Submitted by The Investment Shadow
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THE DISMAL DECADE MY ASSTERISK- 11/30/99 THRU 12/31/2009
NOTES: Working Capital Model (WCM) results are net of all brokerage fees, commissions, and charges. Nearly all figures are also net of Management fees, which were deducted from accounts quarterly, in arrears, for all but a handful of accounts. The maximum fee for any of these accounts would be 1.1% per year. It is (in my opinion) unlikely that their results, if adjusted, would have a significant impact on the WCM numbers.
This spreadsheet summarizes the manual analysis of 55 individual portfolios managed using WCM based Market Cycle Investment Management procedures and techniques. Family portfolios are excluded. Many accounts are not managed precisely in line with WCM strategies due to account owner request and specification. It is estimated that nearly 40% of the assets in this group of portfolios is invested in "income purpose" securities.
The "Net of Adds & Wdrls" column reflects client additions & withdrawals, including management fees and prepaid commissions. Tax payments and tax loss transactions are also treated as withdrawals. A separate "results" line is included that reflects an add back of 50% of the total withdrawals --- approximately $704,212. A second "adjusted results" line assumes that deposits and withdrawals for the period offset one another.
The footnotes below the numbers include important disclosures that you should be aware of. It is likely that there are methodologies and indices that did better and worse than the numbers reported here. The DJIA, S & P 500, and NASDAQ numbers were developed from AOL Charts, and are presumed to be accurate.
General Footnotes and Disclosures: Steve Selengut, owner of Sanco Services, Inc. prepared this summary from unaudited figures compiled by himself and others. Market Value numbers are rarely used for calendar year performance evaluation using the WCM.
1. Information obtained from client statements, Sanco Services manual records, and LMK-MACC Quarterly Reports. Adds/Subs column figures are from manual Sanco Services records. Note that Mid Atlantic Capital was the sole Broker Dealer used in the compilation of the more recent numbers and that LMK Wealth Management was the sole independent broker used for account transactions during most of the time period covered. The reasons for this relationship with LMK was outlined in the Sanco Services ADV II, Schedule F. This disclosure document is no longer available
2. Figures presented are for all WCM accounts active as of December 31, 2009. The results are not "Time Weighted" or adjusted in any manner to estimate the timing impact of additions to or withdrawals from any portfolio.
3. WCM accounts normally contain both equity and income securities. Most income securities are in the form of managed CEFs, but many of the accounts in this group contain individual Government securities, GNMA and Corporate bond unit trusts. Some individual preferred stocks were also held.
4. I understand that a separate Disclosure & Glossary of terms is available for the MACC Performance Reports but the reports themselves are confidential, and not provided.
5. The information contained in this spreadsheet is for information only and there is no intended implication that other funds or methods didn't have better performance during the time period.
6. Figures for the DJIA, S & P, and NASDAQ were taken from public sources.
7. This document is provided for information only and none of the figures have been audited, examined, or studied by anyone. It is not to be redistributed, copied, or disseminated in any way or in any medium under any circumstances.
(8) The figures presented here are provided as an illustration of relative performance for this period of time only. Nothing should be presumed with respect to any past or future time period, overlapping with this one or not.
Clover Capital Rule Disclosures:
1. Economic and market conditions were volatile during this decade --- particularly at beginning and end, when severe corrections took place. These conditions may have seriously impacted the performance of all market measures and participants presented here.
2. All market value numbers are net of brokerage fees, commissions, and charges. Nearly all figures are also net of Investment Management fees, which were deducted from accounts quarterly, in arrears, for all but 6 clients. Figures with respect to clients who pay fees directly are not separated in this presentation. The maximum fee per year for any of these clients was 1.1%.
3. All dividends, interest, capital gains, and capital losses are included in the Sanco Services figures. My methodology requires that only income paying securities are included in client portfolios, and the methodology also emphasizes targeted profit taking. In the latter part of this period, market conditions would have caused me to take lower than normal profits whenever they were available. Major losses taken on bankrupted entities (Lehman, Wash Mutual, Indymac) and to fund client disbursements are also included. The income requirement and profit-taking discipline absolutely enhanced the Sanco performance numbers --- in my opinion. Strict equity selection rules (IGVSI stocks only) were also a significant help: No IPOs, No NASDAQ, No Mutual Funds --- no problem.
4) As with all investment styles, the Sanco approach can produce both profits and losses, dependent on market conditions and other factors that may or may not exist during any reporting period.
5. Sanco results are "live" presentations of nearly all client accounts under management at both dates included in the spreadsheet. The Sanco portfolios are mostly "mixed" or "balanced" portfolios with varying percentages of income CEFs. CEFs are major income generators, and are easy to trade. I believe that their inclusion in WCM/ MCIM portfolios enhances the performance of these portfolios. The averages contain no CEFs.
Mathematically, I believe that excluding these figures would have impacted the Sanco figures marginally, but that the impact would have been negative. The indices included in the Summary Table, to my knowledge, include no CEFs at all.
6. Sanco Services uses an investment methodology referred to as The Working Capital Model. It was created and developed by the company's principal, Steve Selengut, and has evolved to its present state over the past forty + years. I do not believe that a similar approach is used by many managers, perhaps none. This investment methodology has remained the same in principle and practice for many years. The live portfolios and model portfolios designed according to this methodology are referred to as Market Cycle Investment Management portfolios.
Revision Date: 3/25/11