In our third quarter commentary when we noted that the markets were down 20% year to date, little did we know that the most forceful declines were still to come. In October the stock market went into a free- fall as confidence in financial institutions evaporated. There were few places to hide as stocks, corporate bonds, REITS, and even commodities declined sharply. As a consequence, investors across the globe saw their portfolios ravaged. Over $30.1 trillion dollars of value was lost from global markets in 2008.
Our system remained primarily in money markets and bonds for the entire quarter. For the year, our accounts averaged declines of approximately 4.5%, while the US stock market declined 38.5%*. If there was ever a year to employ a manager that specializes in loss avoidance, this was it. (*Based on the Toews Aggressive Growth composite. Toews managed account performance ranged from-1.60% to -11.49% . Performance variance is based on funds available at the custodian and portfolio model. Information is for illustrative purposes only. Please refer to your individual statement for actual account results.)
Toews Poised to Buy Back Into Stocks
Many investors are selling their stock positions to avoid further losses. Our system, however, is poised to buy back into the stock market. As we print this commentary, we are at a level at which we will buy back into US and international stocks. If we successfully enter stocks near our signal, we can come back in at what many consider to be bargain stock prices. While we prefer to avoid declines, we have no issues with participating in subsequent rallies, should they occur.
As we’ve stated before in this commentary, declining markets can potentially produce profits for our investors. First, by remaining in money market funds during the duration of the decline, we help avoid losses. Second, declining markets can increase our investors’ chances for gains.
As the stock market moves lower, our target point for buying back into stocks moves lower too. That means that as the market moves down we have the opportunity to buy back into stocks at lower prices, potentially setting the stage for fresh gains.
So, while you might be inclined to share in the sense of panic when you hear about big declines,remember that with our management system, these declines improve your chances for profits.
Investor-focused Objectives
Have you ever asked the question: Are the fees I pay for investment management adding value? For investment managers that are attempting to out-perform market benchmarks as their primary objective adding value is difficult to achieve. Even worse, strategies that attempt to out-perform during rising markets cause many of those advisors to ignore risk. These managers can prosper for years, or even decades. However, when the stock market finally produces large losses it is revealed to everyone that focusing on out-performance came at the expense of managing risk. In fact, most asset managers have no strategy in place to avoid declines during crisis markets such as the one that we’ve just experienced.
Matching benchmark performance, the primary objective of most management companies, does not correlate to goals of most investors. Instead of attempting to match benchmarks, we have two basic objectives with our management strategy:
1. Provide above inflation returns for our investors
2. Attempt to limit losses
By including loss avoidance among our central objectives, we are forced to build models that allow us to exit markets during periods of decline. We believe that these objectives more closely match investors’ objectives.
Madoff
In the midst of the extraordinary market turmoil of the last 4 months, if you watch the nightly news, no doubt you have heard about Bernie Madoff. Mr. Madoff is alleged to have embezzled over 50 billion from investors and pull off what could be the biggest financial fraud ever. We feel nothing but the utmost compassion for the many investors that have lost their savings to this scandal.
In the Madoff case, it appears that investors gave custody of their assets directly to its investment manager, Bernie Madoff, and not to a separate entity. No independent custodian was used. Subsequently, Madoff was the single source of information about the investor’s account. Because there was no transparency, no other basis for account information, the investor could be told that he made a great return year after year and everything was fine when in actuality his account was worthless. Your investment managed by Toews Corporation is not custodied at Toews Corporation. As you know, you have not invested in some pooled hedge fund, but rather, your investment is under your individual name and registration at places like TD Ameritrade, Prudential, Security Benefit, ING, and others. Independently, these custodians send information to you. We cannot control what they report. You can access your account independently by calling the custodian, requesting a statement, or by checking your account online. Any liquidation is reported to you in the trade confirmation process.
In addition, our advisory business model includes other inherent checks and balances. Other entities and fiduciaries like your registered representative and his broker-dealer monitor your account. Because our program is a fee-based program, they have a direct interest in making surethat your account continues without incident.
The transparency of our advisor program is one its virtues and will serve you as our client. If you have any questions about the security of your investment, do not hesitate to contact your registered representative or Randall Schroeder of Toews Corporation at (877) 863 9726 x101.
Disclosure
Prior performance is no guarantee of future results and there can be no assurance, and individuals should not assume, that future performance of any of the portfolios referenced will be comparable to past performance.
There can be no assurance that Toews will achieve its performance objectives.
This document refers to the performance of the majority of Toews portfolios to illustrate the effect of Toews management on US and intl. stocks and high yield bonds. Performance of individual accounts varied based on the client’s investment risk profile and their specific investment funds. For your individual account performance, please refer to the enclosed quarterly statement or the quarterly statement recently sent you. In addition, not all model portfolios were referenced in this letter. It is not, nor is it intended to be, a comprehensive accounting of Toews asset management. There are other portfolios that Toews manages that performed differently than what is referenced in this letter.
This article may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
This article is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice. Please contact your investment adviser, accountant, and/or attorney for advice appropriate to your specific situation.