March 26, 2025 • 49 mins
When financial stress tore Eric Nyquist's family apart during the mid-2000s, it sparked his lifelong mission to understand how to both grow and protect wealth. Now leading fund sales and distribution at Howard Capital Management, Eric shares how personal experience shaped his investment philosophy and why protecting capital during market downturns is just as crucial as capturing upside.
The cornerstone of Howard Capital's approach is their proprietary HCM Byline – a trend-following indicator that serves as a market barometer, signaling whether markets are healthy or deteriorating. Developed by founder Vance Howard in the mid-90s after experiencing the 1987 market crash firsthand, this systematic methodology removes emotional decision-making from investing, addressing what Eric identifies as the number one reason investors underperform: behavioral finance pitfalls.
Eric challenges conventional investment wisdom throughout our conversation, particularly questioning Modern Portfolio Theory's assumptions about rational investor behavior and its equation of volatility with risk. "Volatility works on a two-way street," he explains. "There's as much upside volatility as downside, and if you can't capture upside volatility, you're never going to make money in the market."
For advisors constructing portfolios, Eric suggests thinking in thirds – allocating to tactical growth strategies like Howard Capital's ETFs, actively managed fixed income, and passive strategies to keep costs down. Their ETFs (LGH and QQH) offer tactical versions of major indexes designed not to avoid every market hiccup, but to protect investors from the devastating 30-50% declines that can derail financial plans, especially for those nearing retirement.
Whether you're concerned about current market valuations, wondering about the persistence of large-cap dominance, or simply looking for ways to enhance your investment approach, this conversation offers valuable perspective on navigating market cycles with confidence. Visit howardcm.com to learn more about their systematic approach to staying tactical in today's rapidly evolving markets.
DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of Howard Capital and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorseme
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Let's talk about that byline approach a little more.
Is it from an actualin-practice perspective or from
a backdressing perspective?
Does it tend to be a betterapproach for large cap names,
mid caps names, small cap names,us international?
I'm trying to get a sense ofsort of where do you find, where
(00:21):
is the historical successreally been?
Speaker 2 (00:22):
Well, this historical success really been um well,
this historical success, thebyline, can be overlaid on any
investment class.
It is our market barometer,michael.
It uh is basically telling usif the market's healthy, if the
market's getting sick or if themarket has cancer and overall,
you know, put very simply, it'sa proprietary trend following
indicator.
(00:42):
It's looking at the overallbreadth of the market and
telling us to take appropriateaction.
If it's trending upwards, youknow we want to maximize upside
participation.
If it starts trending downwards, you know we might take a
little more defensive stance andprotect some capital for our
investors.
Speaker 1 (01:10):
One of the big reasons I'm a big fan of Eric
and Howard Capital Management isthey have a thing for active,
which is kind of my thing too,and they've done it actually
quite well as a firm.
We'll be getting into that.
This is going to be an editedpodcast under Lead Lag Live.
This is a sponsoredconversation by Howard Capital
Management.
We'll get into some of theirstrategies and products here and
, with all that said, my name isMichael Guy, a publisher of the
(01:32):
Lead Lag Report.
Joining me here is Mr EricNyquist himself, who apparently
was familiar with some of mywork before we actually chatted.
As I found out when we werefirst on a call, he had read
some of my papers and didn'trealize I was the guy behind
some of these papers a whileback.
So, eric, I like this formatbecause this is also an
opportunity for me to get toknow you on a more personal
level.
So introduce yourself to theaudience, to me.
(01:56):
Who are you?
What's your background?
Have you done throughout yourcareer?
What are you doing right now?
Speaker 2 (02:05):
Sounds good, michael.
Well, first and foremost, Iappreciate you having me on, man
.
It's been great getting to knowyou in the short time that
we've known each other and lookforward to continued
conversations.
You know, michael, thesemarkets, first of all these
markets kind of make me feellike my golf game Every time I
feel like I've got it figuredout.
It seems to humble me.
So happy Friday to you, man,and thank goodness we're done
(02:27):
with this February, hopefully onto a better month coming up.
But my name is Eric Nyquist.
I lead the charge in the fundsales and distributions for here
at Howard Capital Management.
I've basically been in themoney business and the people
business since coming out ofcollege, graduated Mercer
(02:48):
University, but my reason forgetting in this business kind of
stemmed from earlier in thetime.
I know firsthand what happenswhen you know financial security
can be lost.
When financial security can belost.
My parents struggledfinancially in the mid-2000s and
(03:09):
the financial stress tore theirrelationship apart.
They divorced when I was ateenager.
2008 did not help either.
So it wasn't until afterwardsthat I realized that money
stress, money fights, moneyproblems number one reason for
divorce in America.
So that made one thing veryclear and evident to me that I
did not want to go throughout mylife not understanding money as
(03:33):
well as how to grow and protectit.
So that drive led me where I amtoday and kind of leading the
charge on the fund distributionefforts.
I've always, I've alwaysbelieved, you know, that drive,
michael, kind of led me to whereI am today, not only with this
same.
With you know, I played collegeball at Mercer and then I had a
(03:55):
short stand with the Blue Jays.
I've always believed that, youknow, success is not just about
talent, it's about, you know,being proactive, putting in the
extra work and preparingrelentlessly so when a big
moment comes, you're ready toexecute without having to think
about it.
So that's what drives me towork hard every day and do the
(04:17):
best I can to help investorsnavigate these markets with
confidence.
Man, and to me it's not justabout chasing returns, it's
about having a plan and aprocess in place when things go
bad.
Obviously, markets go throughcycles and downturns will occur,
recessions will happen.
It's inevitable.
But you do not have to rideevery single downturn to the
(04:38):
bottom.
I've seen firsthand whathappens when there's no plan to
protect against a severedownturn, and so that's why I
believe in Howard Capital'sapproach.
I believe having a strategy tomitigate loss and stay on the
right side of the market is notonly smart, it's necessary,
because protecting what you haveis just as important as growing
it.
Speaker 1 (04:55):
You talk about that 2008 experience and suffering
through that, that being sort ofa major driver of your own
personal why in choosing thiscareer and being in the industry
, I talked to a lot of peoplethat remember that period very
well and it scarred them andmade them also hesitant to take
on risk.
And one of the things that youand I have talked about before
(05:17):
is this idea that you want to becognizant of the big risks that
are out there but at the sametime, there's always a reason to
sell.
Yeah, no, let's combine thosetwo concepts, because the appeal
of active management is riskmanagement, but on a long enough
timeframe.
Usually, equity markets go up,so how much should one consider
(05:40):
risk management by timeframe, asopposed to sort of just closing
your eyes and knowing that overtime it probably will be fine?
Speaker 2 (05:48):
Well, definitely no good question, Michael.
I think risk management is veryimportant to consider but at
the same time, I me as well asHoward Capital don't necessarily
believe that you shouldsacrifice one for the other and
vice versa.
You know traditional moneymanagement tends to lean towards
.
You know that you shouldsacrifice one for the other and
vice versa.
You know traditional moneymanagement tends to lean towards
, you know you, either you havea choice either chase returns
(06:12):
and accept volatility, or playit safe and sacrifice upside.
We reject that compromise.
We believe returns matter andrisk management matters.
So, you know, when it comes torisk, you know I really, you
know, want to ask folks how theydefine it, because I think it
can be defined in different ways.
(06:32):
Oftentimes, a lot of peopleequate volatility with risk and
I try to, you know, preach thatvolatility and risk are not
necessarily the same.
You know, volatility it's moreof just a price swing, of a
security.
I look at risk as being apermanent loss or more so, not
(06:53):
being able to reach yourfinancial goals, and I believe
there is definitely risk andalso not taking enough risk.
So, you know, being aware, youknow, is important to pay
attention in the market, butwith the amount of you know
media that we have today.
I look at it the same way Ilook at sports media.
(07:15):
You started off with First Takeback in 2010.
Now you have what feels like 50different channels talking
about the same stuff.
So the noise is bombastic,michael.
It's coming from us everydifferent angle.
We get updates on oursmartphones.
Investors are reacting toinstant sentiment changes in
news feeds and I think it'simportant to block out that
(07:37):
noise.
Again, I think it's importantto pay attention, but when it
comes to listening to the media,I think they more so react to
sentiment changes and you knowhyperbolic headlines rather than
delivering facts.
So I think it's important tokeep your news sources to two or
three trusted sources.
Of course, lead like mediabeing one of those choices.
Speaker 1 (07:59):
I don't know if I'm a news source at this point, but
maybe I'm getting to that point.
You know, usually when I saybreaking news it's something
more sarcastic than not.
Let's talk about Howard CapitalManagement's approach to
markets the active side andlet's talk about the history of
the firm a little bit.
I was not that familiar withthe company, but you guys are
fairly sizable.
Speaker 2 (08:16):
Yeah, absolutely so.
Howard Capital was establishedback in 1999 by Vance Howard.
He's our CEO and lead portfoliomanager man at the helm.
His idea for creating HowardCapital actually stemmed more
than a decade back.
Vance married his wife, karen,while attending college at Texas
(08:41):
A&M and they actually had awaste management company, a
trash compaction business, whichthey were able to have a
successful exit on.
Vance, by the way, has alwaysbeen passionate about the
markets, even when he was a procollege kid he was trading penny
stocks.
But getting back to the trashbusiness, he had a successful
exit from that business and theyhad their first little nest egg
(09:02):
, and so he started to put thatmoney to work.
And then Black Monday happened,the 87 crash, where the market
dropped over around 23% in asingle day.
And so you can imagine when youhave your portfolio drop by
about a third in a single dayand you just don't know how to
deal with something like that,because you've never been
(09:25):
through something like that.
You don't know how it couldcause potentially some lasting
pain, and so that essentiallydrove Vance to go out and find
some of the best managers andtraders he could find in the
world One of the more popularones that advisors may know well
, being Ed Sakota, the famouscommodities trader.
(09:47):
But he just went and learnedfrom these traders for the next
several years and eventually hecame up with a concept that
remains the foundation of ourrisk management process today,
which we call the HCM byline,and he came up with that in the
mid 90s.
Which we call the HCM byline,and he came up with that in the
(10:08):
mid-90s.
It started as Vance basicallytallying up the new highs and
new lows on the various stockexchanges New York Stock
Exchange, american StockExchange these various exchanges
Some don't even exist anymoreand tallying up the new highs
and new lows on a big yellowlegal pack.
And that was his system.
So we've come a long way sincethat point.
(10:29):
We've got a fully autonomoussystem now.
We put a couple million dollarsinto it over the past couple of
decades and we've come up withsomething we believe is pretty
consistent.
Obviously it's not perfect.
Nothing is but it's protected alot of principal for our
clients.
So Vance Howard founded HowardCapital in 99, just in time for
(10:50):
the dot-com bubble burst.
But with the help of the bylinewe were able to navigate
through that pretty well.
And then 2008 comes around.
We navigated that successfully.
So Vance has been aroundmanaging money for his clients
since 92.
So he's seen a thing or two.
Just like that farmer'scommercial, michael, he knows a
(11:11):
thing or two because he's seen athing or two.
And so Vance and Howard Capitaldo things a bit differently.
Vance thinks more like a trader.
He doesn't necessarily thinklike a CFA or a CFP.
He was not mentored by, youknow, cfas and CFPs.
He was mentored by hedge fundmanagers.
(11:32):
And I want to preface this,michael, by saying you know I'm
not saying one is right or wrong, it's just a different approach
.
In fact, I work with a lot offundamental managers and
wholesalers.
I believe pairing aquantitative tactical manager
with a fundamental managercreates a more comprehensive
approach to investing and givesa more full spectrum of the
(11:55):
market in a less more adaptiveand less vulnerable portfolio
through market cycles, bybalancing shorter term
flexibility with long termconviction.
But getting back to, vancethinks like a trader, you know,
not a CFA, cfp, cfas and CFPs.
In our opinion, michael, thinkin a little bit more of a
(12:17):
theoretical, academic way.
They emphasize fundamentalmanagement.
For the most part theyemphasize strategic rebalancing
and buy and hold.
Everything Vance is looking atis on a mathematical and
technical basis and he listensto the probabilities.
He wants to identify and tradesecurities that have a high
probability of success and he'snot just trying to diversify
(12:40):
across the board fordiversification sake.
He wants to identify and tradesecurities that have a high
probability of success andconcentrate more so into those
areas.
So again, it's just a differentapproach and again I welcome
the fundamental managers outthere.
Please reach out to me.
I love partnering with thoseguys because I believe in
(13:01):
manager diversification as well.
Speaker 1 (13:03):
Let's talk about that byline approach a little more.
Is it from an actualin-practice perspective or from
a backtesting perspective?
Does it tend to be a betterapproach for large-cap names,
mid-caps names, small-cap names,us international?
I'm trying to get a sense ofsort of where do you find?
(13:25):
Where's the historical successreally been?
Speaker 2 (13:28):
Well, this historical success, the byline, can be
overlaid on any investment class.
It is our market barometer,michael.
It is basically telling us ifthe market's healthy, if the
market's getting sick or if themarket has cancer and overall,
you know, put very simply, it'sa proprietary trend following
indicator.
It's looking at the overallbreadth of the market and
(13:50):
telling us to take appropriateaction.
If it's trending upwards, wewant to maximize upside
participation.
If it starts trending downwards, we might take a little more
defensive stance and protectsome capital for our investors
when it works best.
Howard Capital specializes intactical, trend-focused
strategies.
The byline works best whenthere's established trend.
(14:12):
2022 was a tough year for a lotof managers, and we were one of
them.
It was actually the worst yearVance Howard has ever had in his
trading career, so he was notgoing to sit there and be
dogmatic saying he's got the end.
All be all equation.
So if markets evolve, so do we,and we haven't seen a market
(14:33):
like that in 40 or 50 years.
So you know, this start of thisyear has been a little bumpy
too, you know.
So, long story short, what I'mgetting at is if there's an
established trend 2008, therewas an established trend.
2020, there was an establishedtrend.
If there's a trend, one way oranother our firm is designed to
perform.
If there's no trend, we mightstruggle a little bit, but we
(14:56):
feel like we've made someenhancements to our system since
2022.
Not full-blown changes, Michael, some enhancements, and I think
our investors are going to seesome favorable results, uh, from
that?
Speaker 1 (15:08):
yeah, certainly.
Um, that was a a year for therecord books.
I don't know people stillreally fully appreciate how
difficult that was.
Um, I do like the uh, themantra on the website uh, for
whatever it's worth around.
Uh, tactical, stay tactical,not traditional.
And I think that lends itselfto sort of a bigger discussion
around cycles under whichtactical tends to do better.
(15:30):
We've been, arguably, in anenvironment which has largely
favored passive indexation,really, I'd argue, since QE3
2012,.
Last set of many years haveactually, I think, been
challenging for active andtactical strategies.
Last set of many years haveactually, I think, been
challenging for active andtactical strategies when you
(15:51):
think through, as youcommunicate to advisors, the
value proposition of the activefunds.
That you guys run what do youtell them in terms of sort of
thinking broadly aboutcycle-wise when they should be
considering active in general.
Speaker 2 (16:00):
I think they should be considering active if they
feel like it's going to bedependent on the client.
I don't think anybody should beconsidering active if they feel
like it's going to be dependenton the client.
I don't think anybody should bedogmatic one way or another.
Passive versus active.
I think the byline in ourtactical process, michael, was
completely built with the ideathat emotions derail investment
(16:24):
returns.
We believe it's the number onecause that investors are
underperforming the market.
We think behavior finance isvery real and clients struggle
with discipline.
They tend to chase returns nearhighs and sell out near bottoms
, and so that's why Vance builtour system.
(16:46):
You know the 87 crash was saidto be fueled by computer-driven
trading and investor panic.
So the byline's big purpose isto put a systematic, rules-based
approach in place to combatemotional decision-making.
We're removing our emotionscompletely from the investment
decision-making process.
So I think a blend of both isalways kind of the way to go,
(17:10):
michael.
I don't.
You know, passive has its place.
You get the simplicity and costefficiency, but then you know,
on top of that active managementto adapt to changing conditions
.
And I think a big thing,michael, is, you know, we're the
markets, in my opinion, in ouropinion, have evolved since the
21st century and you see AI andadvancements in technology.
(17:32):
If advisors are strictly doingthe strategic buy and hold, they
could potentially be replacedby AI in the upcoming years.
So they need to find ways toadd value and also avoid fee
drag.
If the clients are looking forperformance, michael, if the
clients are looking foroutperformance, then you want
active management, because ifyou're using passive money
management no real ability tooutperform the market you get
(17:56):
index returns, less fees.
So with an active tacticalapproach, you know we're
striving to outperform themarket.
Cover the fees, avoid fee dragcreates an alpha we feel like if
we do that, not only will youhave happy clients but you'll
also, you know, promote theirlong term adherence to your
process, keep them invested andprobably get more referrals
(18:18):
referrals from it and make moremoney from stuff like that.
Speaker 1 (18:21):
Talk about some of the ETFs that you guys have more
money from, stuff like that.
Talk about some of the ETFsthat you guys have.
I'm going to share my screen toshow the HCM Defender 100.
And so you've got, as Iunderstand it, three ETFs and a
few mutual funds as well.
But talk to me about the ETFsuite in general and what's been
(18:42):
the reception.
Obviously, with this fund inparticular, it has quite a bit
of assets.
Speaker 2 (18:47):
Yeah, so our Defender ETFs, I mean we've got three.
We partner with Direction ETFsfor a third ETF, but our two
defender ETFs are essentiallyyou know, they're five years old
at this point, a little overfive years but they're
incorporating the same tools.
We've been running since thebeginning and I feel like, if
(19:07):
you know, if the investors know,the why and the how behind the
backbone of our process.
The ETFs are relatively simpleto figure out LGH is our form of
the S&P 500, and QQH is ourtactical version of the NASDAQ
100.
And we're using our proprietarytools to try and get enhanced
(19:30):
returns of the index within adisciplined risk management
framework of the index.
Within a disciplined riskmanagement framework, these ETFs
are, you know, a lot of ouradvisors have used them, you
know, on a smaller level, as acore complement to strategic and
passive allocations like theSPY and the Qs, to allow their
(19:50):
core allocations to be a littlemore dynamic and risk adjusted
and at least strive to deliveralpha within the core segment.
On the larger scale, on theinstitutional scale, 100 million
plus they are a greatcomplement as a satellite
holding to a more passive coreallocation, where it's a more
secure, growth orientedinvestment solution in our
(20:13):
opinion, because we're youbecause when it comes to these
funds there's really Traditionalinvesting tends to when you're
trying to outperform, you canover-concentrate in certain
sectors or stocks.
We feel like that is taking ona bit, a good bit of risk and
(20:36):
even some of the best prosstruggle to find those winning
sectors and stocks consistently,and you also add the business
risk and industry risk whenyou're doing that.
So our approach is we're takingbroad market-leading indexes
that are already tough to beat.
We essentially, when we werecreating these, you know,
Michael, the last 10 years largecap, mega cap has been
(20:56):
dominating and there's manyreasons why that we can get into
and we're looking, we want tosee it brought in now.
You know we'd like to make moreETFs in different categories,
but the large cap space has beenwhere it is.
So these are broad based,market leading indexes that are
tough to beat in terms in in andof themselves, and then we're
(21:17):
adding our tactical tools todynamically adjust exposure to
those indexes to try and getenhanced returns in an
uptrending market and prefer, uh, preserve your capital in the
imminence of a significantdownturn.
You know the byline is overlaidon everything we have, including
these ETFs.
It's not a hedging strategy.
(21:37):
It's not a market neutralstrategy.
It's not trying to pull you outevery time the market hiccups.
Frankly, volatility is theprice of admission to the equity
market.
It's pretty run in the mill.
So our byline is not designedto pull you out every time the
market hiccups, or else we getwhipsawed all over the place.
We seek to outperform.
What we don't want toexperience is a 30, 40, 50%
(21:58):
decline that can take years tocome back from and derail a
financial plan, especially forclients nearing or in retirement
.
Speaker 1 (22:07):
Do you get a sense from the conversations you have
with advisors that there's anincreasing concern around a big
decline like that, especiallyjust given where valuations are
for broader averages?
Speaker 2 (22:21):
I think there's always tends to be that case,
Michael.
It kind of goes back to what wewere talking about it, as
there's always reasons to sell.
You look at the news media.
Oftentimes they're, you know,always telling us every single
year why the next big recessionis about to happen, or reasons
why we shouldn't be invested andwe should be, you know, heading
(22:44):
towards the sidelines, and so,again, that's why we trade a
system and we try to remove theprocess.
And you can go back 10 years,Michael, and you can look at I
mean, you can go back fartherthan that.
There's always reasons to sell.
We can go ad nauseum about that, but just in the past 10 years.
Let me go through this.
(23:04):
So, in 2015, the bigconversation about why the next
recession was happening was theglobal stock sell-off in 2015.
You know, the global stocksell-off in 2015.
Then, in 2016, it was the hugeissue surrounding Brexit.
In 2017, then it was the majorhurricanes we were experiencing.
In 2018, then, you know, it wasthe repo market blowing up.
(23:31):
Then, in 2020, was this littleunknown thing called COVID.
2021, it was the supply chaincrisis.
In 2022, it was rate hikes.
In 2023, it was bank failures.
Last year, it was the AI bubblefears, and now it's tariffs and
continued inflation.
So there's always going to bereasons to sell, Michael.
(23:52):
But you know, history is clearthat you know reacting to these
fears and panic selling israrely the correct decision.
No one's really ever made adime panic selling.
There's always going to bethose reasons and sorry.
So we, you know, we, we want tounderstand that and you know
(24:16):
the worst case scenario hardlyever happens.
And so if you fall into thosepanic cells, Michael, then
you'll be left on the sidelineswhen the market's rallying and
you'll also have troubledeciding when to get back in and
miss out on those gains.
So you know we want to put in asystematic, repeatable process
to combat those human emotions,that kind of derail our
(24:38):
investing success?
Speaker 1 (24:39):
How active are the portfolios in general?
I mean, there's always thiskind of this question of being
tactical, where you're just intime for the tactical decision
to work, versus being tacticalwhere you might be more moving
off of what ends up being noiseas opposed to signal.
Speaker 2 (24:56):
Oh, great question.
So it kind of just depends.
I mean, I know we're talkingabout our ETFs, our mutual funds
.
We're going to trade a littlebit more in and but the you know
.
And our mutual funds are moreactive and tactical.
You know, they're actuallypicking sectors and stocks based
on, primarily, our relativestrength model.
(25:18):
Our ETFs are more two protocolsof tactical management.
Most of the advisors we workwith and investors we work with
look at us as a good balancebetween strategic and tactical,
especially with our ETFs.
Strategic obviously neverreally gets out of the market.
They'll rebalance occasionally,you know.
(25:38):
And then there's the completeopposite side, where we could be
trading hundreds of times, youknow, but we want to, just we
want to.
We want the byline, forinstance, our macroeconomic
indicator.
It's not going to pull us out alot.
Again, it's not designed topull us out of a correction.
What we want to avoid is thesignificant drawdown.
(25:59):
So we don't come out a lot and,to be honest, we'd rather not
sell at all.
We only see it appropriate whenthe probability of a bear
market or recession is growingin intensity and likely to
develop.
Now, since 2022, we may havemade some enhancements within
our funds to allow us to to getin and out of our more
(26:21):
concentrated positions a littlebit more efficiently.
Works is a little bit more of ashorter intermediate term trend
indicator within with thatworks in conjunction with the
byline.
But even that, you know thegoal of that is maybe to make
one trade a month, so not tryingto trade too often.
And obviously the question willcome up.
(26:42):
There is with taxes.
So far in the five years ourETFs have not produced a taxable
event, but there's noguarantees of that obviously
going into the future.
Speaker 1 (26:52):
Yeah, that's always an underappreciated aspect of
the ETF world.
People don't understand theheartbeat dynamic, right.
That kind of resets the costbasis across similar baskets,
which is what makes the ETFs taxefficient.
And, to your point, it's notlike you can always be fully tax
efficient being active, but youcertainly have a higher
probability of doing so.
I want to talk about behavior,since you mentioned behavioral
(27:12):
finance a few times here.
So I want to talk aboutbehavior, since you mentioned
behavioral finance a few timeshere.
I remember my college days whenthey would teach us about CAPM
and modern portfolio theory andall this sounded great
academically but in reality,nobody ever really invests based
on that.
Because they're investing basedon behavior, because we're
human beings and we haveemotions, do you find that in
(27:36):
general, there's more demand foractive after, like, a big
decline has already taken place?
Speaker 2 (27:45):
right, it's like people kind of fighting the last
war to some extent I um, aftera decline, um, yeah, I would
tend to think clients look moreso for tactical money management
out of a decline and the reasonfor that being probably that
they didn't perform so well andyou know they would look into
hire someone with expertise in atrack record some serious
(28:08):
decline.
Our firm saw just as muchinflows as we did when we
crushed in 2020 as midwaythrough 2022 because they were
looking for someone to be able,with a track record of
navigating various market cycles, to do it better than how they
(28:31):
may have been doing it.
Again, not saying we're theend-all be-all, but we've been
through a lot of market cycles,we've seen a lot, and you
mentioned modern portfoliotheory.
That you know we could talk agood bit about that.
First of all, it's not modern,michael.
It was actually.
(28:51):
It came out in 1952 by HarryMarkowitz.
But the idea around it is thatmarkets are perfectly efficient
and the best way for investorsto have success is to diversify
across various asset classes andcategories to give them the
highest possible return for theleast amount of risk.
(29:12):
But there's a few things thatmodern portfolio theory.
There's a few assumptions thatthey make that we just don't
believe are accurate, one of thebiggest ones, being that you
know it assumes that investorswill behave rationally.
Um, so I don't know about yourexperience with dealing with
(29:32):
investors in bad markets,michael, but, um, point being, I
think the big flaw of modernportfolio theory is that you
know it, it it, it assumesinvestors will behave rationally
when they rarely do, especiallyin a severe downturn a severe
(29:55):
downturn.
So that's number one.
Number two is modern portfoliotheory equates volatility with
risk and, like I had mentionedearlier, I think it's important
not to incorporate one with theother.
They are not the same.
Permanent loss and inability tomeet your financial goals are a
big deal, and that's true risk.
To us, true market risk,volatility is simply a price
(30:20):
swing of a given security,measured by standard deviation,
which is how modern portfoliotheory looks at it.
But volatility works on atwo-way street, michael.
As you know, there can be asmuch there is as much upside
volatility as there is indownside volatility, and if you
can't capture upside volatility,you're never going to make any
(30:41):
money in the market.
You can look at things likewhat's the real risk?
How do you define risk?
What's the risk if you've got a50, 55, 58 year old?
That's got a few years toretirement and they've only got
$150,000 saved.
Is it more risky for them toinvest in?
In simple terms, is it morerisky for them to invest in
(31:05):
Procter and Gamble or IBM or isit more risky for them to invest
in Tesla or Nvidia?
I would argue that it's morerisky to invest in IBM or
Procter Gamble because, eventhough they're great value
stocks and a well-run businessand provide a great dividend,
their returns are not going toget them where they need to go.
(31:27):
They need to take on some morevolatility.
So if the S&P drops 25%, teslaand NVIDIA could drop more than
that.
But again, it's a two-waystreet and NVIDIA and Tesla have
both doubled several times overthe last couple of years.
So it really just depends onthe client, you know, and
(31:48):
getting them around.
The fact that just becausesomething is moving up and down
a decent bit in the shorter termdoesn't inherently make it
risky, because bonds, in today'smarket especially, can be as
risky or more risky than stocks.
They've been correlated afterthe last number of years 2020.
(32:10):
Agg Aggregate Bond Index drewdown 30% 2022,.
The 20-year treasury was down30% and with inflation, sticky
inflation and high rates, thetraditional 60-40 portfolio
might not do the same thing thatit did a couple of decades ago.
So I think the conversationneeds to be reframed and
(32:30):
investors need to be.
Investors need to be openminded to potentially adjusting
how things may have been done adecade or two ago.
Speaker 1 (32:39):
Yeah, I think that's very well articulated.
You had mentioned the pointabout you know large cap
dominance and you said you knowwe should talk about.
We'll talk about the reasonsfor some of that.
I guess that's the big question, right?
It's like is there an argumentfor a large cap dominance to
persist, or are we at a pointnow where that passive tech
momentum you know is nearing itsfinal days, which should result
(33:02):
in some other, betteropportunities?
I'm curious if there's a viewthat other advisors have
expressed to you on that, oreven a house view at Howard
Capital Management around youknow that kind of large cap tech
momentum you and Howard CapitalManagement around that kind of
large cap tech momentum.
Speaker 2 (33:18):
First of all, I think absolutely there is an argument
to be made for large cap andmega cap to continue their
dominance.
But I want to preface it bysaying I hope the market I'm
rooting for the market tobroaden out.
We all are.
I think it's very healthy goingforward.
I think it's very healthy goingforward.
But, as you know well, michael,there are a lot of reasons why
(33:42):
large cap and mega cap cancontinue their dominance.
Obviously, based on historicalprecedent, they're about 50%
above their historical price toearnings historical price to
earnings.
But I want to say that price toearnings might need to be
looked at a little bitdifferently in this market.
I mean, you look at how muchcash has been injected into our
(34:03):
system since the COVID pandemic.
It's close to 50% of theoverall cash that has been
fueled in just today.
So the market feels like it'sdisconnected from its
fundamentals a little bit andit's, you know this higher
liquidity is, you know, fuelingcomputer driven trading and
(34:24):
momentum factors.
You know I look at the stockmarket essentially as a giant
pile of cash.
It's constantly shifting aroundwith the attempt to generate
ROI and these big companies thatcannot go to cash like we can.
Necessarily, they look at largeand mega cap as a safe haven.
Michael, there are severalreasons for this.
(34:48):
One large and mega cap leadersare the ones at least in the S&P
and the triple Qs.
They're typically industryleaders.
They have incredibly strongbalance sheets and an R&D
advantage with tremendous amountof cash buildup that they have.
Again, they're a hedge againstinflation.
A lot of their products haveinelastic demand so they can
(35:11):
continue to raise prices alittle bit and people will still
buy iPhones, right.
They typically have veryconsistent returns as well as
steadily growing dividends, andthey've got international
exposure now without necessarilyhaving all the international
risk.
You know globalizationglobalization as well as you
(35:37):
know how we do business and andthe technology has flipped its
head in the world of how comethese companies are doing
business now it's just thelargest and strongest players
that are dominating everywhere.
You look at apple.
They're selling iphoneseverywhere.
Uh, there's a starbuckseverywhere in the world.
Nike's selling everywhere.
So these companies, and not justin the United States, a lot of
(36:02):
the companies that are doingthis and dominating this are US
companies.
So you essentially, by stayingin these bigger, stronger
companies, you still get thebenefits of international
exposure without directly takingon international risk.
It goes back to modernportfolio theory and
diversifying for diversificationsake.
You didn't necessarily want tobe an international over the
(36:25):
last 5-10 years.
I mean, don't take my word forit, just go look at the returns
it's been able to generate.
It's been a lot higher returnshere in America and it's
essentially like I said theselarge and mega caps are looked
at as a safe haven for theselarger companies that can't go
to cash.
(36:45):
And they're the same companiesthat are getting 401k and
retirement plan monies dumped toit in it every single month.
So they've got a littlebackstop there.
I don't expect them to justtank while the rest of the
market doesn't.
Those companies dominate, arethe largest weighting companies
in major indexes.
(37:08):
Risk rises, michael, and youknow this as well as I do.
When systemic risk rises and weget into a serious downturn,
all assets tend to correlate tothe downside.
They all tend to go downtogether.
So what are we going to doabout that?
We want to have a process inplace to mitigate that loss in a
severe downturn.
I think Howard Capital has anapproach that can help with that
(37:32):
.
Speaker 1 (37:33):
Yeah, and there aren't that many firms that have
the longevity as far as publicfunds go, while being truly
active from that side of things,I think that's a big benefit to
what you guys are doing.
Speaker 2 (37:46):
Yeah, no, I mean most tactical managers.
You'd see and I'm not trying todoo-doo on any tactical
managers, it's just most of themwe see have been around, you
know, after 2008, where you knowwe got.
If you were to go on ourwebsite, michael howardcmcom
anybody can howardcmcom you candownload our byline brochure
(38:07):
which shows the actual trades ofour risk management system, the
backbone of our system, goingall the way back to 2000.
So those are real trades and ofcourse you know we're not
perfect.
We don't, again, we don't claimto be the end all be all, but
we have successfully navigated.
In our opinion, four of the lastfive bear markets did well.
(38:28):
In the dot com bubble, ourstrategies were positive in 2002
.
In 2008, we were down less than10% that whole decade, that
lost decade from 2000 to 2010,.
I think the market S&P returnedabout 7%, 8% in those 10 years.
Our longest running portfoliostrategy was up over 100% in
that time.
And then we did really well inCOVID and 2022, again wasn't a
(38:52):
great year for us, but wehaven't seen a market like that
in 40, 50 years, if not ever,where we both had the bonds and
the equities heading to thedownside.
So again, if you can deal with.
What I tell people is you know,if you invest in Howard Capital
, give us three or four years.
If you're judging us by anyindividual quarter, you could be
(39:15):
disappointed, but if you giveus three or four years, you're
going to be very happy.
Speaker 1 (39:19):
Yeah, it's always important to get that long-term
perspective.
You mentioned sort of the ideaof pairing it against passive
and I've made that argumentmyself that diversification
comes from more than just assetclass.
It comes from strategies.
Again, you talk to a lot ofadvisors and allocators.
Typically, how do they thinkabout weighting active versus
(39:42):
passive?
Meaning is an active equityportfolio, like what you guys
are building out acrossdifferent funds.
Is that half of an equityallocation against passive?
Is it a third, a 10?
, like you know what?
What do you typically see interms of those ranges?
Speaker 2 (39:57):
Are you talking about Michael?
When it comes to an advisorbuilding a model, okay, yeah,
I'd say.
I mean in this again, it'sgoing to go back to the clients.
There's no end all be allsolution for anybody.
Any really good advisor isgoing to pay attention to what
their clients are saying A lotof times.
(40:17):
I like to do it in pie slices, Ilike to break it up in about
thirds you can give HowardCapital the growth, the tactical
growth portion of yourportfolio, because even though
we certainly have defensive know, we trade fairly aggressively
when we're in the market.
Then you've got your.
You know, I don't necessarily,I'm not necessarily a fan of
(40:42):
your traditional bonds.
You know passive bonds rightnow.
So hiring an active manager tomanage your fixed income
portfolio as well, and thenyou're at the third for more
passive strategies to keep thecost down and keep it simple.
I think that is, overall, kindof the way I like to view things
(41:03):
.
But again, there's no one sizefits all.
It's going to be dependent onthe client.
You can lean more towardsstrategic if you want, if you
feel like the client's competent, emotionally disciplined,
understands the markets and howthey're going to move up and
down and realizes that they'renot linear in terms of moving
one way or another, that there'sgoing to be some hiccups and
(41:25):
potholes along the way.
So then, yeah, if they havethat discipline, then you can
put a little bit more in thepassive.
But again, if that same advisoris looking to compete or not
advisor, if that same client islooking to compete with his
advisor and maybe you knowhigher net worth guys,
sophisticated guys, trading someof his own money then maybe he
(41:46):
wants to.
The advisor might recommend,you know, a more sophisticated
approach, rather than buy andhold, you know, for these high
net worth guys, because theydon't want to just ride out.
You know, you, you, when itcomes to passive exposure,
you're getting pure beta.
You know, s&p does 30%, you'llget 30%, minus advisor fee.
If it's down 30%, you're ridingit down with it.
(42:08):
So I think you know we areseeing, you know, at least in
the high net worth,sophisticated kind of space when
it comes to investing them,leading more towards an active,
tactical approach these days.
Speaker 1 (42:19):
Eric, there's a, I'm sure, a lot of people listening
that love the idea of active atthis point.
They want to learn more aboutpower capital.
Talk to me a little bit abouthow, from a communication
perspective, you guysdifferentiate against other
active managers yeah, certainly.
Speaker 2 (42:41):
Um, so, communicating with us, you can go, uh,
howardcmfundscom or howardcmcom.
Those are both our websites.
Howardcmfundscom will take youright to our funds and etfs page
.
There should be a number there.
Just ask to speak to the etf ormutual fund guy.
You'll, uh, you'll, ring myline.
Um, in terms of you know some ofour other offerings or just
(43:02):
straight marketing literature,just go to howardcmcom, you'll
find the same number and you canreach out that way and, um, you
can, um, consider us differentfrom other active managers from
the standpoint of you know,we're not trying to again.
There's again going back to.
We're not saying we're the end,all be all or necessarily
(43:24):
saying we're better thanfundamental managers approach is
a little bit more in line withthe way the modern markets are
operating these days.
If you believe that in a risingcomputer-driven trading, if you
believe that the speed of themarkets are continuing to move
faster and faster and they wantto be able to spawn based on
(43:47):
real time data, we're looking atreal time data and trading
what's going on in the marketsright now.
We're not trying to guess orpredict what's going to happen.
We're not trying to call topsor bottoms.
You know we're not trying to bethe next Bernie Madoff.
We're trying to follow thetrends of the market.
If the market's in an uptrend,we want to you know, fully
(44:10):
participate and, you know,possibly juice it up a bit to
get some upside potential.
If it gets into a downtrend, wewant to start taking the layers
of capital.
Again, not trying to predictthings.
Our whole goal is to try andcatch the majority of the upside
while avoiding the majority ofthe dial inside.
So we're not necessarily liketrying to individually select
(44:35):
stocks and you know it's notnecessarily a fundamental
approach.
We're looking at what's movingand that's one thing we can
measure, and measure accurately.
If we're trying to predictthings that were happening, we
might take longer to come intofruition.
That we thought.
I feel bad for some of the smalland mid capcap managers.
I'm rooting for them.
They've been pounding the tableover the last three, four years
(44:57):
.
Mid-caps are undervalued rightnow, saying this is the year,
this is the year.
So we'll see.
I'm rooting for it, but it'sjust a little bit more.
We're using algorithms todetermine how exposed to the
market we should be and if we'rein the market where we should
be invested.
And we believe the one thing wecan measure accurately is
movement.
(45:18):
Michael, we can measuremovement.
We can see if Apple's moving asfast or faster than Amazon, or
if Tesla's moving as fast orfaster than Microsoft.
So you could think of it kindof like a racehorse and, as you
as the investors, you own theracetrack you want.
Let's say, you hop on the horsethat's bleeding the pack, but
(45:38):
if you see another horsecatching up at a mathematically
faster pace, we can hop on thathorse.
So we're trying to strive tomaximize upside capture while
adhering to a disciplined riskmanagement framework that goes
all the way back to, you knowagain, signals going all the way
back to 2000.
Completely removing emotions,we're taking out the guesswork
and we're listening to math andprobability, not assumptions and
(46:02):
intuition.
Speaker 1 (46:03):
Everybody.
Please make sure you learn moreabout Howard Capital Management
on their website.
Curious about their funds.
Obviously a lot of informationthere.
I'm going to be hopefully doingmore of these podcasts with
Eric and various members ofHoward Capital Management in the
coming months.
I like having a kindred spiriton the active side, especially
one that's done as well as youguys have.
So again, congrats on that.
(46:24):
Again, folks, this will be theend of the conversation under
Lead Lag Live.
This is a sponsored podcast andhopefully I'll see you all on
the next episode.
Thank you, eric, appreciate it.
Speaker 2 (46:33):
Absolutely.
Speaker 1 (46:34):
Michael, See you next time.
Cheers everybody.
Let's talk about that byline approach a little more.
Is it from an actualin-practice perspective or from
a backdressing perspective?
Does it tend to be a betterapproach for large cap names,
mid caps names, small cap names,us international?
I'm trying to get a sense ofsort of where do you find, where
(00:21):
is the historical successreally been?
Speaker 2 (00:22):
Well, this historical success really been um well,
this historical success, thebyline, can be overlaid on any
investment class.
It is our market barometer,michael.
It uh is basically telling usif the market's healthy, if the
market's getting sick or if themarket has cancer and overall,
you know, put very simply, it'sa proprietary trend following
indicator.
(00:42):
It's looking at the overallbreadth of the market and
telling us to take appropriateaction.
If it's trending upwards, youknow we want to maximize upside
participation.
If it starts trending downwards, you know we might take a
little more defensive stance andprotect some capital for our
investors.
Speaker 1 (01:10):
One of the big reasons I'm a big fan of Eric
and Howard Capital Management isthey have a thing for active,
which is kind of my thing too,and they've done it actually
quite well as a firm.
We'll be getting into that.
This is going to be an editedpodcast under Lead Lag Live.
This is a sponsoredconversation by Howard Capital
Management.
We'll get into some of theirstrategies and products here and
, with all that said, my name isMichael Guy, a publisher of the
(01:32):
Lead Lag Report.
Joining me here is Mr EricNyquist himself, who apparently
was familiar with some of mywork before we actually chatted.
As I found out when we werefirst on a call, he had read
some of my papers and didn'trealize I was the guy behind
some of these papers a whileback.
So, eric, I like this formatbecause this is also an
opportunity for me to get toknow you on a more personal
level.
So introduce yourself to theaudience, to me.
(01:56):
Who are you?
What's your background?
Have you done throughout yourcareer?
What are you doing right now?
Speaker 2 (02:05):
Sounds good, michael.
Well, first and foremost, Iappreciate you having me on, man
.
It's been great getting to knowyou in the short time that
we've known each other and lookforward to continued
conversations.
You know, michael, thesemarkets, first of all these
markets kind of make me feellike my golf game Every time I
feel like I've got it figuredout.
It seems to humble me.
So happy Friday to you, man,and thank goodness we're done
(02:27):
with this February, hopefully onto a better month coming up.
But my name is Eric Nyquist.
I lead the charge in the fundsales and distributions for here
at Howard Capital Management.
I've basically been in themoney business and the people
business since coming out ofcollege, graduated Mercer
(02:48):
University, but my reason forgetting in this business kind of
stemmed from earlier in thetime.
I know firsthand what happenswhen you know financial security
can be lost.
When financial security can belost.
My parents struggledfinancially in the mid-2000s and
(03:09):
the financial stress tore theirrelationship apart.
They divorced when I was ateenager.
2008 did not help either.
So it wasn't until afterwardsthat I realized that money
stress, money fights, moneyproblems number one reason for
divorce in America.
So that made one thing veryclear and evident to me that I
did not want to go throughout mylife not understanding money as
(03:33):
well as how to grow and protectit.
So that drive led me where I amtoday and kind of leading the
charge on the fund distributionefforts.
I've always, I've alwaysbelieved, you know, that drive,
michael, kind of led me to whereI am today, not only with this
same.
With you know, I played collegeball at Mercer and then I had a
(03:55):
short stand with the Blue Jays.
I've always believed that, youknow, success is not just about
talent, it's about, you know,being proactive, putting in the
extra work and preparingrelentlessly so when a big
moment comes, you're ready toexecute without having to think
about it.
So that's what drives me towork hard every day and do the
(04:17):
best I can to help investorsnavigate these markets with
confidence.
Man, and to me it's not justabout chasing returns, it's
about having a plan and aprocess in place when things go
bad.
Obviously, markets go throughcycles and downturns will occur,
recessions will happen.
It's inevitable.
But you do not have to rideevery single downturn to the
(04:38):
bottom.
I've seen firsthand whathappens when there's no plan to
protect against a severedownturn, and so that's why I
believe in Howard Capital'sapproach.
I believe having a strategy tomitigate loss and stay on the
right side of the market is notonly smart, it's necessary,
because protecting what you haveis just as important as growing
it.
Speaker 1 (04:55):
You talk about that 2008 experience and suffering
through that, that being sort ofa major driver of your own
personal why in choosing thiscareer and being in the industry
, I talked to a lot of peoplethat remember that period very
well and it scarred them andmade them also hesitant to take
on risk.
And one of the things that youand I have talked about before
(05:17):
is this idea that you want to becognizant of the big risks that
are out there but at the sametime, there's always a reason to
sell.
Yeah, no, let's combine thosetwo concepts, because the appeal
of active management is riskmanagement, but on a long enough
timeframe.
Usually, equity markets go up,so how much should one consider
(05:40):
risk management by timeframe, asopposed to sort of just closing
your eyes and knowing that overtime it probably will be fine?
Speaker 2 (05:48):
Well, definitely no good question, Michael.
I think risk management is veryimportant to consider but at
the same time, I me as well asHoward Capital don't necessarily
believe that you shouldsacrifice one for the other and
vice versa.
You know traditional moneymanagement tends to lean towards
.
You know that you shouldsacrifice one for the other and
vice versa.
You know traditional moneymanagement tends to lean towards
, you know you, either you havea choice either chase returns
(06:12):
and accept volatility, or playit safe and sacrifice upside.
We reject that compromise.
We believe returns matter andrisk management matters.
So, you know, when it comes torisk, you know I really, you
know, want to ask folks how theydefine it, because I think it
can be defined in different ways.
(06:32):
Oftentimes, a lot of peopleequate volatility with risk and
I try to, you know, preach thatvolatility and risk are not
necessarily the same.
You know, volatility it's moreof just a price swing, of a
security.
I look at risk as being apermanent loss or more so, not
(06:53):
being able to reach yourfinancial goals, and I believe
there is definitely risk andalso not taking enough risk.
So, you know, being aware, youknow, is important to pay
attention in the market, butwith the amount of you know
media that we have today.
I look at it the same way Ilook at sports media.
(07:15):
You started off with First Takeback in 2010.
Now you have what feels like 50different channels talking
about the same stuff.
So the noise is bombastic,michael.
It's coming from us everydifferent angle.
We get updates on oursmartphones.
Investors are reacting toinstant sentiment changes in
news feeds and I think it'simportant to block out that
(07:37):
noise.
Again, I think it's importantto pay attention, but when it
comes to listening to the media,I think they more so react to
sentiment changes and you knowhyperbolic headlines rather than
delivering facts.
So I think it's important tokeep your news sources to two or
three trusted sources.
Of course, lead like mediabeing one of those choices.
Speaker 1 (07:59):
I don't know if I'm a news source at this point, but
maybe I'm getting to that point.
You know, usually when I saybreaking news it's something
more sarcastic than not.
Let's talk about Howard CapitalManagement's approach to
markets the active side andlet's talk about the history of
the firm a little bit.
I was not that familiar withthe company, but you guys are
fairly sizable.
Speaker 2 (08:16):
Yeah, absolutely so.
Howard Capital was establishedback in 1999 by Vance Howard.
He's our CEO and lead portfoliomanager man at the helm.
His idea for creating HowardCapital actually stemmed more
than a decade back.
Vance married his wife, karen,while attending college at Texas
(08:41):
A&M and they actually had awaste management company, a
trash compaction business, whichthey were able to have a
successful exit on.
Vance, by the way, has alwaysbeen passionate about the
markets, even when he was a procollege kid he was trading penny
stocks.
But getting back to the trashbusiness, he had a successful
exit from that business and theyhad their first little nest egg
(09:02):
, and so he started to put thatmoney to work.
And then Black Monday happened,the 87 crash, where the market
dropped over around 23% in asingle day.
And so you can imagine when youhave your portfolio drop by
about a third in a single dayand you just don't know how to
deal with something like that,because you've never been
(09:25):
through something like that.
You don't know how it couldcause potentially some lasting
pain, and so that essentiallydrove Vance to go out and find
some of the best managers andtraders he could find in the
world One of the more popularones that advisors may know well
, being Ed Sakota, the famouscommodities trader.
(09:47):
But he just went and learnedfrom these traders for the next
several years and eventually hecame up with a concept that
remains the foundation of ourrisk management process today,
which we call the HCM byline,and he came up with that in the
mid 90s.
Which we call the HCM byline,and he came up with that in the
(10:08):
mid-90s.
It started as Vance basicallytallying up the new highs and
new lows on the various stockexchanges New York Stock
Exchange, american StockExchange these various exchanges
Some don't even exist anymoreand tallying up the new highs
and new lows on a big yellowlegal pack.
And that was his system.
So we've come a long way sincethat point.
(10:29):
We've got a fully autonomoussystem now.
We put a couple million dollarsinto it over the past couple of
decades and we've come up withsomething we believe is pretty
consistent.
Obviously it's not perfect.
Nothing is but it's protected alot of principal for our
clients.
So Vance Howard founded HowardCapital in 99, just in time for
(10:50):
the dot-com bubble burst.
But with the help of the bylinewe were able to navigate
through that pretty well.
And then 2008 comes around.
We navigated that successfully.
So Vance has been aroundmanaging money for his clients
since 92.
So he's seen a thing or two.
Just like that farmer'scommercial, michael, he knows a
(11:11):
thing or two because he's seen athing or two.
And so Vance and Howard Capitaldo things a bit differently.
Vance thinks more like a trader.
He doesn't necessarily thinklike a CFA or a CFP.
He was not mentored by, youknow, cfas and CFPs.
He was mentored by hedge fundmanagers.
(11:32):
And I want to preface this,michael, by saying you know I'm
not saying one is right or wrong, it's just a different approach
.
In fact, I work with a lot offundamental managers and
wholesalers.
I believe pairing aquantitative tactical manager
with a fundamental managercreates a more comprehensive
approach to investing and givesa more full spectrum of the
(11:55):
market in a less more adaptiveand less vulnerable portfolio
through market cycles, bybalancing shorter term
flexibility with long termconviction.
But getting back to, vancethinks like a trader, you know,
not a CFA, cfp, cfas and CFPs.
In our opinion, michael, thinkin a little bit more of a
(12:17):
theoretical, academic way.
They emphasize fundamentalmanagement.
For the most part theyemphasize strategic rebalancing
and buy and hold.
Everything Vance is looking atis on a mathematical and
technical basis and he listensto the probabilities.
He wants to identify and tradesecurities that have a high
probability of success and he'snot just trying to diversify
(12:40):
across the board fordiversification sake.
He wants to identify and tradesecurities that have a high
probability of success andconcentrate more so into those
areas.
So again, it's just a differentapproach and again I welcome
the fundamental managers outthere.
Please reach out to me.
I love partnering with thoseguys because I believe in
(13:01):
manager diversification as well.
Speaker 1 (13:03):
Let's talk about that byline approach a little more.
Is it from an actualin-practice perspective or from
a backtesting perspective?
Does it tend to be a betterapproach for large-cap names,
mid-caps names, small-cap names,us international?
I'm trying to get a sense ofsort of where do you find?
(13:25):
Where's the historical successreally been?
Speaker 2 (13:28):
Well, this historical success, the byline, can be
overlaid on any investment class.
It is our market barometer,michael.
It is basically telling us ifthe market's healthy, if the
market's getting sick or if themarket has cancer and overall,
you know, put very simply, it'sa proprietary trend following
indicator.
It's looking at the overallbreadth of the market and
(13:50):
telling us to take appropriateaction.
If it's trending upwards, wewant to maximize upside
participation.
If it starts trending downwards, we might take a little more
defensive stance and protectsome capital for our investors
when it works best.
Howard Capital specializes intactical, trend-focused
strategies.
The byline works best whenthere's established trend.
(14:12):
2022 was a tough year for a lotof managers, and we were one of
them.
It was actually the worst yearVance Howard has ever had in his
trading career, so he was notgoing to sit there and be
dogmatic saying he's got the end.
All be all equation.
So if markets evolve, so do we,and we haven't seen a market
(14:33):
like that in 40 or 50 years.
So you know, this start of thisyear has been a little bumpy
too, you know.
So, long story short, what I'mgetting at is if there's an
established trend 2008, therewas an established trend.
2020, there was an establishedtrend.
If there's a trend, one way oranother our firm is designed to
perform.
If there's no trend, we mightstruggle a little bit, but we
(14:56):
feel like we've made someenhancements to our system since
2022.
Not full-blown changes, Michael, some enhancements, and I think
our investors are going to seesome favorable results, uh, from
that?
Speaker 1 (15:08):
yeah, certainly.
Um, that was a a year for therecord books.
I don't know people stillreally fully appreciate how
difficult that was.
Um, I do like the uh, themantra on the website uh, for
whatever it's worth around.
Uh, tactical, stay tactical,not traditional.
And I think that lends itselfto sort of a bigger discussion
around cycles under whichtactical tends to do better.
(15:30):
We've been, arguably, in anenvironment which has largely
favored passive indexation,really, I'd argue, since QE3
2012,.
Last set of many years haveactually, I think, been
challenging for active andtactical strategies.
Last set of many years haveactually, I think, been
challenging for active andtactical strategies when you
(15:51):
think through, as youcommunicate to advisors, the
value proposition of the activefunds.
That you guys run what do youtell them in terms of sort of
thinking broadly aboutcycle-wise when they should be
considering active in general.
Speaker 2 (16:00):
I think they should be considering active if they
feel like it's going to bedependent on the client.
I don't think anybody should beconsidering active if they feel
like it's going to be dependenton the client.
I don't think anybody should bedogmatic one way or another.
Passive versus active.
I think the byline in ourtactical process, michael, was
completely built with the ideathat emotions derail investment
(16:24):
returns.
We believe it's the number onecause that investors are
underperforming the market.
We think behavior finance isvery real and clients struggle
with discipline.
They tend to chase returns nearhighs and sell out near bottoms
, and so that's why Vance builtour system.
(16:46):
You know the 87 crash was saidto be fueled by computer-driven
trading and investor panic.
So the byline's big purpose isto put a systematic, rules-based
approach in place to combatemotional decision-making.
We're removing our emotionscompletely from the investment
decision-making process.
So I think a blend of both isalways kind of the way to go,
(17:10):
michael.
I don't.
You know, passive has its place.
You get the simplicity and costefficiency, but then you know,
on top of that active managementto adapt to changing conditions
.
And I think a big thing,michael, is, you know, we're the
markets, in my opinion, in ouropinion, have evolved since the
21st century and you see AI andadvancements in technology.
(17:32):
If advisors are strictly doingthe strategic buy and hold, they
could potentially be replacedby AI in the upcoming years.
So they need to find ways toadd value and also avoid fee
drag.
If the clients are looking forperformance, michael, if the
clients are looking foroutperformance, then you want
active management, because ifyou're using passive money
management no real ability tooutperform the market you get
(17:56):
index returns, less fees.
So with an active tacticalapproach, you know we're
striving to outperform themarket.
Cover the fees, avoid fee dragcreates an alpha we feel like if
we do that, not only will youhave happy clients but you'll
also, you know, promote theirlong term adherence to your
process, keep them invested andprobably get more referrals
(18:18):
referrals from it and make moremoney from stuff like that.
Speaker 1 (18:21):
Talk about some of the ETFs that you guys have more
money from, stuff like that.
Talk about some of the ETFsthat you guys have.
I'm going to share my screen toshow the HCM Defender 100.
And so you've got, as Iunderstand it, three ETFs and a
few mutual funds as well.
But talk to me about the ETFsuite in general and what's been
(18:42):
the reception.
Obviously, with this fund inparticular, it has quite a bit
of assets.
Speaker 2 (18:47):
Yeah, so our Defender ETFs, I mean we've got three.
We partner with Direction ETFsfor a third ETF, but our two
defender ETFs are essentiallyyou know, they're five years old
at this point, a little overfive years but they're
incorporating the same tools.
We've been running since thebeginning and I feel like, if
(19:07):
you know, if the investors know,the why and the how behind the
backbone of our process.
The ETFs are relatively simpleto figure out LGH is our form of
the S&P 500, and QQH is ourtactical version of the NASDAQ
100.
And we're using our proprietarytools to try and get enhanced
(19:30):
returns of the index within adisciplined risk management
framework of the index.
Within a disciplined riskmanagement framework, these ETFs
are, you know, a lot of ouradvisors have used them, you
know, on a smaller level, as acore complement to strategic and
passive allocations like theSPY and the Qs, to allow their
(19:50):
core allocations to be a littlemore dynamic and risk adjusted
and at least strive to deliveralpha within the core segment.
On the larger scale, on theinstitutional scale, 100 million
plus they are a greatcomplement as a satellite
holding to a more passive coreallocation, where it's a more
secure, growth orientedinvestment solution in our
(20:13):
opinion, because we're youbecause when it comes to these
funds there's really Traditionalinvesting tends to when you're
trying to outperform, you canover-concentrate in certain
sectors or stocks.
We feel like that is taking ona bit, a good bit of risk and
(20:36):
even some of the best prosstruggle to find those winning
sectors and stocks consistently,and you also add the business
risk and industry risk whenyou're doing that.
So our approach is we're takingbroad market-leading indexes
that are already tough to beat.
We essentially, when we werecreating these, you know,
Michael, the last 10 years largecap, mega cap has been
(20:56):
dominating and there's manyreasons why that we can get into
and we're looking, we want tosee it brought in now.
You know we'd like to make moreETFs in different categories,
but the large cap space has beenwhere it is.
So these are broad based,market leading indexes that are
tough to beat in terms in in andof themselves, and then we're
(21:17):
adding our tactical tools todynamically adjust exposure to
those indexes to try and getenhanced returns in an
uptrending market and prefer, uh, preserve your capital in the
imminence of a significantdownturn.
You know the byline is overlaidon everything we have, including
these ETFs.
It's not a hedging strategy.
(21:37):
It's not a market neutralstrategy.
It's not trying to pull you outevery time the market hiccups.
Frankly, volatility is theprice of admission to the equity
market.
It's pretty run in the mill.
So our byline is not designedto pull you out every time the
market hiccups, or else we getwhipsawed all over the place.
We seek to outperform.
What we don't want toexperience is a 30, 40, 50%
(21:58):
decline that can take years tocome back from and derail a
financial plan, especially forclients nearing or in retirement
.
Speaker 1 (22:07):
Do you get a sense from the conversations you have
with advisors that there's anincreasing concern around a big
decline like that, especiallyjust given where valuations are
for broader averages?
Speaker 2 (22:21):
I think there's always tends to be that case,
Michael.
It kind of goes back to what wewere talking about it, as
there's always reasons to sell.
You look at the news media.
Oftentimes they're, you know,always telling us every single
year why the next big recessionis about to happen, or reasons
why we shouldn't be invested andwe should be, you know, heading
(22:44):
towards the sidelines, and so,again, that's why we trade a
system and we try to remove theprocess.
And you can go back 10 years,Michael, and you can look at I
mean, you can go back fartherthan that.
There's always reasons to sell.
We can go ad nauseum about that, but just in the past 10 years.
Let me go through this.
(23:04):
So, in 2015, the bigconversation about why the next
recession was happening was theglobal stock sell-off in 2015.
You know, the global stocksell-off in 2015.
Then, in 2016, it was the hugeissue surrounding Brexit.
In 2017, then it was the majorhurricanes we were experiencing.
In 2018, then, you know, it wasthe repo market blowing up.
(23:31):
Then, in 2020, was this littleunknown thing called COVID.
2021, it was the supply chaincrisis.
In 2022, it was rate hikes.
In 2023, it was bank failures.
Last year, it was the AI bubblefears, and now it's tariffs and
continued inflation.
So there's always going to bereasons to sell, Michael.
(23:52):
But you know, history is clearthat you know reacting to these
fears and panic selling israrely the correct decision.
No one's really ever made adime panic selling.
There's always going to bethose reasons and sorry.
So we, you know, we, we want tounderstand that and you know
(24:16):
the worst case scenario hardlyever happens.
And so if you fall into thosepanic cells, Michael, then
you'll be left on the sidelineswhen the market's rallying and
you'll also have troubledeciding when to get back in and
miss out on those gains.
So you know we want to put in asystematic, repeatable process
to combat those human emotions,that kind of derail our
(24:38):
investing success?
Speaker 1 (24:39):
How active are the portfolios in general?
I mean, there's always thiskind of this question of being
tactical, where you're just intime for the tactical decision
to work, versus being tacticalwhere you might be more moving
off of what ends up being noiseas opposed to signal.
Speaker 2 (24:56):
Oh, great question.
So it kind of just depends.
I mean, I know we're talkingabout our ETFs, our mutual funds
.
We're going to trade a littlebit more in and but the you know
.
And our mutual funds are moreactive and tactical.
You know, they're actuallypicking sectors and stocks based
on, primarily, our relativestrength model.
(25:18):
Our ETFs are more two protocolsof tactical management.
Most of the advisors we workwith and investors we work with
look at us as a good balancebetween strategic and tactical,
especially with our ETFs.
Strategic obviously neverreally gets out of the market.
They'll rebalance occasionally,you know.
(25:38):
And then there's the completeopposite side, where we could be
trading hundreds of times, youknow, but we want to, just we
want to.
We want the byline, forinstance, our macroeconomic
indicator.
It's not going to pull us out alot.
Again, it's not designed topull us out of a correction.
What we want to avoid is thesignificant drawdown.
(25:59):
So we don't come out a lot and,to be honest, we'd rather not
sell at all.
We only see it appropriate whenthe probability of a bear
market or recession is growingin intensity and likely to
develop.
Now, since 2022, we may havemade some enhancements within
our funds to allow us to to getin and out of our more
(26:21):
concentrated positions a littlebit more efficiently.
Works is a little bit more of ashorter intermediate term trend
indicator within with thatworks in conjunction with the
byline.
But even that, you know thegoal of that is maybe to make
one trade a month, so not tryingto trade too often.
And obviously the question willcome up.
(26:42):
There is with taxes.
So far in the five years ourETFs have not produced a taxable
event, but there's noguarantees of that obviously
going into the future.
Speaker 1 (26:52):
Yeah, that's always an underappreciated aspect of
the ETF world.
People don't understand theheartbeat dynamic, right.
That kind of resets the costbasis across similar baskets,
which is what makes the ETFs taxefficient.
And, to your point, it's notlike you can always be fully tax
efficient being active, but youcertainly have a higher
probability of doing so.
I want to talk about behavior,since you mentioned behavioral
(27:12):
finance a few times here.
So I want to talk aboutbehavior, since you mentioned
behavioral finance a few timeshere.
I remember my college days whenthey would teach us about CAPM
and modern portfolio theory andall this sounded great
academically but in reality,nobody ever really invests based
on that.
Because they're investing basedon behavior, because we're
human beings and we haveemotions, do you find that in
(27:36):
general, there's more demand foractive after, like, a big
decline has already taken place?
Speaker 2 (27:45):
right, it's like people kind of fighting the last
war to some extent I um, aftera decline, um, yeah, I would
tend to think clients look moreso for tactical money management
out of a decline and the reasonfor that being probably that
they didn't perform so well andyou know they would look into
hire someone with expertise in atrack record some serious
(28:08):
decline.
Our firm saw just as muchinflows as we did when we
crushed in 2020 as midwaythrough 2022 because they were
looking for someone to be able,with a track record of
navigating various market cycles, to do it better than how they
(28:31):
may have been doing it.
Again, not saying we're theend-all be-all, but we've been
through a lot of market cycles,we've seen a lot, and you
mentioned modern portfoliotheory.
That you know we could talk agood bit about that.
First of all, it's not modern,michael.
It was actually.
(28:51):
It came out in 1952 by HarryMarkowitz.
But the idea around it is thatmarkets are perfectly efficient
and the best way for investorsto have success is to diversify
across various asset classes andcategories to give them the
highest possible return for theleast amount of risk.
(29:12):
But there's a few things thatmodern portfolio theory.
There's a few assumptions thatthey make that we just don't
believe are accurate, one of thebiggest ones, being that you
know it assumes that investorswill behave rationally.
Um, so I don't know about yourexperience with dealing with
(29:32):
investors in bad markets,michael, but, um, point being, I
think the big flaw of modernportfolio theory is that you
know it, it it, it assumesinvestors will behave rationally
when they rarely do, especiallyin a severe downturn a severe
(29:55):
downturn.
So that's number one.
Number two is modern portfoliotheory equates volatility with
risk and, like I had mentionedearlier, I think it's important
not to incorporate one with theother.
They are not the same.
Permanent loss and inability tomeet your financial goals are a
big deal, and that's true risk.
To us, true market risk,volatility is simply a price
(30:20):
swing of a given security,measured by standard deviation,
which is how modern portfoliotheory looks at it.
But volatility works on atwo-way street, michael.
As you know, there can be asmuch there is as much upside
volatility as there is indownside volatility, and if you
can't capture upside volatility,you're never going to make any
(30:41):
money in the market.
You can look at things likewhat's the real risk?
How do you define risk?
What's the risk if you've got a50, 55, 58 year old?
That's got a few years toretirement and they've only got
$150,000 saved.
Is it more risky for them toinvest in?
In simple terms, is it morerisky for them to invest in
(31:05):
Procter and Gamble or IBM or isit more risky for them to invest
in Tesla or Nvidia?
I would argue that it's morerisky to invest in IBM or
Procter Gamble because, eventhough they're great value
stocks and a well-run businessand provide a great dividend,
their returns are not going toget them where they need to go.
(31:27):
They need to take on some morevolatility.
So if the S&P drops 25%, teslaand NVIDIA could drop more than
that.
But again, it's a two-waystreet and NVIDIA and Tesla have
both doubled several times overthe last couple of years.
So it really just depends onthe client, you know, and
(31:48):
getting them around.
The fact that just becausesomething is moving up and down
a decent bit in the shorter termdoesn't inherently make it
risky, because bonds, in today'smarket especially, can be as
risky or more risky than stocks.
They've been correlated afterthe last number of years 2020.
(32:10):
Agg Aggregate Bond Index drewdown 30% 2022,.
The 20-year treasury was down30% and with inflation, sticky
inflation and high rates, thetraditional 60-40 portfolio
might not do the same thing thatit did a couple of decades ago.
So I think the conversationneeds to be reframed and
(32:30):
investors need to be.
Investors need to be openminded to potentially adjusting
how things may have been done adecade or two ago.
Speaker 1 (32:39):
Yeah, I think that's very well articulated.
You had mentioned the pointabout you know large cap
dominance and you said you knowwe should talk about.
We'll talk about the reasonsfor some of that.
I guess that's the big question, right?
It's like is there an argumentfor a large cap dominance to
persist, or are we at a pointnow where that passive tech
momentum you know is nearing itsfinal days, which should result
(33:02):
in some other, betteropportunities?
I'm curious if there's a viewthat other advisors have
expressed to you on that, oreven a house view at Howard
Capital Management around youknow that kind of large cap tech
momentum you and Howard CapitalManagement around that kind of
large cap tech momentum.
Speaker 2 (33:18):
First of all, I think absolutely there is an argument
to be made for large cap andmega cap to continue their
dominance.
But I want to preface it bysaying I hope the market I'm
rooting for the market tobroaden out.
We all are.
I think it's very healthy goingforward.
I think it's very healthy goingforward.
But, as you know well, michael,there are a lot of reasons why
(33:42):
large cap and mega cap cancontinue their dominance.
Obviously, based on historicalprecedent, they're about 50%
above their historical price toearnings historical price to
earnings.
But I want to say that price toearnings might need to be
looked at a little bitdifferently in this market.
I mean, you look at how muchcash has been injected into our
(34:03):
system since the COVID pandemic.
It's close to 50% of theoverall cash that has been
fueled in just today.
So the market feels like it'sdisconnected from its
fundamentals a little bit andit's, you know this higher
liquidity is, you know, fuelingcomputer driven trading and
(34:24):
momentum factors.
You know I look at the stockmarket essentially as a giant
pile of cash.
It's constantly shifting aroundwith the attempt to generate
ROI and these big companies thatcannot go to cash like we can.
Necessarily, they look at largeand mega cap as a safe haven.
Michael, there are severalreasons for this.
(34:48):
One large and mega cap leadersare the ones at least in the S&P
and the triple Qs.
They're typically industryleaders.
They have incredibly strongbalance sheets and an R&D
advantage with tremendous amountof cash buildup that they have.
Again, they're a hedge againstinflation.
A lot of their products haveinelastic demand so they can
(35:11):
continue to raise prices alittle bit and people will still
buy iPhones, right.
They typically have veryconsistent returns as well as
steadily growing dividends, andthey've got international
exposure now without necessarilyhaving all the international
risk.
You know globalizationglobalization as well as you
(35:37):
know how we do business and andthe technology has flipped its
head in the world of how comethese companies are doing
business now it's just thelargest and strongest players
that are dominating everywhere.
You look at apple.
They're selling iphoneseverywhere.
Uh, there's a starbuckseverywhere in the world.
Nike's selling everywhere.
So these companies, and not justin the United States, a lot of
(36:02):
the companies that are doingthis and dominating this are US
companies.
So you essentially, by stayingin these bigger, stronger
companies, you still get thebenefits of international
exposure without directly takingon international risk.
It goes back to modernportfolio theory and
diversifying for diversificationsake.
You didn't necessarily want tobe an international over the
(36:25):
last 5-10 years.
I mean, don't take my word forit, just go look at the returns
it's been able to generate.
It's been a lot higher returnshere in America and it's
essentially like I said theselarge and mega caps are looked
at as a safe haven for theselarger companies that can't go
to cash.
(36:45):
And they're the same companiesthat are getting 401k and
retirement plan monies dumped toit in it every single month.
So they've got a littlebackstop there.
I don't expect them to justtank while the rest of the
market doesn't.
Those companies dominate, arethe largest weighting companies
in major indexes.
(37:08):
Risk rises, michael, and youknow this as well as I do.
When systemic risk rises and weget into a serious downturn,
all assets tend to correlate tothe downside.
They all tend to go downtogether.
So what are we going to doabout that?
We want to have a process inplace to mitigate that loss in a
severe downturn.
I think Howard Capital has anapproach that can help with that
(37:32):
.
Speaker 1 (37:33):
Yeah, and there aren't that many firms that have
the longevity as far as publicfunds go, while being truly
active from that side of things,I think that's a big benefit to
what you guys are doing.
Speaker 2 (37:46):
Yeah, no, I mean most tactical managers.
You'd see and I'm not trying todoo-doo on any tactical
managers, it's just most of themwe see have been around, you
know, after 2008, where you knowwe got.
If you were to go on ourwebsite, michael howardcmcom
anybody can howardcmcom you candownload our byline brochure
(38:07):
which shows the actual trades ofour risk management system, the
backbone of our system, goingall the way back to 2000.
So those are real trades and ofcourse you know we're not
perfect.
We don't, again, we don't claimto be the end all be all, but
we have successfully navigated.
In our opinion, four of the lastfive bear markets did well.
(38:28):
In the dot com bubble, ourstrategies were positive in 2002
.
In 2008, we were down less than10% that whole decade, that
lost decade from 2000 to 2010,.
I think the market S&P returnedabout 7%, 8% in those 10 years.
Our longest running portfoliostrategy was up over 100% in
that time.
And then we did really well inCOVID and 2022, again wasn't a
(38:52):
great year for us, but wehaven't seen a market like that
in 40, 50 years, if not ever,where we both had the bonds and
the equities heading to thedownside.
So again, if you can deal with.
What I tell people is you know,if you invest in Howard Capital
, give us three or four years.
If you're judging us by anyindividual quarter, you could be
(39:15):
disappointed, but if you giveus three or four years, you're
going to be very happy.
Speaker 1 (39:19):
Yeah, it's always important to get that long-term
perspective.
You mentioned sort of the ideaof pairing it against passive
and I've made that argumentmyself that diversification
comes from more than just assetclass.
It comes from strategies.
Again, you talk to a lot ofadvisors and allocators.
Typically, how do they thinkabout weighting active versus
(39:42):
passive?
Meaning is an active equityportfolio, like what you guys
are building out acrossdifferent funds.
Is that half of an equityallocation against passive?
Is it a third, a 10?
, like you know what?
What do you typically see interms of those ranges?
Speaker 2 (39:57):
Are you talking about Michael?
When it comes to an advisorbuilding a model, okay, yeah,
I'd say.
I mean in this again, it'sgoing to go back to the clients.
There's no end all be allsolution for anybody.
Any really good advisor isgoing to pay attention to what
their clients are saying A lotof times.
(40:17):
I like to do it in pie slices, Ilike to break it up in about
thirds you can give HowardCapital the growth, the tactical
growth portion of yourportfolio, because even though
we certainly have defensive know, we trade fairly aggressively
when we're in the market.
Then you've got your.
You know, I don't necessarily,I'm not necessarily a fan of
(40:42):
your traditional bonds.
You know passive bonds rightnow.
So hiring an active manager tomanage your fixed income
portfolio as well, and thenyou're at the third for more
passive strategies to keep thecost down and keep it simple.
I think that is, overall, kindof the way I like to view things
(41:03):
.
But again, there's no one sizefits all.
It's going to be dependent onthe client.
You can lean more towardsstrategic if you want, if you
feel like the client's competent, emotionally disciplined,
understands the markets and howthey're going to move up and
down and realizes that they'renot linear in terms of moving
one way or another, that there'sgoing to be some hiccups and
(41:25):
potholes along the way.
So then, yeah, if they havethat discipline, then you can
put a little bit more in thepassive.
But again, if that same advisoris looking to compete or not
advisor, if that same client islooking to compete with his
advisor and maybe you knowhigher net worth guys,
sophisticated guys, trading someof his own money then maybe he
(41:46):
wants to.
The advisor might recommend,you know, a more sophisticated
approach, rather than buy andhold, you know, for these high
net worth guys, because theydon't want to just ride out.
You know, you, you, when itcomes to passive exposure,
you're getting pure beta.
You know, s&p does 30%, you'llget 30%, minus advisor fee.
If it's down 30%, you're ridingit down with it.
(42:08):
So I think you know we areseeing, you know, at least in
the high net worth,sophisticated kind of space when
it comes to investing them,leading more towards an active,
tactical approach these days.
Speaker 1 (42:19):
Eric, there's a, I'm sure, a lot of people listening
that love the idea of active atthis point.
They want to learn more aboutpower capital.
Talk to me a little bit abouthow, from a communication
perspective, you guysdifferentiate against other
active managers yeah, certainly.
Speaker 2 (42:41):
Um, so, communicating with us, you can go, uh,
howardcmfundscom or howardcmcom.
Those are both our websites.
Howardcmfundscom will take youright to our funds and etfs page
.
There should be a number there.
Just ask to speak to the etf ormutual fund guy.
You'll, uh, you'll, ring myline.
Um, in terms of you know some ofour other offerings or just
(43:02):
straight marketing literature,just go to howardcmcom, you'll
find the same number and you canreach out that way and, um, you
can, um, consider us differentfrom other active managers from
the standpoint of you know,we're not trying to again.
There's again going back to.
We're not saying we're the end,all be all or necessarily
(43:24):
saying we're better thanfundamental managers approach is
a little bit more in line withthe way the modern markets are
operating these days.
If you believe that in a risingcomputer-driven trading, if you
believe that the speed of themarkets are continuing to move
faster and faster and they wantto be able to spawn based on
(43:47):
real time data, we're looking atreal time data and trading
what's going on in the marketsright now.
We're not trying to guess orpredict what's going to happen.
We're not trying to call topsor bottoms.
You know we're not trying to bethe next Bernie Madoff.
We're trying to follow thetrends of the market.
If the market's in an uptrend,we want to you know, fully
(44:10):
participate and, you know,possibly juice it up a bit to
get some upside potential.
If it gets into a downtrend, wewant to start taking the layers
of capital.
Again, not trying to predictthings.
Our whole goal is to try andcatch the majority of the upside
while avoiding the majority ofthe dial inside.
So we're not necessarily liketrying to individually select
(44:35):
stocks and you know it's notnecessarily a fundamental
approach.
We're looking at what's movingand that's one thing we can
measure, and measure accurately.
If we're trying to predictthings that were happening, we
might take longer to come intofruition.
That we thought.
I feel bad for some of the smalland mid capcap managers.
I'm rooting for them.
They've been pounding the tableover the last three, four years
(44:57):
.
Mid-caps are undervalued rightnow, saying this is the year,
this is the year.
So we'll see.
I'm rooting for it, but it'sjust a little bit more.
We're using algorithms todetermine how exposed to the
market we should be and if we'rein the market where we should
be invested.
And we believe the one thing wecan measure accurately is
movement.
(45:18):
Michael, we can measuremovement.
We can see if Apple's moving asfast or faster than Amazon, or
if Tesla's moving as fast orfaster than Microsoft.
So you could think of it kindof like a racehorse and, as you
as the investors, you own theracetrack you want.
Let's say, you hop on the horsethat's bleeding the pack, but
(45:38):
if you see another horsecatching up at a mathematically
faster pace, we can hop on thathorse.
So we're trying to strive tomaximize upside capture while
adhering to a disciplined riskmanagement framework that goes
all the way back to, you knowagain, signals going all the way
back to 2000.
Completely removing emotions,we're taking out the guesswork
and we're listening to math andprobability, not assumptions and
(46:02):
intuition.
Speaker 1 (46:03):
Everybody.
Please make sure you learn moreabout Howard Capital Management
on their website.
Curious about their funds.
Obviously a lot of informationthere.
I'm going to be hopefully doingmore of these podcasts with
Eric and various members ofHoward Capital Management in the
coming months.
I like having a kindred spiriton the active side, especially
one that's done as well as youguys have.
So again, congrats on that.
(46:24):
Again, folks, this will be theend of the conversation under
Lead Lag Live.
This is a sponsored podcast andhopefully I'll see you all on
the next episode.
Thank you, eric, appreciate it.
Speaker 2 (46:33):
Absolutely.
Speaker 1 (46:34):
Michael, See you next time.
Cheers everybody.
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