Breadcrumbs

April, 2015: Earnings Season Kicks Off

March equities began the month just a fraction off of their all-time highs and closed down 1.74% for the month. This was after experiencing their best month in over 3 years in February, as measured by the S&P 500. Earnings season officially began after the market close on April 8th with Alcoa reporting. Alcoa is a company that was anticipated to benefit from the stronger dollar, as market watchers try to determine the impact of lower oil and a higher U. S. dollar on overall earnings. The following statistics and estimates are courtesy of John Butters, VP and Sr. Earnings Analyst at Factset:

Earnings Growth: For Q115, year-over-year earnings for the S&P 500 are projected to decline by 4.6%. If the index reports a year-over-year decline for the quarter, it will be the first time since Q3 2012 (-1.0%).

Earnings Revisions: On December 31, the estimated earnings growth rate for Q1 2015 was 4.3%. All ten sectors have lower growth rates today (compared to December 31) due to downward revisions to earnings estimates, led by the Energy sector.

Earnings Guidance: For Q1 2015, 85 companies have issued negative EPS guidance and 16 companies have issued positive EPS guidance.

Valuation: The current 12-month forward P/E ratio is 16.7. This P/E ratio is above the 5-year (13.7) average and the 10-year (14.1) average for the index.

Earnings Scorecard: Of the 19 companies that have reported earnings to date for Q1 2015, 16 have reported earnings above the mean estimate and 12 have reported sales above the mean estimate.

In reference to the last point above, investors should keep in mind that earnings have already been revised down throughout the quarter. Although earnings will be down year over year for only the second time in 6 years and the other time was more "unchanged" than substantially down, many companies will beat these lower revised earnings. The point here is....buyer beware of the full story.

Themes for our most recent quant analysis include long the U.S. dollar, international equities in Japan and Hong Kong, healthcare stocks in the U.S., U.S. Treasuries and cash equivalents. The PCM US Bond Index is spread across investment grade corporates and U.S Treasuries of varying maturities covering the short and the long end of the yield curve. The PCM Absolute Bond Index added exposure to the 20 year U.S. Treasury with the remainder in cash equivalent, as it picked up another "Top Gun" award for performance for the 3 year period ending 4th quarter of 2014 from Informa Investment Solutions. This was mistakenly reported as a quarterly award in the last newsletter, but was actually for the three year time period.
PCM Absolute U.S. Sectors continued the theme of U.S. healthcare equities and the remainder in cash equivalents. The PCM U.S. Industries Index is long internet, food and beverage and retail equities, with the remaining 25% in cash equivalents. Like the S&P 500, both of these indexes are just off of their all-time highs.

The April reallocation of the Emerging Market Equity Index is invested in Asian emerging markets, emerging market technology and cash equivalent.
Healthcare, Japan, Hong Kong, the U.S. dollar and cash equivalents are all represented in the PCM Total Return and Stable Growth Plus. (Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)
The PCM Global Tactical Index is long U.S preferred equities and healthcare, Japan, Hong Kong, and the 20 year U.S. Treasury.
The Alpha One Index is invested in 7-10 year U.S Treasuries. The PCM Absolute Metals Index has 50% exposure to copper and the remaining 50% allocation to silver, while PCM Commodities Index is 50% in silver and 50% in cash equivalent, as this index is seeing very substantial outperformance both last year and year to date vs its appropriate commodity index.
PCM Index Strategy composites have been recognized for performance by Informa Investment Solutions; most recently for the Absolute Bond composite for the 3 year timeframe ending the 4th quarter of 2014, as well as previous awards for 1-year trailing performance and 3-year trailing performance. As of 2nd quarter 2014, the PCM Absolute Bond strategy and the PCM Absolute Commodity strategy both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 strategy was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond and PCM Alpha 1 are particularly timely for where we are in the current market cycle.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by CIO Michael Chapman


The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission. Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"
Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.
Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

March, 2015: February Sees Best Month for Equities in over 3 Years

Equities experienced their best month in over 3 years in February as measured by the S&P 500, which rose 5.49%. Quantitative easing begins in Europe on March 9th and the market appears to be anticipating at least some of that capital being reinvested in U.S. equities. Equities continue to ignore any warning signs as it brushes off the negative forward guidance from 80% of U.S. companies reporting their 4th quarter 2014 earnings, the possibility of deflation and what that means, indications that risk aversion is increasing, and a historical sell off in oil. Additionally, the market is at levels significantly higher than the long term mean.

The strongest theme for our most recent quant analysis is long technology stocks. Historically, technology stocks have been the strongest performer in late stage bull markets and since we are beginning the 7th year of the current bull market, this would definitely qualify as late stage. U.S. Treasuries pulled back substantially in February, as part of the rotation back to "risk on". The PCM US Bond Index picked up on equity strength and bond weakness, allocating 25% to high yield corporates, which is generally a proxy for equities. The remaining allocation went into cash equivalent. The PCM Absolute Bond Index also added exposure to high yield corporates with the remainder in cash equivalent, as it picked up another "Top Gun" award for performance for the 4th quarter of 2014 from Informa Investment Solutions.

PCM Absolute U.S. Sectors stayed long equities with exposure to materials, technology and consumer discretionary. PCM U.S. Industries continued the strong technology theme with holdings in internet companies, technology, food and beverage and retail. Both of these indexes are poised to break through all-time highs hit at the end of November.

The February reallocation of the Emerging Market Equity Index is invested in Asian emerging markets, developed markets in the Middle East and infrastructure in emerging market countries.

Technology, materials, consumer discretionary and preferred stocks are all represented heavily in the PCM Total Return and Stable Growth Plus. Both Indexes also hold the British Pound and exposure to Japan, which is hitting 15 year highs. (Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)

The PCM Global Tactical Index is long the U.S and Japanese equity markets, as well as continuing the theme with exposure to technology, materials and consumer discretionary.

The Alpha One Index is invested in preferred stocks, which is holding up very nicely month to date with the markets biased to the down side out of the gate for March. The PCM Absolute Metals Index has 50% exposure to palladium and the remaining allocation in cash equivalent, while PCM Commodities Index is 50% in cotton and 50% in cocoa, as this index is seeing very substantial outperformance both last year and year to date vs its appropriate commodity index.

PCM Index Strategy composites have been recognized for performance by Informa Investment Solutions; most recently for the Absolute Bond composite for the 4th quarter of 2014, as well as previous awards for 1-year trailing performance and 3-year trailing performance. As of 2nd quarter 2014, the PCM Absolute Bond strategy and the PCM Absolute Commodity strategy both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 strategy was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond and PCM Alpha 1 are particularly timely for where we are in the current market cycle.

To view Morningstar Fact sheets of all of our index models, please visit our website at www.pcminvestment.com under the "indexes" tab.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by CIO Michael Chapman

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission. Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"

Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

January, 2015: Santa Says Bah Humbug

Equity indexes begin 2015 down and volatile, experiencing the worst Santa Claus rally (or lack thereof) since 1999. The sell-off in oil is being debated amongst the bulls and the bears, with bulls believing lower oil will be a boost to consumer spending, while bears see it as a systemic warning sign of a slowing economy. Either way, oil companies earnings will be down at least in the short term and energy companies make up over 10% of the companies in the S&P 500. U.S. Treasuries are up strong with the 10 year yield now below 2%. PCM Absolute U.S. Sectors enters 2015 with exposure to industrials, consumer discretionary, and utilities. PCM U.S. Industries is allocated to food and beverage, retail, transportations and REIT's. Both indexes are just a fraction off of all-time highs hit at the end of November.

The January reallocation of the Emerging Market Equity Index continued with exposure to inverse emerging markets, with the remaining allocation going to cash equivalent.

The U.S. dollar continues to strengthen and is well represented in PCM Total Return and Stable Growth Plus. Both Indexes also hold U.S. Treasuries and inverse Europe and Asia. (Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)

The PCM Global Tactical Index is allocated to U.S. Treasuries and preferred equities, consumer discretionary equities, dividend paying equities and the New Zealand equity market. Despite seeming very exposed to equities, the index is right at unchanged month to date with the broader market down almost 3% for the same time period as of this writing.

The Alpha One Index went into cash equivalent in the recent high volatility. The PCM Absolute Metals Index remained invested 50% in palladium, with the remaining 50% allocation in cash equivalent, while PCM Commodities Index is strong month to date with exposure to cotton and gold.

The PCM US Bond Index is allocated amongst varying maturities in U. S. Treasuries and also in investment grade corporates, while the PCM Absolute Bond Index remained in 1-3 year U.S. Treasuries and 20 year U.S. Treasuries with both indexes benefitting from the month to date rise in U.S. Treasury prices.

PCM Index Strategy composites have been recognized for performance by Informa Investment Solutions; most recently for the 2nd quarter of 2014, as well as 1-year trailing performance and 3-year trailing performance. The PCM Absolute Bond strategy and the PCM Absolute Commodity strategy both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 strategy was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond and PCM Alpha 1 are particularly timely for where we are in the current market cycle.

To view Morningstar Fact sheets of all of our index models, please visit our website at www.pcminvestment.com under the "indexes" tab.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by Co-CIO's Michael Chapman

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission. Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"

Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

February, 2015: Volatility is Back!

Equity Indexes are experiencing a noticeable increase in volatility. Factors contributing to the increase in equity market volatility include: the Fed potentially raising rates, QE ending in the U.S., QE beginning in Europe, possibility of a Greek exit from the European Union, negative forward guidance from 80% of U.S. companies reporting, the possibility of deflation and what that means, indications that risk aversion is increasing, and a historical sell off in oil. Additionally, the market is at levels significantly higher than the long term mean.

The sell-off in oil is being debated amongst the bulls and the bears, with bulls believing lower oil will be a boost to consumer spending, while bears see it as a systemic warning sign of a slowing economy. U.S. Treasuries were up strong in January with the 10 year yield going below 1.7%. Both of PCM's bond indexes had a very strong month, as the 20 year U.S. Treasury yield fell below 1.70%, sending bond prices strongly higher. The PCM US Bond Index hit an all-time high for the month ending January 2015. It is allocated amongst varying maturities in U. S. Treasuries and also in investment grade corporates. The PCM Absolute Bond Index also hit an all-time high, as it remained in 20 year U.S. Treasuries and added government inflation linked bonds.

PCM Absolute U.S. Sectors enters 2015 with exposure to healthcare, consumer discretionary and utilities. PCM U.S. Industries is allocated to utilities, aerospace, consumer staples and REIT's. Both indexes are just a fraction off of all-time highs hit at the end of November.

The February reallocation of the Emerging Market Equity Index again continued with exposure to inverse emerging markets, with the remaining allocation going to cash equivalent.

Bonds, preferred stocks and conservative equity plays are all represented heavily in the PCM Total Return and Stable Growth Plus. Both Indexes also hold the U.S. dollar and exposure to Hong Kong and both experienced a positive return in January. (Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)

Despite equity indexes being down almost 3% in January, The PCM Global Tactical Index also held up very well and substantially outperformed the broader market with a positive return for the month. It goes into February allocated to U.S. Treasuries and preferred equities, utilities, and Hong Kong equity markets.

The Alpha One Index continued in U.S. government inflation linked bonds. The PCM Absolute Metals Index remained invested 50% in gold and 50% in silver, while PCM Commodities Index is 50% in gold and 50% in cash equivalent, as this index is seeing very substantial outperformance both last year and year to date vs its appropriate commodity index.

PCM Index Strategy composites have been recognized for performance by Informa Investment Solutions; most recently for the 2nd quarter of 2014, as well as 1-year trailing performance and 3-year trailing performance. The PCM Absolute Bond strategy and the PCM Absolute Commodity strategy both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 strategy was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond and PCM Alpha 1 are particularly timely for where we are in the current market cycle.

To view Morningstar Fact sheets of all of our index models, please visit our website at www.pcminvestment.com under the "indexes" tab.

By: Melissa Wieder, CFP®, Director Institutional Services
Collaborative insight provided by CIO Michael Chapman.

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission. Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"


Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.
Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

December, 2014: Despite Volatility, Dollar Strength Continues to push U. S. Equity Indexes Higher

Equity indexes continue higher despite several downward revisions in GDP across the globe including China, Japan and Europe. Although GDP forecasts have been revised downward in the U.S. as well, we are the only large global economy that appears to be done printing money and are also anticipating short term rates to begin rising mid to late next year. This in turn makes all assets denominated in the U.S. dollar attractive, as such an investment would appear poised to appreciate by both being in the strongest global economy and a currency that is appreciating vs a foreign investors' own currency. This trend in money flow to the U.S. continues to be picked up by our quant analysis, as we see the December reallocation continue to be very long U.S. equities and the U.S. dollar. PCM Absolute U.S. Sectors is long consumer staples, consumer discretionary, and technology. PCM U.S. Industries is now in consumer staples, food and beverage, aerospace and transportations.

The December reallocation of the Emerging Market Equity Index continued spread off with exposure to inverse emerging markets, while being long India and emerging Asia Pacific.

The strengthening dollar is also a contributing reason, albeit not the only reason, for the continued weakness in oil that we have seen recently. PCM Total Return and Stable Growth Plus both also have a heavy exposure to the U.S. equity sectors mentioned above, as well as to the U.S. dollar. (Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)

The PCM Global Tactical Index is "all in" U. S. equities with exposure to broader U.S. equities, as well as consumer staples and discretionary, technology and industrials. The theme continues with the Alpha One Index also being long broad based U.S. equities. PCM Absolute Metals Index is invested 50% palladium, with the remaining 50% allocation in cash equivalent, while PCM Commodities Index is long livestock and cash equivalent.
The PCM US Bond Index is allocated amongst varying maturities in U. S. Treasuries and also inverse high yield corporates, while the PCM Absolute Bond Index is in 1-3 year U.S. Treasuries and 20 year U.S. Treasuries.

****Newly announced performance awards: PCM Index Strategy composites have again been recognized for performance by Informa Investment Solutions; this time for the 2nd quarter of 2014, as well as 1-year trailing performance and 3-year trailing performance. The PCM Absolute Bond strategy and the PCM Absolute Commodity strategy both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 strategy was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond and PCM Alpha 1 are particularly timely for where we are in the current market cycle.
To view Morningstar Fact sheets of all of our index models, please visit our website at www.pcminvestment.com under the "indexes" tab.

By: Melissa Wieder, CFP®, Director Institutional Services

Collaborative insight provided by CIO Michael Chapman

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission. Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

About "PCM Quant Coalescence"


Welcome to Provident's bi monthly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.
Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

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