Leverage & Inverse Trading Strategies

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´╗┐Leverage & Inverse Trading

Strategies

Ugo Egbunike

Moderator ETF Analyst IndexUniverse

Neil R. Peplinski, CFA

Panelist Co-Founder & Managing Partner Good Harbor Financial LLC

Dave Schombert

Panelist Founder, President & CIO Metropolitan Capital Strategies

Steve Blumenthal

Panelist Founder & CEO CMG, Inc.

Good Harbor Financial, LLC Neil Peplinski

Using Leverage as Part of A Strategy

The Good Harbor U.S. Tactical Strategy

? A repeatable process

? Model driven

? Fully vetted, precise process

inputs

? Consistently applied

? Closely monitored

A well-constructed, data-driven model that produces results through consistent execution.

Analyze

1 market, credit and economic conditions

Model outputs

2 asset classes expected to

? Outperform

? Underperform

Investment Universe:

? SP500 Large Cap ? SP400 Mid Cap ? Russell 2000 Small

Cap ? US Treasury Bonds

Inputs:

? Momentum measures ? Yield curve dynamics ? Economic conditions

4 Active monitoring and risk management

? Determine asset

3

a l location and l everage targets

? Monthl y execution

a nd tra ding

Value added trading: ? Continuous ? Monitored

Leverage does not need to mean "conviction"...

1/2/1981-12/31/2009

Best Month Worst Month Best 12 Months Worst 12 Months Worst Drawdown Effective APR Average Annual Return Standard Deviation Sharpe Ratio (1% Rf) Information Ratio

Beta Upside Capture Downside Capture Source: Internal

Use leverage to:

Good Harbor

(Net-of-Fees)

14.13% -12.32% 56.61% -13.21% -20.61% 12.71% 13.03% 11.83%

1.01 0.36 0.53 80% 43%

S&P 500

13.18% -21.76% 52.94% -44.76% -56.78% 7.52% 9.18% 15.37%

0.47 * * * *

1/2/1981-12/31/2009

Best Month Worst Month Best 12 Months Worst 12 Months Worst Drawdown Effective APR Average Annual Return Standard Deviation Sharpe Ratio (1% Rf) Information Ratio

Beta Upside Capture Downside Capture

GH Leveraged

(Net-of-Fees)

18.45% -15.13% 81.29% -16.69% -25.17% 17.57% 18.31% 15.53%

1.06 0.72 0.69 106% 54%

S&P 500

13.18% -21.76% 52.94% -44.76% -56.78% 7.52% 9.18% 15.37%

0.47 * * * *

? Approximately bring "risk" to levels consistent with benchmark

? Use that leverage in an attempt to raise the APR

? In a case such as this, leverage is not a decision about whether markets are more or less "attractive" at any given time

? Here, looking for about 1.3x (15.53/11.83 = 1.3). Can achieve by using 70/30 blend of 1x and 2x ETFs.

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