tactical alpha presentation april 2011

Tactical Alpha PortfolioMarch 2011 Update

Trey HaydonVice PresidentPortfolio ManagerPortfolio Manager404-240-6700

Morgan Keegan & Company, Inc. Member FINRA, SIPCNot FDIC Insured | May Lose Value | No Bank Guarantee | Not a Deposit | Not Insured by Any Government Agency

Disclosure

The information contained in this report is based on sources considered to be reliable but is notrepresented to be complete and its accuracy is not guaranteed. This report is designed to providecommentary onmarket strategy and the opinions expressed reflect the judgment of the author as ofthe date of publication and are subject to change without notice. This report does not constitute anoffer to sell or a solicitation of an offer to buy any securities. Morgan Keegan & Company, Inc., asubsidiary of Regions Financial Corporation and its officers directors shareholders employees andsubsidiary of Regions Financial Corporation, and its officers, directors, shareholders, employees andaffiliates and members of their families may have positions in these securities and may, as principal oragent, buy and sell such securities before, after or concurrentlywith the publication of this report. Insome instances, such investments may be inconsistent with the opinions expressed herein. An employeey p p p yof Morgan Keegan & Company, Inc. may be amember of the Board of Directors of companies referredto in this report. Morgan Keegan & Company, Inc. may, from time to time, perform or solicit investmentbanking or other services for or from a company, person or entities mentioned in this report. Theb ki ffili t f R i Fi i l C ti h d l d t fbanking affiliates of Regions Financial Corporation may serve or may have served as lenders to any ofthe companies or securities mentioned in this report. The securities and other investment productsdescribed in this report are: 1) Not insured by the FDIC, 2) Not deposits or other obligations of, norguaranteed byMorgan Keegan& Company, Inc., Regions Financial Corporation or any of theirguaranteed byMorgan Keegan& Company, Inc., Regions Financial Corporation or any of theiraffiliates, 3) Subject to investment risks, including possible loss of the principal amount invested.


Secular Bears Begin when PE’s are High…

…and the Average Length of a Secular Bear Market is 18 years.


Last Secular Bear (1966 – 1982)…Not a good environment for “buy and hold” investing.


Win by Not Losing

S&P Average Annual Return 1990-2010 6.23%

Your Average Annual Return would have

Your Average Annual Return would have

If you missed the been If you missed the been

Best 10 Days 2.78% Worst 10 Days 10.13%

Best 20 Days 0.52% Worst 20 Days 12.88%

Best 30 Days -1.39% Worst 30 Days 15.17%

Best 40 Days -3.16% Worst 40 Days 17.21%

Your Average Annual R t ld h

If you missed theReturn would have

been

Best and Worst 10 Days 6.55%

Best and Worst 20 Days 6.81%y




Tactical Alpha

Methodology

1. Global allocation portfolio that can invest across 6 major asset classes

1. US Equity2. International Equity3. Fixed Income4. Currencies5. Commodities6. Money Market (Cash)

2 Relative Strength analysis across 1 000+ ETFs representing the 62. Relative Strength analysis across 1,000+ ETFs representing the 6 major asset classes.

3. The Portfolio is divided into 3 equal parts (or legs) and invested in the markets with the greatest Relative Strength

1 33% i th t t t l (L 1)1. 33% is the strongest asset class (Leg 1)2. 33% is the second strongest asset class (Leg 2)3. 33% is US equity always (Leg 3)

4. Monitor portfolio daily for changes in Relative Strength5. Maximum of 66% Cash allowed in Bear Markets


Improving our odds…

Number of days each Asset Class was emphasized for inclusion in the tactical portfolio using Relative Strength analysis :

BEAR BULL BEAR BULL

Asset ClassJan 2000 to June 2003

June 2003 to Jan 2008

Jan 2008 to Mar 2009

Mar 2009 to Sept 2010

US Equity 137 616 0 264q y

Intl Equity 0 1555 12 391

Commodities 777 1008 201 145

Foreign Currencies 0 0 203 0

Fixed Income 851 0 148 99

Cash/Money Market 735 171 316 203

Total Days 1250 1675 440 560


Trading history for the portfolio

Asset Classes emphasized and dates of Portfolio Changes


Tactical Alpha

Current HoldingsMarch 31 2011

Name Ticker % WeightRydex S&P Equal Weight RSP 28.61P Sh DB Sil DBS 17 53PowerShares DB Silver DBS 17.53PowerShares DB Agriculture DBA 15.9First Trust Dow Jones Internet Index FDN 7.89First Trust Consumer Disc AlphaDEX FXD 7.49First Trust NASDAQ-100-Tech Index QTEC 7.21First Trust Materials AlphaDEX FXZ 6.95First Trust Financials AlphaDEX FXO 6.67Default Cash 1 75Default Cash 1.75Total 100


Performance

Tactical AlphaPerformance

Through March 31 2011Results are gross

Annual Returns 2007 2008 2009 2010

Tactical Alpha 7 97 -9 17 23 40 12 35Tactical Alpha 7.97 9.17 23.40 12.35

SP500 5.49 -37.00 26.46 15.06

Monthly Returns Jan-11 Feb-11 Mar-11

T ti l Al h 1 81 2 28 0 93Tactical Alpha -1.81 2.28 0.93

SP500 2.37 3.43 0.04


Why doesn’t everyone do this?

1. Relative Strength forces us to do what is unnatural- there may be no fundamental

reason that can be found for the shift.

2. Hold onto the Winners Long Term and Sell the Losers QUICKLY! 80% of the profits

come from 20% of the trades.

3. Difficult to hold the course at turning points- nobody can catch the top or the bottom.

4. Choppy markets are very frustrating. Like a sail boat luffing in light wind waiting for

the next gust.

5. Requires discipline, time and broker discretion.5. Requires discipline, time and broker discretion.


Account Information for Tactical Alpha Strategy

• The strategy is Core Growth.• Minimum account size is $50,000.• The strategy is deployed in a brokerage account or an IRA

held at Morgan Keegan.• All accounts are individually titled. There is no co-mingling

of assets.C l t t f h ldi th h th M• Complete transparency of holdings through the Morgan Keegan Client website.

• Client will receive a monthly statement and quarterly performance reportingperformance reporting.

• Management Fee of 1.5% annually on the first $1 Million.• The portfolio is managed on a discretionary basis by Trey

Haydon, Morgan Keegan Atlanta.Haydon, Morgan Keegan Atlanta.• For more information please call 404-240-6700.


Disclosure


tactical alpha presentation april 2011

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