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Will Ebola Fear Cause Healthcare Blowoff?

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Healthcare outperformance is reaching new highs.

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"To fight fear, act. To increase fear - wait, put off postpone." - David Joseph Schwartz

There is no doubt that headlines and media coverage over the Ebola virus are scary.  I do not claim to know the intricacies of the virus, but I do believe that probabilities matter, and that human beings have a way of overestimating things.  Various behavioral experiments have shown that because of the availability heuristic, for example, people tend to fear more losing their life in an airplane, when driving statistically is far more dangerous.  Odds are higher that people die from a car crash than die from the Ebola virus.  Yet, images and panic make people believe the opposite holds true.

None of this is meant to diminish fear.  On the contrary, clearly a pandemic can become non-linear and exponential, which can means the odds of dieing from Ebola become heightened if an outbreak truly occurs.  However, information can be a powerful weapon, and the more media coverage and fear there is, the more likely people become vigilant and aware, which in turn mitigates the risk that it infects the whole population.  That alone may explain some of the continuous momentum in healthcare stocks as of late, which our equity sector ATAC Beta Rotation Fund (Ticker: BROTX) is overweight when our risk trigger says it's time to be defensive on the sector spectrum.
Take a look below at the price ratio of the iShares Healthcare ETF (IYH) relative to the S&P 500 ETF (SPY).  As a reminder, a rising price ratio means the numerator/IYH is outperforming (up more/down less) the denominator/SPY.  Note the ratio is now at new relative highs, continuing on its top ranked momentum over the last three rolling quarters which is one of the reasons our low beta basket for the Beta Rotation Fund is overweighting the area quantitatively.



Healthcare has been incredibly strong for the better part of three years.  Indeed some of this has to do with Obamacare and structural demand for healthcare services as baby boomers retire and the population ages.  However, I suspect that if the Ebola virus does become a legitimate outbreak, Healthcare may be the only sector which attracts money from asset allocators on the hope that someone will find either a vaccine or an easy cure.  Blowoff moves up tend to be characterized by extreme excitement before an eventual let down from already strong momentum.  Ebola may be the catalyst for this to happen in the near term, regardless of whether fears are overblown or not. 

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The Fund's investment objectives, risks, charges, expenses and other information are described in the statutory prospectus, which must be read and considered carefully before investing.  You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting www.atacfund.com.  Please read the Prospectuses carefully before you invest.


Mutual fund investing involves risk. Principal loss is possible.  Because the Funds invest primarily in ETFs, they may invest a greater percentage of its assets in the securities of a single issuer and therefore is considered non-diversified.  If a Fund invests a greater percentage of its assets in the securities of a single issuer, its value may decline to a greater degree than if the fund held were a more diversified mutual fund.  The Funds are expected to have a high portfolio turnover ratio which has the potential to result in the realization by the Fund and distribution to shareholders of a greater amount of capital gains.  This means that investors will be likely to have a higher tax liability.  Because the Funds invest in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, large and smaller companies, real estate investment trusts, foreign securities, non-diversification, high yield bonds, fixed income investments, derivatives, leverage, short sales and commodities.  The Fund will bear its share of the fees and expenses of the underlying funds.  Shareholders will pay higher expenses than would be the case if making direct investments in the underlying funds.  The Beta Rotation Fund is new with no operating history and there can be no assurances that the fund will grow or maintain an economically viable size.

All investing involves risks. 


Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
A correlation coefficient is a measure of the interdependence of two random variables that ranges in value from -1 to +1, indicating perfect negative correlation at -1, absence of correlation at zero, and perfect positive correlation at +1.

The fund as of 10/04/2014 does not invest in any of the following investments: IYH, and SPY.  Fund holdings are subject to change and are not recommendations to buy or sell any security.  Current and future holdings are subject to risk.
MA(4) = 4 week moving average

References to other securities should not to be interpreted as an offer of these securities.

ATAC Beta Rotation Fund is distributed by Quasar Distributors, LLC.  No other products mentioned are distributed by Quasar Distributors, LLC.

Twitter: @pensionpartners
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No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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