• This is a special Market Alert because we are unveiling an important evolution to our Invest and Protect Strategy after over six months of work by the Investment Oversight Committee
• We accelerated this release because we are now approximately 2% away from our new sell signal, and we want you fully informed before any action is taken
• The goal of Invest and Protect 2.0 is simple: respond faster to market declines while maintaining discipline and avoiding unnecessary moves
• Our new sell signal replaces the old “5% below the 200-day moving average” with a combination of two indicators:
• 3.5% below the simple moving average
• 4% below the exponential moving average
• Both must occur at the same time (an AND condition)
• By combining these two measures, we aim to get the best of both worlds: a signal that is both responsive and reliable
• Historically, this combined signal has triggered earlier and at higher market levels than the old method, helping us potentially reduce downside risk
• Once the sell signal is triggered, we do not automatically sell everything. Instead, we use four “sanity checks” to determine how much to sell:
• Yield curve
• Building permits
• Equity sentiment
• Credit conditions
• These indicators help us distinguish between “big bad bear markets” and more normal, shorter-term declines
• If all four sanity checks are flashing red, we treat it as a major bear market and sell the vast majority of equities
• If fewer indicators are negative, we scale the response accordingly, from significant reductions to smaller, more cautious adjustments
• Even if all indicators are green, we still reduce some exposure because a sell signal is like a financial tornado warning, and protection always comes first
• We have also built in a safety net: if conditions worsen after an initial sell, we have a predefined process to reduce exposure further
• On the other hand, if the market stabilizes and does not confirm a major downturn within approximately 42 trading days, we re-enter the market
• This ensures we are not sitting on the sidelines unnecessarily if the decline turns out to be temporary
• Beyond equities, we are actively evolving the bond side of portfolios to better serve as a stabilizer and shock absorber rather than a return driver
• We are also researching improvements to our buy signals to potentially re-enter the market more efficiently in the future
• Our objective remains unchanged: participate in market growth while protecting against major downturns so you can enjoy your Second Childhood Without Parental Supervision

Transcript:

Ken Moraif
Hello everyone, this is a very special I’m not going to call it a market alert video, because it’s not that, but it kind of is. So you’ll you’ll understand once I get into it and we’re sending it out on a Thursday, which is why it may feel extra special. So I’ll explain. There’s an old there’s an old French expression that says that, um, propose and you dispose. What that says is, man proposes and God disposes. And so this is exactly an example of that. So what happened is, is that we have been working diligently the investment oversight committee on a new sell strategy that is designed to be faster. Many of you have said, you know, why does it take so long for us to get out? And so we’ve developed one that does that. And then, of course, the sanity checks that help us to decide how much to sell when we reach that point. And we unveiled that to you earlier, but we were going to repeat that, and we produced this beautifully done webinar that we were going to send to you and have a big splash and promotion and everything around it. And our goal was to send it to you in April. We’re going to follow it up with, you know, Jordan Roach, our Chief Investment Officer, coming out to an office, a location near you, to answer your questions. We had it all planned out well, as things go with the markets, sometimes something happens faster than what you thought, and that and so what happened is, is that right now, as I record this, we are about 2% away from our sell signal, which is different than our traditional sell signal. And so in our, I guess, relentless endeavor to meet our core value number four, which is, if a client calls us, we lost. We want to get that webinar that we are going to do in April out to you today, because it is possible that in the next few days we might hit our new sell signal, and we wanted to let you know what it was, so that you are not surprised that it’s different than the one that we already had. So therefore I’m going to stop talking, and we’re going to play for you the webinar that we had planned on releasing in April, and then tomorrow we will have our normally scheduled weekly market alert video, which in case something did happen and we do need to act on it, and I’ll tell you all about that tomorrow. So we have two for you in two days. So thank you for understanding, but wanted to make sure you knew that none of this is like sudden, that we’re reacting in panic or whatever. It’s not. We’ve been planning this for easily six months, and we wanted to make you aware of it. So thank you, and make sure you watch the entire video, because we’re going to go through not only the new sell signal, but we are going to review also the sanity checks that we use to determine how much we’re going to sell if we hit our sell signal. So thank you, and we’ll talk soon. Hello clients and SCWPerS, and welcome to this very special unveiling of our new invest and protect strategy, 2.0 and this is the result of over six months of dedicated work by your IOC team. And I want to give credit to everybody who was on it, Doug Dyer, Chris Winkler, Jordan, roach will be joining us in a moment. And of course, moi and we have come up with some things that I think you will like in terms of improving the speed at which our strategy works, the sanity checks which we unveiled before. But we want to review those with you. And as always, we’re going to have more fun than a human being should be allowed to have when talking about all of this boring financial stuff, because this is actually going to be really, really fun. So I want to start off with just looking at the past and going through a little bit of a I’ll call it a glossary, a dictionary, a little bit of an education. Okay, so for those of you who are super sophisticated, this is review, be patient. We’re going to get into the complicated stuff in just a minute. And for those of you who this is all Martian to you, we’re going to try to make it English for you as best we can. Okay, so let me bring Jordan here. Jordan, good to see you. Excited for this one. Are you excited? Yep, it’s a lot of work. As our Chief Investment Officer, I think you’re the proud, proud papa here, right?

Jordan Roach
This is we’ve been waiting for this lot of work up leading up to this.

Ken Moraif
Yeah, it’s been very exciting. And so let’s get going. Let’s start off with some terminology. So the first thing I want to talk with you about is what is called a simple 200 day moving average. Okay, so basically, the way that a simple 200 day moving average works is we take tomorrow’s closing price of the market. I’m sorry, yesterday’s closing price. Of the market, and we go back 200 trading days. We add all 200 of those trading days together, it gives us a big number. We divide that big number by 200 and then that gives us the average for yesterday, tomorrow. We put today on. We drop a day off the back end, recalculate, and that gives us the average for today. So that’s why it’s called a moving average, a 200 day moving average. So Jordan, tell us what is wrong. Maybe wrong is too strong of a word, but what is it that we find lacking in a simple moving average when we’re looking at it, what are the features of it, that that, that it

Jordan Roach
has well, because of how we weight the data, as you get 200 days in there making way to meet. Why it’s simple is because every data point is weighted equally, right? So what happened yesterday is just as important as what happened 200 days ago. What that means is it’s less reactive. This moving averages to recent action. So it maybe moves more slowly than other types of moving averages.

Ken Moraif
And it also gives equal credibility, equal weight to days, because 200 traded days is about nine months, so it gives the same weight to trading days that were nine months ago versus today. And so it doesn’t contain it doesn’t it doesn’t take into account that the information most recently might be more relevant, right?

Jordan Roach
So it’s a push and pull. I mean, the good news is it’s less reactive to noise, but the problem is, sometimes what happens recently is pretty relevant.

Ken Moraif
Okay, all right, so that’s a simple moving average. So let’s look at a different kind of moving average, and let’s look at an exponential moving average. So basically, an exponential moving average still looks at the previous 200 days, okay, but think of it as a teeter totter, right? We’ve got the days that are 200 days old, and we’ve got the days that are brand new. They’re like a week old. And what you can do with an exponential moving average is you can weight the front end versus the back end. And so by doing that, you can make the more recent data more relevant, and it drives that moving average. And so what’s what’s different between an exponential moving average and a simple moving average?

Jordan Roach
Jordan, so an exponential is going to be more reactive. It is going to recalibrate right, it’s going to find a new average and react to new market conditions much more quickly than a simple now, with an exponential like you said, is, you know, if it’s a 200 day it still looks at 200 days ago. It didn’t just throw it out and discount it, but it weights it, you know, more lightly than it would more recent data, and that can just give us a more responsive look at what’s happening.

Ken Moraif
So the way I kind of think of it is that the simple is maybe more sane, because it’s using nine months worth of data, and it’s kind of evening it all out. So it’s not getting all freaked out about the most recent data, but the exponential moving average is more it’s freaking out more because it’s like, oh my gosh, you know, there’s new data that just came out that’s, you know, that’s causing the market to do all this kind of stuff. So because you’re weighting it more on that data, it tends to be more freaky, yes. So probably either one of them,

Jordan Roach
you know, they both have utility, right? So neither one is better than the other. It just they’re going to react more differently, and depending on the environment you in, they both could be useful, right?

Ken Moraif
But each one has a little bit of a shortfall, that’s right, right? So let’s look at what would happen if we, if we combine the two, okay, right? So. So, in other words, we’re taking the the calm person, and we’re putting a crazy person in with them, and we’re having them give me balance there, get some balance. Yeah. And so what we looked at was, what if we combined, when the S P falls, this the stock market, the s p5 100 index falls three and a half percent below the simple moving average. Again, it’s when we, every single day, is weighted the same, and at the same time, it reaches 4% below on the exponential moving average. So we’re using, we’re going to look at what happens if we use both of them, right?

Jordan Roach
Yep, look at both. See if, if you look at both, does that, you know, tell you something different than just using one or the other, right? So again, some balance there. And whenever

Ken Moraif
you’re looking at any kind of economic indicator, if you look at it all by itself, it has pluses and minuses that another one doesn’t, that may be different than the other. And so by combining them, maybe even smooth out both of them.

Jordan Roach
That’s, that’s, that’s exactly right. So I mean, the nice thing about using just one is it does give you clarity, right? It fits out in a ways. You’re just looking at one thing. It’s simple to track, but there can be potentially a different benefit to where you look at both of them at the same time. So.

Ken Moraif
So we decided to just look at what would happen if it was three and a half and four. And so let’s go back in time and look at what happened. So we’re gonna look at it year by year, going back the last, what, 25 years, back to the year 2000 and so if we look at that, what we can see is that the SMA, EMA, okay, so that’s where we’re combining the two together crossed in 2000 and that’s, of course, the big bear market of y, 2k and we’re also going to compare that that combination, when that happened to 5% below the 200 day moving average. And so did that get reached as well? And so what you can see here is that yes, it did. And then the next thing you can see is that there was a one day the the SMA EMA combination happened one day before the 5% below happened, right?

Jordan Roach
So the market moved to the SMA, Ema combo, one day before it moved solely 5% below the SMA.

Ken Moraif
And you would think, Oh, big deal one day, right? But it turned out that it was 1.56% higher. The market was 1.6% higher, 1.56% higher, even though it was only just one day. That’s right, okay?

Jordan Roach
And that, you know, it’s interesting, if you, if you just look back at market activity, what tends to happen below any type of, you know, longer term moving average is the day to day volatility on the market starts picking up, right? So if, in theory here, seeing 1.56 that that kind of validates what we would expect

Ken Moraif
to see. Okay, so now let’s look at 2004 which is the next time that that combination of the exponential moving average and the simple moving average crossed each other. That happened again in 2004 now in 2004 it was interesting. They what happened in 2004 the other four, the market

Jordan Roach
moves below that cross that three and a half percent under the simple 4% below the EMA, but the market never got 5% below the simple moving average.

Ken Moraif
So therefore there were no days to reach it, because it never got, ever happened market.

Jordan Roach
Basically that was the end of the right

Ken Moraif
and then the next line down, we have 2007 which was, of course, the great credit crisis. And here we see that, once again, that combination happened, right? It crossed the 5% below also crossed, and it happened two days earlier, which, again, doesn’t sound like a lot, two days, big deal,

Jordan Roach
but two days is two days. A lot can happen in two days in market. That’s right. And so the market moved point six, 3% from the SMA EMA combo

Ken Moraif
down to the 5% so you might say that the SMA EMA combo happened earlier, that’s right. And therefore when the when the market was higher, that’s right. Okay, all right. So then we look at 2010 they both did one day, and 1.35% higher, the market was higher at that point when they all crossed 2011 what happened there in 2011

Jordan Roach
Well, this is an interesting point, you know, like I referenced, where we tend to see historically, you know, the s, p5, 100 daily volatility, or a spread between highs and lows, picks up under the 200 day, no matter What kind of 200 day you look like on average. Like on average. And so what can happen here is you can get some big down days under the 200 day. So here, what this is telling us is there was a big enough down day to where the market moved through the SMA, Ema combo and to the 5% below in the same

Ken Moraif
day, in the same day. So there was so much volatility, the market went

Jordan Roach
down and sliced through them both, right? That’s where you see those maybe the 3% down day or something

Ken Moraif
like that. Okay, so in that in 2011 there were no days between, and therefore there’s no difference between the two, all right, so let’s kind of look at the others. So 2015, same thing happened, right? Okay, now 2018 is really interesting. So they both crossed a month before, 35 days before, and a big 2% so what was going on in 2018 that was when China was about

Jordan Roach
to go on. 2018 was we were raising rates for the first time since the credit crisis, right? We were having a little scare on maybe a slowdown. We have tariff talk picking up. So there’s a lot going on, yeah? And this is, by the way, this is 35 trading days, not even calendar

Ken Moraif
days. Oh, that’s right, it’s 35

Jordan Roach
it’s almost two months, right? So that’s,

Ken Moraif
that’s a month and a half, so, but a big 2% difference between the two. So that’s interesting, yeah. And then 2020 again, happened on the same day, right? So we had some big down days there, that’s right? And then this 120 25 is interesting, because this was Liberation Day, right? And they happened 15 days apart and 2% but the really interesting thing is that they crossed at the same time. Hmm, what was it? How many days before President Trump even announced the tariffs? It was like, it was like, a week before.

Jordan Roach
It was, that’s exactly right. That’s exactly right. And the 5% crossing, I believe, happened on Liberation Day, I think, itself, or one day post, yeah, so

Ken Moraif
that’s crazy. So, so it was like, somehow the market starts pricing. The market was like, how did the market know that President Trump was going to announce tariffs on liberty? Tariffs on Liberation Day? That was supposed to be kind of a shock, but yet somehow the market knew it, and it was already the moving average was just starting to move down. Yes, that’s exactly right. So when we look at all of this and we look back, we can conclude again, just using back data, right, that either the cross happened before or at the same time as the 5% below, but also we can conclude that it happened higher on average. Now, it doesn’t guarantee anything right? But it does show that that happens. That’s right.

Jordan Roach
On average, the market seems to slice through the combo right before it does the 5% below, just the simple and on average, the market is moving down from the combo average to the 5% below.

Ken Moraif
Okay, all right. So that’s very interesting. So now let’s change gears, and let’s talk about bear markets. Okay, all right. And so there are two kinds of bear markets. What’s that song? There are two kinds of people in the world. Never mind. So there are two kinds of bear markets. You don’t know that song, right?

Jordan Roach
I mean, maybe, maybe if you kept jingling there, I’d get to it.

Ken Moraif
But name that tune. I’m kind of proud of that. I thought I was a good singer anyway. So there are two kinds of bear markets. And so there’s the big bad bears, right? So, oh,

Jordan Roach
eight, right. Y, 2k, Great Depression.

Ken Moraif
Yeah. So these are the ones where we have a massive downward trend, yes. And they last a long time to most big, bad bears.

Jordan Roach
Again, you’re talking one to three years in duration. You’re talking 4050, in the Great Depression, 80 plus percent. So yeah, those

Ken Moraif
that was terrible. And, of course, 2008 was pretty terrible. And y 2k

Jordan Roach
the worst one, yeah. And third worst was ytk, why?

Ken Moraif
2k? So we’ve experienced those just in our hemisphere, shall we say? So there are big bad bears. These are major destructive declines, and they can wreak havoc on the economy and people’s finances. And then we also have the kind of the teddy bears, I’ll call it, the not big bad bears, right? And so tell us about those. They’re more

Jordan Roach
frequent, right? The big yes, so the non big, bad bears, think about this, the average, right? The market’s going to say it’s got something new to price in. It’s going to have to sell off. Call it 1520, maybe 30% but it gets through that maybe within a year or prior. And that’s typically, you know, you think about the last 15 years in particular, we’ve seen several of those, right? So your old age don’t happen all the time. Your regular bear that you don’t always know you’re in the regular bear at the time, because it always feels worse. But that is, on average, historically, you run into way more of those than you do a big, bad bear.

Ken Moraif
Okay, all right. So what we want to do then is, you know, our challenge is, how can we develop, I guess, a way to differentiate between what’s coming as a big bad bear and what is not a big bad bear, right? So after much research and debate, and I would say, pretty vociferous debate over which, which things we we could look at as a thing to do. And then we came up with basically four, let’s, let’s call them indicators of whether the possibilities are great, that it’s a big bad bear versus a non Big Bad bear. What we wanted

Jordan Roach
to do is look at other economic or monetary indicators and see what were those saying in different periods, right? So that’s, that’s what we’re looking at with these different indicators. Okay?

Ken Moraif
So basically, we looked at a lots of them, lots of hundreds and hundreds and so narrowed it down to four and said, you know, what would those four indicate on average, and the four of those where the yield curve building permits, equity sentiment and credit conditions, right? Those were the four that we wanted to look at and see. How did they behave, leading into a bear market, or a big bad bear or a not big bad bear, right? We’re listening

Jordan Roach
at four indicators that all look at four different, very different things to say, what were those saying in different parts of history? Right? To set. Indicators themselves. So we looked at the yield curve.

Ken Moraif
Okay, so tell us what the yield curve? What is?

Jordan Roach
What is that the yield curve basically just showing us the relationship between short term interest rates, Treasury rates and longer term right? And what it can tell us is, does the bond market see economic growth and prosperity on the horizon? They price Treasury’s interest rates accordingly, or they start seeing a slowdown. And when that can happen, the bond market will react and shift.

Ken Moraif
And the yield curve is very interesting, because if the yield curve is inverted, then it means that long term interest rates are lower than they are today. So basically, what it means is that the Federal Reserve has set interest rates here, but the market said, Hey, no, they’re going to be down here because a recession is coming and the Fed is going to have to lower interest rates, yes, and vice versa, if they’ve said interest rates here, but the market says, oh, no, you don’t, because the economy is going to heat up and we need to slow it down. So they’ll price interest rates here. So if the line is going up, then that is a positive yield curve. If it’s going down, it’s called an inverted yield curve. Yes. And the yield curve has predicted every single recession we’ve ever had, right? Yes.

Jordan Roach
The bond market is good about pricing in expected recession in area conditions or not. Yeah.

Ken Moraif
But the problem with the yield curve is that it’s also predicted a bunch of recessions that never happened.

Jordan Roach
That’s right. It’s reactionary, right? It’s similar to the market, right? Sometimes the price is in pain that doesn’t actually, you know,

Ken Moraif
take place, all right. So let’s talk about the second one, which is So, which is building permits. So why is that an interesting data point to look at in terms of, you know, economic sentiment, or, you know, the possibility of a big bad bear or a or a not big bad bear.

Jordan Roach
Well, building permits, let’s call it home construction is a forward looking indicator, right? It’s called a leading indicator, and that’s because, if you look at home construction itself, you know, represents 20% of the economy in terms of materials and job, labor and all these things that happen in so it’s a huge part of the US economy. And so what we just want to do is say, Okay, is there a part of that home construction cycle that could be a good early indicator of expansion and growth and jobs and construction or something that’s going to tell us, let’s say permits are coming down. We expect the housing slow down.

Ken Moraif
So the problem with the yield curve is that it’s, it’s 100% correct, but it’s also over. It over predicts. So that’s why you know you don’t, you don’t ever want to rely on just one economic indicator when you’re looking at what the global picture looks like. You always want to be looking at various things different parts. So Okay, so we’ve talked about building permits. The next one is equity sentiment. So this is the stock market, right? So what is the stock market doing that can tell us about investor behavior and what the stock market investors think. The yield curve was telling us what bond the bond people think, this is what this one tells us, what the stock people think sentiment

Jordan Roach
is, looking at various underlying positioning inside of the market, around the market, to tell us, basically, if the market’s going up, our investor is getting too complacent and think that it’s definitely going to continue to go up, or if it’s going down, is everybody panicking and think it’s going to continue to go down? And you’re basically looking for these inflection points. It could tell us maybe we might be moving the other way. It’s almost a contrarian indicator

Ken Moraif
in some respects. So as investors in the stock market get more confident, they tend to move into more aggressive stocks. When they get more scared, they tend to move into more defensive stocks. And if you kind of look at that ebb and flow, you can derive from that what stock market people think that’s exactly and as we know, maybe over time, they’re right, but in any particular instance, they could be wrong as well. That’s right. So all by itself, that’s not a good one. So you want to, you know, if you’re going to be looking at these indicators, you want to not put too much weight on just one of them, right? You want to think about the bigger picture. So let’s look at the last of the four, and that’s credit conditions. So credit conditions are very important, because basically, it’s the lifeblood of the economy, right, the ability to

Jordan Roach
borrow money. And that’s individuals borrow money, you know. And big corporations borrow money. Same way the US government borrows money. And if you look at consumer spending, you know, it’s roughly 70% of the economy, you know. And we’re getting more and more news all the time about, you know, an Oracle issuing debt and all these things, right? Companies issue debt to pay for things too. And so what we’re basically looking at the ability of consumers and businesses to get access to credit, to pay for their credit, you know, on time. And just see if that gives us a broad indication of, again, the monetary or the credit cycle.

Ken Moraif
And, you know, in 2008 for example, credit dried up. It basically stopped. And so nobody could borrow money to do anything, because everybody was so scared banks that they had that’s how they do so banks started failing. Real Estate started collapsing. The economy almost died. So it’s really important that credit is available for people to continue doing business. Blood of the economy. So life. Out of the economy. So now each of these can flash red or green, right? And we can look at it and say, okay, the yield curve is inverted. Building Permits are going badly or Well, while the yield curve is inverted. So all of these can either be flashing green or red. So again, let’s go back the last 25 years, and let’s look at which ones did what. Okay, so let’s look at, for example, all four flashing red happened before, the two big, bad bears we’ve had in the last 25 years, right?

Jordan Roach
So if you look at this, you know, so we looked at this graph before of October 2000 right? That’s when the s and p5 100 moved through the EMA SMA. And at that same time, if you look at these, you know indicators, yield curve was already signaling pain, which were flashing red, permits pain, sentiment was flashing red, and consumer credit and business credit, we call that credit conditions. That for us, is really one indicator. It’s an either or also flashing red.

Ken Moraif
So all four were flashing red before that big bad bear. That’s right, okay. And then same thing with the credit crisis. We were just talking about November, all four of them were flashing red. Then too,

Jordan Roach
right at the same time, the market is moving down through this, you know, EMA, SMA, these other indicators

Ken Moraif
are flashing red. And this is on the day that those two, the EMA and the SMA, crossed. It’s on that particular day, correct? So it’s not but the day before or the day after, it’s on that day is when all of this happened. That’s right.

Jordan Roach
So some of these were flashing maybe before, but yeah, the point of this graph here is saying, Okay, on the day the market moves through the EMA, sma that cross on that same day. What are the indicators saying? And this would say, well, all of them on the same day were also

Ken Moraif
signaling red. Okay, so, so this, then was, at least, for those two, an indicator of the two big bad bears we’ve had in the last 25 years, right? This is

Jordan Roach
indicator at the time prior to those big bad bears, all these other indicators were flashing red. They were red all over the all

Ken Moraif
over the economy. Okay, all right. So now let’s look at what happened in the non Big Bad bears. And so May of 2010 August of 2011 et cetera. As you can see on the screen, not all four were flashing red

Jordan Roach
right at that point, broadly. You look at these other indicators, they were all still green.

Ken Moraif
So you have, in 2015 their businesses were having a little trouble borrowing money, but everything else looked okay. And then in 2020 which was covid, even then the yield curve inverted right, and the stock market obviously wasn’t happy we saw what happened there. But overall, everything else seemed to be okay from that indicator standpoint, right? Yeah, all right. And then so in none of these instances did we see all four of them flash red. And in all of these instances, they were bear markets, but they were not. They were either approximating or were bear markets, but they weren’t big bad bear markets.

Jordan Roach
Yeah, it’s really interesting going through the study again to see that, yes, these other indicators supported what the stock market was doing, you know, leading up to, you know, seven and October of 2000 like we’ve shown and then here again, we didn’t know it at the time, but where these indicators were on balance, majority were saying it’s going to be okay, if you will, while the market was moving down, which did kind of forewarn that maybe this won’t be too Bad.

Ken Moraif
Okay, all right, so let’s switch from education to all right, what is the unveiling? What is our new sell signal? And so our new sell signal, therefore, is the the new investment protects sell signal is when the s, p falls four and a half, three and a half percent below its simple moving average. And when the S and P and falls below 4% below its exponential moving average, when those when they cross, that is going to be our new cell signal versus the previous one, which we call our legacy, which was a simple 5% below.

Jordan Roach
That’s right. So going forward, right, the point in time where the market has to cross this certain point, this is our line in the sand for us then to take action is we are going to be shifting from using 5% below the simple, 200 day simple, to this, this combination move. And the important thing here is, and right? We have that right

Ken Moraif
there in bold, yes. Is this an and condition? So both of them have to happen.

Jordan Roach
We found for you know, overall we’re looking to do to get the best of both worlds, or to mute, kind of the drawbacks of either one by itself. You combine them together,

Ken Moraif
yeah, and again, this doesn’t guarantee that it’ll be correct, but it does you. Hopefully accelerate when we sell in the future, and hopefully gives us a little we sell a little bit higher than where we have normally sold, waiting for

Jordan Roach
the 5% below, right? And at the same time, quite frankly, we’re hope. What we’re hoping, and again, we look at this historically, is where the number of instances where this happens, but the our old legacy, you know, would not have kicked in. You want to be mindful of that too, right? Which is, how many additional cells in theory could you be dealing with?

Ken Moraif
Okay, all right. So the next thing we want to do is, okay, so we got it. When we reach a new sell signal, we’re gonna we’re gonna sell, okay, but the question then becomes, well, how much do we sell, right? And so at this point, that’s where we look to the four sanity checks to decide how much we’re going to sell. That’s right. That’s right. So, so again, we go through the tell us. We go through the the four sanity

Jordan Roach
checks, s p5 100, not the Dow, not the NASDAQ, not the Russell, right? The s p5 100 moves three and a half percent below the simple 200 day moving average, instead of five, instead of five, and it’s gone 4% under the exponential moving average, which is the faster one, which is the faster one. As we move through both of those then on that same day, we are looking at, okay, what are our sanity checks indicating to us? Okay, so we

Ken Moraif
looked at the four sanity checks and the percentage of the sanity checks, or rather, the number of sanity checks, is going to help drive our decision as to whether we think it’s a big bad bear or a not big bad bear. So therefore, let’s talk about, if all four of them are flashing red, then we’re gonna, we’re gonna sell 100% or the vast majority, or

Jordan Roach
the vast majority, right? That’s that is the overwhelming weight of the evidence. Looking at different types of indicators telling us different things, is suggesting that this is going to be bad, prolonged.

Ken Moraif
Okay, and then let’s walk it down. So three reds,

Jordan Roach
then what we sell a little less. We’re not going to sell 100% position, but we will still sell a significant portion

Ken Moraif
of our it still looks like things might get bad, and so bad, but not necessarily a big, bad bear, but it could be, it could be bad enough to sell, you know, a substantial portion, correct, all right? And then we get down to two, which we saw, you know, in the past, that that could happen, then we sell a moderate position. And if we’re down to one, we sell a small let’s talk about if we have zero. In other words, they’re all flashing green. Then, then what we’re

Jordan Roach
still going to be selling some still sell a minority position, because we still do not know what’s going to happen, right? So we will still on there, err on the side of risk management, of caution, of protection.

Ken Moraif
Okay, all right. So the next question that someone may ask is, you know, what? If the sanity checks say this is not a big, bad bear, right? As in, they’re all flashing green or less than four, but then it turns out to be one? Yeah? Okay, so we just, we didn’t sell everything, and yet. Now here it’s heading way down. What?

Jordan Roach
When do we sell more? And this is a, probably a topic that we talked about a ton, yeah,

Ken Moraif
and but let me preface this. In our research, we have never, we have not found a time when all four of them were flashing red, when it did not turn into a big, bad bear. And so, because of that, this is because, just because something never happened before doesn’t mean it won’t, it can’t happen in the future. So there’s a very small probability that if all four of them are flashing red, that it’s not a big bad bear. But we want to accommodate for the fact that there’s a more than zero chance you know, that it could. There’s an old expression that an algorithm works until it doesn’t, so to protect our clients and our squippers, what if the sanity checks say that this is not a big bad bear and it turns out to be one? When do we sell more? So in other words, not all four are flashing red, okay? And so we don’t sell everything, right, but it just keeps on going down.

Jordan Roach
Then what do we do? Right? So this is something we we agonized over for a long time, right? Of do we? Do we need something to kick in? Because, again, you go back to least 2000 we have all this data to kind of look at it. The indicators, Sandy chips, been pretty good, right? They’re, they’re showing in advance of big bag bear. So we haven’t seen this where, you know, we get an all green it turns into a 50 percenter. That’s something, but we want to plan for that, because it could happen.

Ken Moraif
It could happen, right? So what do we do if it’s not, if all four are not flashing red, we don’t sell everything. And now the market’s headed down, and it turns into a big, bad bear. How do we, how do we address that

Jordan Roach
particular risk? Not want to be hanging over the cliff without a parachute, right? So we develop what we call a safety net, right? So that is a still a line in the Send method, without our discretion to say, look, we have a mechanism to take more off the table if things continue to turn worse and worse. So we have

Ken Moraif
built in. We do what happens if it still keeps going down, that we will sell more. We have a safety net for that. Let’s do

Jordan Roach
and it’s not going to be just you and I debating a what this and that, the other that is pre built. That is a, you know, a, effectively, a math problem that we haven’t worked out.

Ken Moraif
Okay? So now let’s look at, what if the sanity checks say it is a big, bad bear. We sell and then we don’t reach the bear market confirmer, which is the 5% below? Yeah.

Jordan Roach
So, you know, going back to our earlier slide, 2004 right? In 2004 the s, p5, 100, moved through the new signal, right? But, but then it, it never got to 5% below. You know, it wasn’t a 50% error. So we looked at that and said, well, we need to build in effectively, a confirmation signal, okay, to allow us to say, look, we got to give the market time to digest, but at some point we got to move back in if things don’t

Ken Moraif
continue to get worse, because if it’s not gonna be a big, bad bear, we don’t be sitting there in

Jordan Roach
cash forever. We do not That’s right. So basically, what we do is we have a a 42 day look back, right? So once we trigger, we put the clock on, and we look at 42 days. 42 days is two trading months, okay? And in that time, if we do not get to our legacy signal, that 5% number, that is our signal. Say, look, on day then day 43 we need to re enter the market.

Ken Moraif
We’re gonna go back in. We’re gonna get back in. Okay, all right. So that way, if it doesn’t turn out to be a big, bad bear, we’ve, we’ve thought of that too. That’s exactly right. Okay, so then the next thing is, what if all of the sanity checks are flashing green, then why would we sell anything? I mean, if they’re all green, then it’s like, everything’s fine. Why? Why would we sell anything? I mean,

Jordan Roach
because at the end of the day, and you’ve talked about this a lot, right? It’s a tornado warning, and this is we don’t know what’s going to happen, right? These are probabilities, and there are things that we’ve that could happen that haven’t happened, right? And so again, it’s tornado War, where we will always take precautionary steps First, yeah, and we go back through the data, quite frankly, is, you know, there have been times where it’s all green, and let’s just say, in theory, you know, you if you sell a minority position, you can still have continued selling. It’s still not fun in that period. We don’t know. We don’t know, so we’re going to take cautionary protection first, and we still believe selling a minority position is the right decision. Yeah.

Ken Moraif
And I always like to equate, as you just mentioned, our sell signal as a financial tornado warning. And the way I look at it is, you know, I was a, let’s say you lived in Oklahoma, where tornadoes are a fact of life every year, and you hear the tornado siren going off, okay, and so what do you do when that siren goes off? Right? In my opinion, you always take your family down into the tornado shelter. So let’s put it into terms of, you know, investing, and let’s say that while you’re in the shelter, you’re not making anything, but if you were not in the shelter, you’d be outside, you know, having fun with your family, and that’s making money. Okay, so while you’re in the shelter, you’re not having any fun at all. You’re down there in the shelter, you’re playing cards, and you’re waiting out what is presumably going to be a storm, but then the storm doesn’t happen, or the tornado doesn’t hit you, right? So now you go, Okay, it’s all clear. Let’s go back outside. So you look back at that, you think, man, that was a mistake. We should have never gone in. Should have ignored that tornado warning, but I think, and then what happens if it goes off again? Do you say, Well, this time, I’m not going to take my family. No, you’re going to take them back down again. And if you don’t get hit by the tornado, was that a bad decision to put your family in the tornado shelter if the sirens are going off? No. So how many times would it take for the tornado show the tornado siren to go off before you would say, You know what? This time I’m going to ignore it. For me, that would never happen, because I cannot afford to be wrong once, right? If there’s the one time, let’s say it happens three times in a row. And now I’m like, okay, these tornado warnings, I’m not even gonna listen. And that’s the one that flattens and, you know, does terrible harm to my family. I can’t afford to be wrong once, and so the way we look at it is your money, our clients monies, and our scripters monies. It’s our family, right? And we want to put your money in the tornado shelter when the siren goes off, so even if only none of them are flashing red, but our signal, the tornado, the financial tornado signal, is going off, we want to put some money, at least into the tornado shelter to protect against that absolutely.

Jordan Roach
And that’s where it’s we’re playing probabilities and unknowns, and for us, that’s a good decision every time.

Ken Moraif
Okay, so let’s talk now about the future of where we’re going with what we’re doing as an investment oversight committee. Okay, and so let’s talk about, what about the bond side of our portfolio? Are there any plans for us to make any changes on that side of the portfolio? Are we working on anything there? Because we’ve been talking all this time about the stock side, right? So let’s talk about the bond side. What’s what’s the future hold? What are we

Jordan Roach
working on? Well, we just recently, we made just the smallest of change, but nonetheless, kind of give insight into our thinking where we moved out of high yield. Be more risky, right? Which is more risky, and we moved into shorter term corporate bonds, less risky on average. But I think we have a lot of plans for where we want our bond portfolio to do based on the role we want it to have for our clients. Yes, and that’s the thing is, we’ve had a lot of really good conversations of the role we want that part of our portfolio to play for us. And so there are all sorts of iterative steps I think we’re going to take over the next three months to 12 months, to rebuild that Yeah.

Ken Moraif
And for us, pardon me, our bond portfolio is basically a stabilizer, yes, right? As a shock absorber. It’s not necessarily we want it to be the driver of returns. We want it to be a diversifier against the stock market, and the traditional bonds that have been used in the past have shown not to be that. And so we have to look at the reality of the situation and make changes accordingly. So we’re working on that. And then what about our the buy side? We’ve talked all about today, about the sell side, right? But once, so we’ve got that. But now we need to talk about, you know, the buy signal, right? And are we working on, you know, getting it to be faster or better, or whatever terminology you

Jordan Roach
want to use. We have a big priority list that I see this year, and the buy side, the buy signal, is certainly on there, right? We like our signals. We have now. There are things that we’re looking into to say, basically, is there another one we could put in between, kind of, where our historically, where our two buy signals sit? Can we speed that up, right? Especially on environments where ends up not being a big, bad bear, right? That’s kind of where you look at but we’ve also found too, and we’re still going to look at this. You know, using the sanity checks allows us to have a little more time to really think through the buy signal. Because, on average, you know, if you sure up the sell side, your buy side is still matters, but it’s not as impactful as it used to be. So but there we have some current ideas, and I would, you know, expect that that research project to really start

Ken Moraif
spinning up here. Okay, all right. So ladies and gentlemen, I hope you had as much fun watching this video, this webinar, as we did producing it for you. We are so excited about it. Of course, none of this guarantees the future, as you guys know, past performance does not guarantee the future, but we’re very confident that by using our new sell signal, and that by using our invest and protect our sanity checks to help us to distinguish between big bad bears and not big bad bears, and how much we should sell and all that kind of stuff, we think that that should help us going forward, and we’re very excited about it now. Jordan is going to be going on the road, and he’s going to be visiting a town near you to go over the invest and protect 2.0 and so make sure that you register for when he comes to town, because he’s going to be there to answer your specific questions. And I think it’s going to be very informative for you to you know if you have any additional questions, he’ll be there in person to be able to answer that for you, right? Jordan, where are

Jordan Roach
we doing it? A lot of travel this year. Look

Ken Moraif
forward to it. Yeah. All right. So thank you guys for watching. We appreciate you beyond words. You are our valued and beloved clients and skippers, and without you, we would be nowhere. Everything we do is to protect you, to grow you and to have you enjoy your second childhood without parental supervision. So thanks for watching, and we’ll talk soon.

Please note: transcript has been modified after the time of recording. 

Economic indicators and stock market performance cannot be predicted. Opinions expressed regarding the economy and the stock market belong solely to employees of RPOA on behalf of Retirement Planners of America and may not accurately portray actual future performance of the economy or stock market outcomes. Opinions expressed in this video is intended to be for informational purposes only and is not intended to be used as investment advice for individuals who are not clients of Retirement Planners of America. All content provided is the opinion of employees of RPOA Advisors, Inc. (d/b/a Retirement Planners of America ) (“Retirement Planners of America”, “RPOA”). ©Copyright 2026