Let’s first demonstrate the affect that “the energy of” human intention and perception has in shaping every aspect of material reality. Naturally investment management is included. Developing an ability to quantify intentions that drive decisions is the most direct and powerful risk management strategy known to mankind. Nothing on this earth surpasses this power. More important it is God given and equally distributed to all people. Investment analysis and risk management can then be applied with confidence dramatically increasing your success potential.
Intention, Application and Outcome
Intentions and risk management can easily be demonstrated using a short story. I used to believe that the small investor was in greater need. The belief has since changed, however it prompted the research of a project that can increase potential returns at lower cost and risk for small accounts, sponsors and trading advisors involved with the service.
A legal exemption from CFTC registration is 4.12A and B. Part A is for clubs or friends and family. Part B allows anyone to form a limited partnership of 15 non-accredited investors or less with $200,000 maximum capital as starting value. Looking at state law and studying exemptions from securities registration easily PROVES how CFTC Regulation 4.12 evolved and its original purpose. Awareness of original purpose and application is an important factor in managing risk.
“Intention behind the law”: the original INTENTION for creating the law was to promote the growth of small business. Small business is what built this country! Everything starts from a seed. The “spirit” of the law was in alignment with what this country stands for.
The LAW is ALWAYS used with an INTENTION. Here we define intention as use of human energy driving the application that causes a result for self and others.
- I can use the LAW to teach or package a turnkey strategy for small investors. Partnerships can then invest into larger private partnerships. That gives small investors equal opportunity at equal cost to the affluent, the General Partner has limited risk and advisors have decent size accounts to manage. The strategy can be marketed through a network of financial advisors and probably investment clubs. People can construct their own partnerships and learn to prudently choose trading advisors. Here our intentions are aligned with the original “spirit” of the law. The promote the growth of small business and help small investors.
- The law can also be used to exploit people. Knowingly or unknowingly deceptive, “legal” investment and marketing practices can be packaged and sold to a variety of people causing more harm than good.
Defining the intention driving an application is THE KEY INDICATOR for managing many risks, including investments. Defining intention can help predict the long-term stability and probable outcome of any endeavor. Because universal law is neutral, it supports both positive and negative intentions. Aligning yourself with positive intentions is living with the tide of life on your side. Again the ability to make that decision is real power given equally to all people. How we choose to develop what we naturally have is a book unto itself and not a topic for discussion this month.
The Power of LAW
The energy of intention and consciousness can never be separated from action or what people create. By watching what people do, results they create and how they apply both universal and man-made law anyone can easily perceive underlying intention. When we align our intentions with “the side of right,” we use ourselves with a motive of love. Once we feel and live that way – prayers are answered and life flows from a better place than anything we can experience or create alone. We then live with and for our creator and life comes back to us tenfold! A friend says it: ”Things are really good, when I’m not in the way.” Watching myself, I can easily concur with his statement!
The power of faith is never recognized if it is placed in sin. But it is always recognized if it is placed in love. Course in Miracles Pg 421
Apply Investment Analysis to Increase Returns
Although traditional investment analysis is statistically correct, the application for managed futures or any leveraged investment is incorrect. Rather than be redundant read: Why you benefit from SafeMoneyMetrics®. It clearly supports the previous statement with several facts about how rate of return is calculated.
Not only do traditional performance calculations have no factual relationship to capital at risk relative to realized return, the inaccurate relationships are then used to construct a myriad of elaborate statistical measures that perpetuate the original inaccuracy! The composite story is then distributed to the masses at lightning speed through electronic media. More important we claim to be intelligent responsible beings! To maintain delusions of intelligence, when something goes wrong we blame the investment strategies we built and markets for all the losses!
There is a Zen saying that I’m about to misquote. “The right man with the right tools must always create right results. The right man with the wrong tools will create right results half of the time. The wrong man with the right tools will also create right results half of the time. Finally the wrong man with the wrong tools can never create right results.”
The right man with wrong tools and the wrong man with right tools can deliver equal results. However choosing the right man with the wrong tools can usually increase probabilities for a positive outcome.
WHY? Their heart is in the right place!
Right Men and Wrong Tools.
We spent several years developing practical applications for SafeMoneyMetrics.® Professional training and metaphysical understanding allowed solutions to inherent industry issues to evolve that we never thought possible. A few specific examples are:
Benchmarks: A benchmark can be any investment you currently have or the risk free rate of return. It needs to be a practical comparison to any investment you are considering. Benchmark risk and returns can also be defined using SafeMoneyMetrics®
- Realized Ratio: Capital at risk relative to realized return net of costs and the risk free rate of return.
- Volatility Ratio: Capital at risk relative to unrealized profit or losses for a specified time frame.
- Net Ratio: Capital at risk relative to realized and unrealized returns without unwanted interference.
- Tax Ratio: Capital at risk relative to after tax returns relative to volatility.
Benchmarks Should:
- Have direct relevance to the investment being considered. We perceive that relevance for managed futures has more to do with account size, leverage used, capital at risk, realized investment return net of interest, costs and tax consequences.
- Knowledge of volatility, time and liquidity are useful.
- Individual stocks within sectors have relevant movement to the sector. So index benchmarks may have value for specific applications. Managed futures have no direct relevance to any index or sector and need to be treated differently.
- Scrutinized a motive behind any application offered.
- Be applied using similar ROR calculations for all investments being compared.
- Be applied after considering everything inaccurate about the application. WHY? Negative thinking brings mistakes and hidden risk to the surface.
Modern Portfolio Theory
Professor Kevin Dowd is very clear as to the primary intention of Modern Portfolio Theory. It was specifically invented for application to investments having consistent predictable returns and little or no risk. For example: T-bills and bonds may be non-correlating, however they produce predictable returns. The investment community has abused the use of MPT. After exploiting its beauty, some claim that it no longer has value because it no longer works. Rather than looking at their motives and applications of MPT, people can maintain delusions of possessing honor and intelligence by blaming MPT. Since Adam and Eve blame is the perfect embodiment for denying truth. Sadly the statement describes much of how humanity functions.
A Few Solutions from SafeMoneyMetrics®
- Correlate return and volatility ratios for each market within a strategy and the composite investment.
- Market movements have value relative to an investments ability to deliver a return by participating in the movement. Correlating market movements has little direct value.
- Correlating returns and volatility has direct value.
- Use a SafeMoneyMetrics® correlation process for constructing multi-advisor portfolios.
- Market movements in futures/options are independent of each other. They do not now, never have or will ever move like stocks.
- Treating any managed futures account as you would a stock investment is delusional. Delusion usually causes misery. Avoid any investment that uses the correlation until you adjust for the weakness.
- Investment applications applied to stocks and other sectors will probably not work when applied to managed futures. Be careful when using specific risk management strategies or analysis across any market sector. You may actually increase risk of loss.
- Spend time tracking the original purpose of every risk management and analytical application you use.
- Take extra caution and ask how the rate of return for any investment was calculated.
Always align any current investment application with the original intention of its being, risk is automatically reduced.
An onslaught of NEW derivative contracts related to stocks, mutual funds and other sundries will perpetuate massive amounts of inaccurate marketing and investment analysis. We believe the intentions underlying the marketing may unknowingly not be in your best interests. We suggest using extra caution when approaching these strategies. Think about what you are doing. Speculation is not investment.
- Benchmarks as early warnings can be self-determined by each advisor.
- An ability to quantify weakness and strength of results for each market within the strategy and how each contributes or detracts from the composite result.
- Quantify a range of ratios that can create future expectations rather than rely only on past performance.