Robert Drach - Nightly Business Report Market Monitor

» Skeptic999 - What's the meaning of Drach's ANNUALIZED returns?

There are lots of investment scenarios where an annualized return description DOES illuminate something. In risk arbitrage, for example, when one investment is finished, another can take its place. But this is not the case witDrach's's approach, so he's misleading his followers by displaying an annualized return.

-- posted by Skeptic999

» Kirk - Drach update: 83% cash 17% equities

Author: RSREXX1
Date: September 6, 2003 6:18 PM
Subject: Re: general

Drach update: 83% cash 17% equities

Fabian update: Buy gold,energy,double up S&P500 fund for 5-10% gains in w/in 2 weeks and huge rally staring oct-nov

Brinker: 100% equities since March 11 2003 for aggressive investors.

-- posted by Kirk

» axolotl - Drach should found a mutual fund

-- posted by axolotl

» Happy - Re: Drach should found a mutual fund

-- posted by Happy

» Kirk - Re: Re: Drach should found a mutual fund

Newsletter writers don't want to start mutual funds because it would be too hard to hide thier true records.

I think you are letting the dishonest ones spoil the whole basket Norm.

As far as I can tell, Robert Drach lists ALL of his buys and sells right on his NBR web page. I do the same with my newsletter (My Portfolio Buy & Sell Table - 5 months old, subscribe if you want one up to date!). All folks need to do is plug in the trades into Quicken and they have a history vs time of our complete records. How could we be any more honest than that?

Mutual Funds, OTOH, can "window dress" where they can hide their bad stocks. Of course, their reporting requirements are much stronger so the dishonest newsletter writers can't hide their bad advice as easily.

I can think of one reason a stock picker like Drach or myself don't want to run mutual funds. People can send money to mutual funds to invest any time they want. This usually means you get money to buy stocks when the market is going up and they take money out when it is going down! My system generates money (cash) when the market is going up and consumes it when it is going down. Getting more cash in a rising market would increase the risk for those already in as there would be net buying as the market went up rather than net selling. From what I can tell, Drach would suffer the same "problem."

Think about it. Open-ended mutual funds are not the way to go if you are a "buy low, sell high" type of person.

I noticed that Jimmy Rogers is running his new Commodities index as a limited partnership where you have to buy shares and I believe he can run it as a closed ended fund. If he keeps the expenses low that fits an index, then I know why he is doing this - so he can sell parts of the index when high and rotate assets to areas that are low. Then again, he could just capitalize on his name and charge a huge load.

  Date       Kirk    S&P500   Delta
2003 YTD    +50.8%   17.4%    33.6% as of 9/6/2003
 

                                Kirk   S&P500+  NASDAQ 
4.5+ Yrs 12/31/98 to 09/06/03  131.3%  (11.3%) (15.2%)
Annualized Annual Return        19.6%  ( 2.5%) ( 3.5%)
 
+with dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter .

-- posted by Kirk

» Skeptic999 - Re: What's the meaning of Drach's ANNUALIZED returns?

Having studied Drach's system (not the approach shown on NBR, but the approach described in his book) and noticing that his timing parameters entail being out of the market for months at a time, it seems to me his annualization of returns is a bit misleading --e.g. if I'm in the market for, say, 6 months out of the year fairly regularly, and I make a 10% return on my investment during that period, what does it illuminate to say I created a 20% return?

-- posted by Skeptic999

» smile_1 - Re: What's the meaning of Drach's ANNUALIZED returns?

if anyone is stupid/or naive enough to swallow that... well let's just say a fool and his/her money are soon parted.

-- posted by smile_1

» Kirk - Re: Drach's ANNUALIZED returns?

The ONLY thing that matters is how much he starts each year with and how much he ends the year with then you calculate a return for that year. String several years together and you can then do an annualized return.

Anything else is just smoke and mirrors.

Mutual funds are regulated on how they can report returns and you never see them talking about returns from arbitrary dates to make them look good or bad. They all use the returns by year then report a YTD return for the current year.

You should be able to construct some sort of data similar to what I report below where I've added my returns for each year with a comparison to the S&P500 (my goal is to beat that overall):

  Date       Kirk    S&P500   Delta
2003 YTD    +48.3%   17.1%    31.2%  as of 9/13/2003
2002        (21.2%) (22.1%)    0.9% 
2001          1.3%  (11.9%)   13.2% 
2000        (11.5%)  (9.1%)   (2.4%)
1999        117.0%   21.0%    96.0% 
                                Kirk   S&P500+  NASDAQ 
4.5+ Yrs 12/31/98 to 09/13/03  127.3%  (16.6%) (15.4%)
Annualized Annual Return        19.1%  ( 2.6%) ( 3.5%)
 
+with dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter .

Drach has good results so you should be able to construct a similar table for his portfolio. THEN you can compare it to indexes, etc.

-- posted by Kirk

» Q_out - Re: Drach update: 83% cash 17% equities

RSREXX1 has it backwards. Drach is 85% stock and 15% cash.
http://nbr.com/drach/drach.html

<img src="/files/mysites/qout/bhoestarts.gif" width=53 height=34 align="left">
Q_out
DISCLAIMER: My words and observations are general in nature, and are not meant as specific investment advice. Individuals should consult with their own advisors for specific investment advice.

-- posted by Q_out

» axolotl - PRUDENT SPECULATOR BEATS DRACH?

-- posted by axolotl