Can Ill Fated Losses in Managed Futures Really be Prevented?
SafeMoneyMetrics™ (SMM™), a risk and asset management strategy claims to reduce or maybe even prevent ill-fated losses inherent within many managed futures investments. But is the claim true? The SafeMoneyMetrics™ Risk Management system evolved from hedging and redefines procedures currently used to select, integrate and evaluate managed futures and other high leveraged investments.
We "believe" that traditional investment analysis, when applied with clear intentions is quite useful. However, clear intentions are rare and when traditional analysis is used to evaluate managed futures trading talent, those same strategies can actually increase risk of loss. WHY? because it is impossible to produce accurate results using inaccurate applications. There are fundamental paradigms of reality currently ‘believed’ as ‘truth’ used to determine investment value that may actually cause unwanted losses. SafeMoneyMetrics™ offers a few solutions that can dramatically reduce the effects of uninvited misfortune. We are talking about major issues on a colossal scale, a very serious matter that needs attention! Material reality can unknowingly be built on erroneous 'beliefs.' Truth will eventually reveal itself, causing physical loss.
Unwanted loss ceases to exist, when the cause of that unwanted loss is eliminated.
Consider a few facts and remember that the entire industry uses the similar analytical tools.
** Past rate of return is the foremost element for evaluating investments. A decision to fund a specific investment usually evolves from an analytical process that includes past rate of return data.
** How past rate of return is calculated has no relevance to the Capital at Risk used to produce the rate of return. This fundamental error is only one CAUSE of poor decisions. For example: Rate of return (ROR) is calculated using realized and unrealized profit and loss, interest income minus costs; returns are applied to both actual and notional account funding levels. Notional funds represent client elected trading account levels. Actual funds represent actual cash that accounts are funded with.Although advisors vary, many use only between 3% and 10% of their required account size for trading. Also unrealized profits have no value to a client until realized and interest income is NOT a trading return earned from capital at risk.
**Past rate of return data also has no relevance to current reality and potential future results. Past rate of returns cannot be used to evaluate future capital at risk relative to potential returns. Past rate of return data cannot provide insight into the current stamina or mental acumen of traders and how that relates to current market conditions.Specifically, past rate of return on a managed account is a financial scorecard that measures human skill successfully applied within a specific situation. The situation that allowed success partially includes market condition, perceived "trade-setup" within that market condition, relative to an ability to perceive and act effectively at that specific moment. That particular situation with all detail is forever gone and will never repeat itself.
** Applications used to evaluate market price movements are erroneous when applied to evaluating any managed investment. This includes options on futures, currencies or equities. Evaluating human trading skill clearly requires different considerations than evaluating stock, bond or futures price movement.
**No one owns, nor will they ever own a portfolio of individual commodity futures as they would own a portfolio of individual stocks and bonds. There is no relevance to the comparison. Therefore commodity indexes, especially indexes of managed futures investments, used as Benchmarks, when applied to evaluating any managed futures investment should be selectively considered.**Contrary to emerging “beliefs” managed futures are NOT a hedge for any other investment and DO require strict risk management supervision.
**The Standard Deviation, also calculated using past rate of return only measures volatility of past return. Volatility is easily manipulated by account size and is dramatically influenced by unrealized trading returns. Both account size and unrealized returns have no relationship to capital at risk relative to realized returns. Also larger accounts usually have less volatility, which again, is a function of account size NOT trading talent.SafeMoneyMetrics™ reveals information that would otherwise remain concealed. It focuses on the analysis of variables that are directly meaningful and consistent in current reality. Since it only quantifies and analyzes real risk relative to real return; the analysis produces cleaner data and a more accurate look at forces that effect investment returns. Reflect for a moment; returns are only the scorecard we prefer to focus on cause.
You can download free investment guides at http://www.sanctity.com/guides.html and mini courses at http://www.sanctity.com/mini.html. The guides offer multiple methods of selecting investments that PROMISE to save thousands of dollars in unwanted losses. Institutions can save hundreds of thousands, probably millions depending on the account size.
Contact: Marlee-Jo Jacobson 212-777-3862 mj@safemoneymetrics.com
