both good times and bad. But don’t be surprised if you notice differences in the specific tactics and investment picks. The professional money managers at Weiss Capital Management read and consider the opinions of many independent research providers and study many investment publications, including those offered by Weiss Research. They also perform their own independent, in-depth research and analysis. And then they make the final investment decisions on behalf of their clients. They take into account your personal financial circumstances. This means the investment recommendations or decisions they make for you will inevitably differ from those that you read in Weiss Research publications. They are customized to your individual goals. And naturally, there’s also a big difference in the level of service provided by Weiss Capital Management. Sherri, would you explain that aspect?
If you decide to become a client of Weiss Capital, your advisor won’t simply sell you a product and leave it up to you. Instead, he or she will match your personal situation with a customized portfolio that we believe is best for you — one we believe is equipped to weather the ups and downs of the market without undue risk. We manage your money. And we manage your money in individual, separate accounts. In other words, your assets are always segregated from other clients’ assets at the custodian brokerage firm we have chosen, Fidelity Investments. We also handle all the paperwork for you. Most important, we handle all the investment decisions based on your circumstances. We decide what to invest in, how much and when — and we make all trades for you. Plus, even for money that we don't manage for you, we can still provide you with valuable input, such as helping you find safer banks and insurance companies. No matter what, we stay in close contact with you. Plus, you have online access to your account 24/7. The best part: you can leave the driving to us. That way, you can stay focused on your business, on your retirement ... or even on your golf game. You can go on long vacations or cruise the world. We mind the store for you and STAY on top of it all day, every trading day of the year. Martin: Sherri Parker-Daniels is the President of Weiss Capital Management and has been with Weiss for 19 years, and an executive since 1994.
You’ve been with the Weiss Group for nearly two decades … Sherri: Yes, I have. When I joined, the Weiss Group was like a family. Your father, who was a senior consultant to the firm, was a mentor to me. Martin: And to others as well. Sherri: Of course. I remember my first day. While I was waiting in the conference room, I found a little boy lying under the table reading a pile of books. Martin: My son, Anthony. Who is now 27. Sherri: Now though, the company has grown far beyond a family organization, but your father’s spirit and the family feeling are still with us, and more important, we have built on his fundamental philosophy of all-weather investing. Martin: Yes, and that’s especially important in these tough times ... which look like they could get a lot rougher. You’ve done a wonderful job. I’m pleased by the personal, caring customer service you and your staff provide. And I’m pleased with the managed investment accounts you offer to investors — whether they be conservative or aggressive. It’s to your credit and experience as a leader. And this is your event, Sherri. So, I’ll let you take it from here. I'll leave it to you to introduce some of your team, discuss the next financial storm and explain your all-weather approach. I trust you to run this company and to oversee the investment decisions. And to underscore the fact that I’m not involved in that aspect — to underscore my confidence in you — I will step aside now to let you and your Weiss Capital Management investment team share your outlook and advice with our viewers from here. Sherri: Thank you Martin. We appreciate you sharing with our viewers the differences in our affiliate companies and most importantly the different services we each perform for investors. And, Martin, thanks for your time today which I know is very valuable – take care, I’ll take it from here. Good afternoon to our viewers. I’m pleased to be here today to share with you our insights on the next financial storm — plus share with you an exciting new investment strategy that, in our view, may be the ultimate all-weather investment strategy to follow in both good times and bad. Joining me are two key members of the Weiss Capital Management Investment Committee: Sebastian Leburn is a Chartered Financial Analyst and our Chief Investment Officer. He is the portfolio manager for two of our longest-running and most-successful managed account strategies: The Weiss Bear Strategy and the Weiss Balanced Program. Also with me today is Mike Burnick, our Director of Research & Client Communications. Mike is a frequent guest on CNBC and Fox Business News, and the editor of our weekly investment e-letter, Weiss Advice. Gentlemen, welcome. Sherri: Mike, we’re in the midst of the worst economic and financial crisis since the Great Depression, yet we see another major storm on the horizon. We have warned repeatedly that recent optimism in the marketplace may be misplaced. Please walk our viewers through the sequence of events we see unfolding.
Mike: There’s no question, this rebound has been a robust rally, but it is a counter-trend rally. And I must add that it is a rally we were expecting! Bear markets don’t go down in a straight line and their rallies are often powerful, so powerful that it’s easy to get fooled into thinking the worst is over. That said, stocks could move higher still, rallies during secular bear markets are often powerful ... 40, 50, even 60% rallies or more aren’t that uncommon. However, these temporary moves may only end in disappointment. Sherri: We’re still in this secular bear market then.
Sherri: Explain the storms, please. Mike: The first storm was centered on Wall Street — hundreds of billions in losses at major Wall Street investment banks like Bear Stearns, Lehman Brothers and Merrill Lynch ... billions more lost at banks like Citigroup and Bank of America — not only from the subprime crisis, but also from other debt markets. Sherri: That storm reached a crescendo in the fourth quarter of 2008.
Sherri: As you show here in this chart on personal income. Mike: This chart goes all the way back to 1950. And right now, as you can see, personal income is plunging faster than it has any time on record.2
Mike: Right. Same pattern, here in GDP. GDP has just plunged at the fastest rate since the 1950s. This is the worst 6-month contraction in the past half century.3 You have personal income plunging. You have GDP plunging. So, in that environment, it should come as no surprise that corporate earnings also fell apart. Sherri: Which you’re showing on this next chart.
Sherri: In other words, you’re talking 60 years or more without a true change in that uptrend. Mike: Exactly, except for a minor break in the early 1990s … until now, we had never seen a significant break below prior lows. Now, look at this plunge. Just in the last 20 months, this measure of corporate earnings has crashed by -90%!5 Sherri: So is this the largest decline in history? Mike: Not exactly. It would be more accurate to say it’s the largest decline since the mid-1930s. This is what's driving companies like Chrysler and General Motors toward bankruptcy. Sebastian: And that’s why stocks have plunged the most since 1931. This plunge in stocks is actually worse than it appears. If you measure the market in terms of your purchasing power — by adjusting for inflation— the S&P 500 has fallen nearly 60% from its peak in 2000.6 Sherri: Does that incorporate the recent rally? Sebastian: No. That was up from the recent low. But even with the recent rally, stocks are still down nearly HALF from the 2007 high. Mike: And our fear now is that we may be headed for a third type of storm, if you will, one not centered on Wall Street or Main Street ... but in Washington. In essence, this is a new crisis of confidence. Sherri: ... that has long lasting consequences. Mike: The key point is: This has been so disruptive that investors just can’t trust what’s coming next, especially given how involved the government has become in the financial markets. The consequences for investors could be enormous. Sebastian: Every day the government is jumping in to change the rules of free-markets. No one knows what they’re going to do next. No one knows what the repercussions are going to be. It’s completely changing the rules of investing. Mike: They’re changing the rules haphazardly. They’re taking risky short cuts. They’re breaking the system. And all this could backfire with potentially severe and unintended consequences. Sherri: I assume you’re going to tells us how investors can deal with this situation. Mike: Absolutely. But for now, let me show you how this is creating the next financial storm on the horizon. As you can see in this next graph, Washington has committed to spending, lending and other guarantees to the tune of nearly $13 trillion, according to the latest tally.7
Mike: That’s what they think! But in the real world, we’re now beginning to see the unintended consequences ... In the form of rising long-term interest rates. And those rising interest rates are threatening to undo everything Washington is trying to accomplish. Sherri: Can you fast forward a bit to give us a sense of where that could wind up? Mike: We could see the worst of both worlds — massive federal deficits as far as the eye can see, AND a stagnant economy that could remain stuck in a rut. Sebastian: What Mike’s describing here is potentially a major secular bear market, not just in stocks but also long-term government bonds. The Federal deficit this year is already projected to be a record $1.84 trillion.8 Sherri: That's the official estimate. Sebastian: Yes. The Obama administration’s official estimate of this year's deficit is $1.84 trillion, or FOUR times more than last year's. Overall, Goldman Sachs says the Treasury may have to raise up to $3.25 trillion this fiscal year alone.9 Sherri: To cover the deficit ... Sebastian: To cover the deficit, the bailouts, refunding of maturing Treasuries, the works! Sherri: That’s a huge supply of new Treasury bonds coming on the market. I’ve been watching bond markets for 25 years, including some of the most chaotic environments for bonds, and I’ve never seen this much supply before. It’s unprecedented. Mike: The obvious consequence is falling bond prices and rising interest rates precisely when we have — like we showed you a moment ago — the worst plunge in personal income, the worst plunge in GDP and the worst plunge in corporate profits in our lifetime. We believe that could bring us to the ultimate day of reckoning. Sherri: For whom? Mike: For all of us ... for the entire country. Remember: Most U.S. Treasury securities are in the hands of foreign investors — the Central Bank of China; Japanese insurance companies; West European investors. Even Brazil is now a big investor in U.S. Treasuries.10 The big fear, and it’s a real one, is that as the United States loses control over its fiscal balance, the value of these bonds will tumble, and foreign investors could easily lose confidence and sell.11 Sebastian: They don’t even have to sell. All they have to do is start shifting from long-term to short-term, and that alone will have a huge impact on the bond market.12 Sherri: We’re seeing some evidence of this already, aren’t we? Sebastian: Absolutely. Mike: The bottom line for all of us is that the cost of borrowing money goes substantially higher for virtually all American consumers and businesses. This is the third financial storm lurking just over the horizon: a bursting of the last bubble ... the bubble of the U.S. Treasury bond market. Sherri: The third financial storm. Sebastian, you're a portfolio manager making investment decisions every day. And right now, you're talking to an audience of individuals also making investment decisions every day. How do YOU invest with this third financial storm on the horizon? How do you find shelter in this financial storm? Sebastian: You have to change the way you think about your savings and your investments — AND dramatically change your expectations for the returns that traditional investment approaches can provide. Traditional investment approaches have not done a good job of handling the increased market uncertainty, and we think this uncertainty is likely to continue for many years. Sherri: It’s pretty obvious that the so-called “tried and tested” investment approach has failed investors. Sebastian: Unfortunately, too many portfolio managers have stubbornly stuck to the old buy-and-hold approach to investing. And obviously, this has not served investors well. Sherri: What about diversification in the stock market? Explain to our viewers why that wasn’t enough to shelter investors from big losses.
In 2008, investors who bought small-cap U.S. stocks suffered the worst losses in that sector since 1937. Sherri: And large-cap stocks? Sebastian: Investors who bought LARGE-cap stocks have suffered the worst losses since 1931. Sherri: Looks like real estate stocks were even worse. Sebastian: The worst losses of all time! Sebastian: True diversification takes hard work and research. Plus, you need to look beyond the stock market. We believe your priority going forward should be to focus on preserving your wealth, and only then [should one] look for prudent opportunities to grow your money over time. Sherri: Over time, not overnight! But you’re not advocating we cross all stocks off the list of opportunities for the next few years? Sebastian: Absolutely not! The fact is that blindly buying and holding when stocks offered little long-term value was a big mistake. And in the future, ignoring major values and buying opportunities in stocks could be an equally big mistake. Even retired investors must still consider a mix of high-quality, dividend-paying stocks to enhance their total return potential. In fact, I see some unusual values in some sectors right now, always, of course, with a focus on quality and relatively low risk. Sherri: Most people are living a lot longer. And with that, you risk depleting your wealth. I hope I live longer as well. If I do, I just can’t afford to sit in cash indefinitely and expect to maintain my purchasing power — not with cash yielding 1/10th of 1%.14 Sherri: I'm 47. I’ve got a ways to go. But I’m already thinking about retirement. I want to make sure I keep what I have. Then, I want to protect the purchasing power of my money and look forward to a comfortable retirement that, hopefully, I can enjoy for a couple of decades, maybe three. This is what I want for myself. And this is what we aim to achieve for our clients. Give us the steps. Sebastian: STEP ONE is to thoroughly “stress test” your own portfolio. Go through each and every item to make absolutely sure you understand what you own and, more importantly, the risk associated with each investment. Mike: This is especially important now, since we’ve seen the market rally nearly 30%+ off the lows. In fact, there’s no better time than after a rally to completely review your holdings: every stock, bond, mutual fund, ETF, REIT even your annuities ... every security you own. This is part of our standard portfolio evaluation process that’s done every day for new clients. Sherri: What about insurance companies and banks? If an investor is concerned about his or her insurance or bank deposits, versus the stocks, we will review those as well, correct? Sebastian: That’s part of STEP TWO: help ensure that your cash deposits are as safe as possible. Just be sure to send us the full name of each institution with the state of domicile. We have direct access to the ratings that were originally formulated by our affiliate, Weiss Research**. Whether you join our firm as a client or not, we'll be glad to tell you what we think you should get rid of and what we think you should keep. We even review your investment and retirement accounts with other banks, brokers, and insurers to help you decide if it makes sense to move your money into safer hands. Mike: Including annuities? Sebastian. Yes, including annuities. Sherri: All at no charge. Sebastian: Right. STEP THREE begins only after you join us as a client, of course. And that's to build your all-weather investment account. For example, we use inverse mutual funds and ETFs to help hedge against market declines. Plus, we take it one step further by utilizing these same securities with the goal of profiting from stock or bond market declines. Sherri: This is where we depart from what most portfolio managers do. Sebastian: Yes, but I must stress that these kinds of hedging techniques involve a lot of analysis and careful monitoring. You need to re-adjust with the markets. Sherri: You’re absolutely right Sebastian, but before we jump into the specifics of building this all-weather investment account, let’s talk about the all-weather philosophy behind this approach. Sebastian: The key to stable long-term returns is to be flexible and take a pro-active approach to investing. You have to start with the fundamental basis of controlling risk and the best way to do that is through diversification among truly different asset classes — including hard assets, like gold, silver, oil and other commodities ... foreign currencies like the Swiss franc and Japanese yen.*** Mike: Right. Diversification doesn’t just mean owning 20 different mutual funds that are invested in stocks, with sometimes very similar holdings. Sebastian: It also must not mean that you can ‘set it and forget it.’ You’ve got to take a dynamic approach to rebalancing your portfolio, repositioning your portfolio. Most important, you don’t always have to be fully invested. There are times when you need to scale back and invest less! There’s already enough volatility in the marketplace. If you compound that by using volatile investments and risky strategies, you’re just asking for trouble. Our goal is to manage your money to earn a reasonable rate of return without taking unreasonable risks[ I ]. For most investors, I don’t think quick, overnight home runs are a suitable goal. And that’s not our goal either. Sherri: Sebastian, you're the portfolio manager of two of our longest-standing and most-successful programs at Weiss Capital Management: The Weiss Bear Strategy, and the Weiss Balanced Program. Sebastian: Correct. Sherri: And Mike, you have put together some of the performance stats [on these programs]. Can we run through them briefly?
Sherri: And the S&P 500 during that same period? Mike: During that same period, the S&P 500 LOST -29.6%. Sherri: So, the difference between the Weiss Bear Strategy and the S&P 500 has been ... Mike: It's the difference between a +47.3% gain and a -29.6% loss, or a total differential of nearly 77 percentage points in performance overall. Sherri: Seventy-seven percentage points. Mike: Yes. Needless to say, however, past performance is no guarantee of future results.
Mike: That's why we also have our Weiss Balanced Program, which invests mostly in conservative bonds and stocks, and which is more correlated to the stock and bond market in general. The performance there is a positive +20% since inception, during a period when markets generally declined.[III] Sebastian: And many of our clients have some of their money allocated to our Weiss Bear Strategy plus some of their money allocated to our Balanced approach. Sherri: So, you’ve prepared a chart showing the combined performance of these two strategies? Mike: Correct. This chart is a hypothetical performance illustration, starting at year-end 2001, when both programs were first available.[IV]
In this hypothetical illustration, an investment of $500,000 is split — half of the money in each of the programs — 50 percent to the Weiss Bear Strategy and 50 percent to the Weiss Balanced Program. Sherri: And, as we always do, this hypothetical performance is after the broker takes out all his commissions and after we take out all of our management fees. Correct? Mike: Correct. What you see here is net of all commissions and fees. This hypothetical performance is based on a composite of actual client accounts in each of the two programs, taking into account re-investment of dividend income and capital gains starting from the end of December 2001, through March 31, 2009. Sherri: Let me tell you what I like about this. First of all, I like the all-weather performance — except for brief periods, this chart shows a continued pattern of growth in BULL markets and it also shows a continued pattern of growth in BEAR markets. That’s what an all-weather portfolio should do ... and that's what it did. The second thing I like is the slow, but steady growth over time, without the extreme up-and-down volatility experienced by the S&P 500. That doesn’t mean there were no draw-downs. As you can plainly see in this chart, there were periods when this approach lost money. [That’s an important point — you can lose money even with an all-weather approach.] But, the third thing I like is that, in bear markets, such as we have now, the gap between the S&P and this all-weather approach is large. And that is indeed an all-weather approach. Sebastian: And it's this all-weather approach that we are using as the basis for our new program. Sherri: That’s right, Sebastian, thank you. At this juncture though, let me introduce this strategy to everyone. We have named this new program the WEISS ALL WEATHER MANAGED ACCOUNT, combining what we consider to be the best of both worlds — both the bear approach and the balanced approach we have been using throughout most of this decade.[V] Please understand, however, that the combined past hypothetical performance we just discussed is no guarantee of the future performance we'll achieve in the new Weiss All-Weather Managed Account. Sebastian: Plus, going forward, I want this strategy to be even more flexible and proactive — to adjust to the new reality we’re seeing here. Sherri: Please be more specific. Sebastian: Well, first of all, we’re not tying ourselves down to a static 50-50 blend. It’s got to be more dynamic. Instead, we will change our blend percentages depending on market conditions. If we see markets improving, we’ll overweight the balanced side of the portfolio. If we see markets deteriorating, we’ll overweight the bear side. Sherri: Any other adjustments? Sebastian: Yes, an important one. I’ve set aside up to 15 percent of the [program’s] assets to be used for special situations ... Sherri: ... that you and our Investment Committee think are especially attractive. Sebastian: Yes, I call this our ‘best ideas’ component of the account, where we make more targeted, tactical, shorter-term investments that our committee has a particularly strong conviction on. Sherri: Sebastian, Mike, I’m proud of what we’ve accomplished here. We’ve designed the Weiss All Weather Managed Account to achieve all the things we believe are essential for these times: To help protect wealth ... to potentially grow wealth ... and to help give our clients the opportunity to enjoy a comfortable retirement. Let me quickly review some of the benefits [of this managed account] for our viewers:
We are accepting applications for the All Weather Managed Account starting today [June 3, 2009] and this charter membership period is open only through the end of July. So, your application process must be initiated by July 31, 2009. And as a special incentive, anyone responding to this event will be entitled to a special discount[VI] off our standard management fee. Mike: Sherri, please don’t forget to give our viewers a reference if they want further information. Sherri: For more information on the Weiss All Weather Managed Account and to get your complimentary All Weather Investor Kit, just click on this link. Or you can pick up the phone and call us at: 1.800.814.8045. Good investing, P.S. Today more than ever, you should explore an all-weather investment strategy to help you shelter your investments from financial storms. To get your All Weather Investor Kit right away, go here! Important Disclosures: This Weiss Wealth Webinar edited transcript has been a presentation of Weiss Capital Management, Inc. a SEC Registered Investment Adviser and a separate, but affiliated entity of Martin Weiss’ publishing company, Weiss Research - publisher of Money and Markets. Both companies are owned by Weiss Group, LLC, although managed independently. The preceding edited transcript contains forward-looking statements regarding intent and belief with regard to the market, the economy and the benefit of an ‘all-weather’ investment strategy. Readers are cautioned that such statements are opinions and actual results may differ materially from those statements. * International investing presents certain risks not associated with investing solely in the United States. These include, for instance, risk related to fluctuations in the value of the U.S. dollar relative to the values of other currencies, custody arrangements, political risks, differences in accounting procedures, and the lesser degree of public information required to be provided by non-U.S. companies. ** On August 7, 2006, TheStreet.com, a leading provider of financial commentary, analysis and news, acquired certain assets of Weiss Ratings, Inc., a wholly-owned subsidiary of the Weiss Group, Inc., and an affiliate of Weiss Capital Management, Inc. Under contractual agreement, Weiss Capital Management pays for research provided by TheStreet.com Ratings based on an annual usage fee. *** The risk of loss trading currency and commodities can be substantial. The profit or loss in transactions in foreign currency-denominated contracts are affected by fluctuations in currency rates where there is a need to convert from the currency denomination of the contract to another currency. The value of commodity contracts relates directly to the underlying commodities. Weiss Capital Management utilizes mutual funds and ETFs containing currencies and commodities instead of individual contracts to further reduce the risk through diversification. However, fluctuation in the price of mutual funds and ETF shares could materially adversely affect the value of those shares. [I] All investments carry risk, this strategy is no exception. It is possible to lose money by investing in this strategy. Prior to investing, read our program-specific materials regarding risk, suitability and important disclosures along with the Firm’s ADV Part II. [II] Weiss Bear Strategy Complete Performance
Past performance is not indicative of future returns and, as with any investment program; it is possible to lose money by investing in the strategy. The Weiss Bear Strategy is suitable for investors with an AGGRESSIVE risk tolerance. The program has a recommended holding period of three-to-five years. There are no guarantees that the program will be able to achieve its stated objectives. Before investing, please review the Firm’s ADV Part II and all program materials. PERFORMANCE: Performance of the Weiss Bear Strategy depends on the performance of the underlying mutual funds in which it invests. In turn, performance of the underlying mutual funds depends on the performance of equity and fixed-income markets. Returns are based on a composite of actual client accounts. Individual client returns may vary depending on, among other things, account opening date, contributions, withdrawals, and fees. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. Net returns cited include actual management fees, commissions, and other similar fees charged on transactions, and reinvestment of dividends, income and capital gains. Gross returns cited exclude management fees and are net of actual commissions and other similar fees charged on transactions, and include dividends, income and capital gains. BENCHMARK: The S&P 500 Index is a capitalization-weighted index that consists of 500 large-cap U.S. stocks, which assumes the reinvestment of dividends and capital gains, and excludes management fees, transactions costs and expenses. It is not possible to invest in an index. Index return data source: Bloomberg. [III] Weiss Balanced Program Complete Performance
Past performance is not indicative of future returns and, as with any investment program; it is possible to lose money by investing in the program. The Weiss Balanced Program is suitable for investors with a MODERATE risk tolerance. The program has a recommended holding period of three-to-five years. There are no guarantees that the program will be able to achieve its stated objectives. Before investing, please review the Firm’s ADV Part II and all program materials. PERFORMANCE: Returns are based on a composite of actual client accounts. Individual client returns may vary depending on, among other things: account opening date, contributions, withdrawals, and fees. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. Net returns cited include actual management fees, commissions, and other similar fees charged on transactions, and reinvestment of dividends, income and capital gains. Gross returns cited exclude management fees and are net of actual commissions and other similar fees charged on transactions, and include dividends, income and capital gains. BENCHMARK: The benchmark for the Weiss Balanced Program is a custom blend of the S&P 500, MSCI All-Country World®, Barclays Capital Aggregate Bond Index and the Dow Jones-AIG Commodity Total ReturnSM indices. The benchmark consists of the following:
These indices assume the re-investment of dividends and capital gains, and exclude management fees, transactions costs and expenses. It is not possible to invest in an index. Index return data source: Bloomberg. [IV] HYPOTHETICAL PERFORMANCE ILLUSTRATION: The chart illustrates the hypothetical performance of $500,000 had it been invested on 12/31/01 through 3/31/09 using a combination of the Weiss Balanced Program (50%) and the Weiss Bear Strategy (50%). This hypothetical performance is based on composites of the performance of actual client accounts, net of fees (management fees, commission and other similar fees charged on transactions), and takes into account the re-investment of dividends, income and capital gains, as calculated since the most recent inception date of the two programs. Please note that the inception of the Bear Strategy was 12/31/00 and therefore, performance for the period from 12/31/00 to 12/30/01 is not represented in the hypothetical illustration of combined performance, since the Balanced Program was not in existence at that time. The performance presented is hypothetical performance because no actual client accounts were managed pursuant to the combined strategy during the period presented. Past performance of either program does not indicate the potential for future returns for either program or the combination of these programs as utilized in the Weiss All Weather Managed Account. As with any investment program, it is possible to lose money by investing in the Weiss All Weather Managed Account and there are no guarantees that the Strategy will meet its stated objectives. Additionally, individual client returns for both the Weiss Balanced Program and the Weiss Bear Strategy may vary materially from the performance depicted due to factors such as: account opening date, withdrawals and fees. Fees charged to individual client accounts may vary. The investment minimum for the Weiss All Weather Managed Account is $500,000. Individually, the Weiss Bear Strategy investment minimum is $100,000 and the investment minimum for the Weiss Balanced Program is $150,000. The Weiss All Weather Managed Account differs from the hypothetical performance illustration in that the strategy may vary the percentage invested in the respective programs — Weiss Balanced Program and The Weiss Bear Strategy — above or below the 50/50 percentage shown. Also, the Weiss All Weather Managed Account may invest up to 15% of the portfolio assets in any liquid asset at the discretion of the portfolio manager, which is not represented by either program or the hypothetical performance illustration of the combined individual programs. If the combined strategy presented in the hypothetical performance illustration had been managed utilizing these differences, the performance of the combined strategy would have differed from that presented in the hypothetical performance illustration. The S&P 500 Index is a capitalization-weighted index that comprises 500 large-cap U.S. stocks, which includes the reinvestment of dividends and capital gains and excludes expenses. It does not represent the Weiss All Weather Managed Account objective, nor is it the benchmark, but is used for comparison as a representation of the market in general. It is not possible to invest in an index. [V] The Weiss All Weather Managed Account The Weiss All Weather Managed Account is suitable for investors with a MODERATE risk tolerance seeking total return and portfolio growth over time, without the higher level of risk associated with a pursuit of pure capital appreciation. The program has a recommended holding period of no fewer than three-to-five years. Prior to investing, please review the Weiss All Weather Managed Account strategy materials for more information on risks, suitability, fees and other important disclosure information, in addition to the individual program information for the Weiss Balanced Program and The Weiss Bear Strategy and the Firm’s ADV Part II. [VI] New clients who apply during the charter membership period (June 3, 2009–July 31, 2009) and are accepted into the Weiss All Weather Managed Account with the $500,000 initial investment will receive a special lifetime discount on management fees. The discounted fee will be 1.25% annually on assets under management. The standard management fee is 1.50% annually on assets under management for new clients entering this program after the charter membership period expires. 1 Stockcharts.com: S&P 500 Index, 5/21/09 Disclaimers: 1. Weiss Advice is a publication of Weiss Capital Management, an SEC Registered Investment Adviser. Weiss Research is a separate, but affiliated publishing company. Both entities are owned by Weiss Group, LLC. 2. "Weiss Advice" is published for general information and educational purposes only and should not be construed as a specific recommendation to buy or sell any security. Specific recommendations can only be given to advisory clients of Weiss Capital Management, with the benefit of knowing their financial condition and suitability. Receipt of this publication should not be construed as a solicitation to do business outside the jurisdiction for which the Firm is approved. Currently, Weiss Capital Management offers investment advisory services to individuals maintaining legal residency within the United States. For details, please contact the Firm. View Weiss Capital Management's Privacy Policy. To make sure you don't miss our urgent updates, add Weiss Advice to your address book. Just follow these simple steps. |
We have witnessed a series of devastating financial storms batter the global economy and financial markets with the force of a category 5 hurricane. Left in the wake of these storms ... tens of trillions in lost wealth and massive government spending and lending amounting to trillions more.
Dr. Martin D. Weiss: For the first time in our lifetime, we are confronting a financial storm that challenges the best minds in Washington, empties the deepest pockets on Wall Street and threatens to rip through the portfolios of investors with the force of a hurricane. 
None of the key decision-makers in Washington or on Wall Street have ever experienced anything like this before in their lifetimes … and neither have we. But we do have one great advantage: The teachings and legacy of my father, J. Irving Weiss. 
Sherri Daniels: Sure. As soon as you contact us, you are assigned your own personal financial advisor. Our advisors are all licensed and experienced with the knowledge to work closely with you to understand your personal situation then help guide you toward achieving your financial goals.
Dad is no longer with us, but early on, she worked closely with me AND my father on a number of projects, publications and services for investors. Overall, Sherri has 25-years of experience in the financial industry with an emphasis on investment program design, allocation and analysis. At our investment advisory affiliate, she heads up a team of four portfolio managers and sub-advisors, plus 12 investment professionals and 11 operations and support staff.
Mike Burnick: The events of the past year have been unprecedented for the global economy, financial markets, and even society as a whole. We’ve seen dramatic changes already … big changes in government policy, in the business landscape, even in consumer behavior. We believe these dramatic changes will continue for many years, as a consequence of this crisis we’re still struggling through.
Sherri: Turning points of this magnitude always carry great uncertainty, but great opportunity as well.Markets were plunging to new lows just a fewmonths ago. They turned abruptly, and now stocks have rallied over +30% since early March.
Sebastian Leburn: Yes. And we still have major financial storms ahead. 
Mike: Correct. And then came the second major storm, when this crisis spread to Main Street. The formula was simple: No credit = No spending. And indeed, credit was suddenly unavailable for mortgages, for auto loans and for businesses. Wages and salaries began to suffer as job losses mounted. So, personal income and spending plunged.
Sebastian: This has impacted the entire economy.
Mike: This shows the earnings of S&P 500 companies, adjusted for inflation. Starting after World War II, these earnings have been trending mostly up, with only temporary setbacks.
Sherri: They seem to think they have a blank check to spend all the money we have and all the money we don’t have.
Sebastian: Because true diversification requires going into other asset classes, not just stocks. Let me give you some factual examples here, based on this chart.
Mike: Sure. Let me give you the results for The Weiss Bear Strategy, which, as the name implies, aims primarily for profits in bear markets. We began that strategy at the end of 2000. And, since inception, including both winning years AND losing years, it returned a total of +47.3% through March [2009].[ II ]
Sherri: ... which segues to my next question, and probably the question that most investors are asking: No matter how deep this bear market may be, sooner or later it will end, right? 
First, this is a VIP service. We will only accept a limited number of clients so we can provide the top-notch personal service you deserve. That’s one reason why our minimum account size is $500,000. 
