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The Disconnect Between Perception and Reality

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Our professors and partners have come from as far away as Australia to contribute their wisdom and guidance. Throughout the next two days we will be highlighting some of their ideas on managing risk and staying in the game as catalysts for discussion.

Approach:

- A two-tier methodology that attempts to capture near-term trading opportunities while positioning for longer-term secular trends

- An assimilation of the four primary trading metrics (technicals, fundamentals, structural and psychology) to gauge the health of the market

- Using "trading tells" (market breadth, leadership, sector rotation, reaction to news) to help navigate the daily dance

- Proactive patience, capital preservation and identifying advantageous risk/reward set-ups

Key themes:

- Energy will ultimately overtake the financials as the top weighting in the S&P.

- Energy and metals will be the tech and financials of yesteryear

- Be wary of relying on a historic basis of comparison as we edge through the post-bubble world.

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The dollar will remain an important variable juxtaposed against asset class buoyancy.

- Don't confuse debt induced largesse with legitimate economic expansion.

- The Wall Street model has begun to invert as the "commoditization of information" manifests and low cost trading solutions proliferate.

Outlook for the financial markets:

-Historic fiscal and monetary stimuli since the 2002 low have buoyed financial asset classes at the expense of the dollar. While this dynamic has decoupled in recent months (as a function of EU uncertainty), the basis of our investments (dollar) will continue to devalue or asset classes must deflate. The disconnect between perception and reality will be alleviated as a function of time or price, mitigating the tails of return in the years ahead. Capital preservation should remain a focus as we weed through a confluence of risks that have yet to trigger downside causation.

Thoughts on controlling risk and staying in the game:

- Make sure that your risk profile and time horizon are in synch.
- Diversify your portfolio with non-dollar denominated assets.
- Allow for an ample margin of error when initiating risk.
- Stay out of debt.
- Remember that discipline always trumps conviction.

If I could give one piece of advice to attendees...

-Don't let your net worth dictate your self-worth and remember that the purpose of the journey is the journey itself.


R.P.

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