Meet Matt

We employ a proven strategy with clear advantages over traditional
money managers using tools they choose not to

Matt Pavich Alpha Management

I’ve been in the investment arena for over thirty years and charting the markets for twenty plus. I believe all financial market analysis; fundamental, quantitative, cyclical, etc.  inevitably reveal technical supply and demand patterns through chart formations.

I imagine you have heard the phrase “There is always a Bull Market somewhere.” I believe that and have designed a system to ferret out where the Bulls are. Sometimes these moves will last just a few days and can show up in the darndest places, even in Bear Funds.

I use market timing and realize many money managers and pundits say “No one can time the market.” Which I believe is code for “I have no clue how to time the market?” I employ a proven strategy with clear advantages over traditional money managers and update our indicators and process regularly.

How Matt Pavich Alpha Models Works

(learn more about our four key tenets by clicking the tabs below)

Arguing with the Market, which we have done, is essentially akin to arguing with the Truth. The sun does not rise in the west. Ever heard a money manager or pundit say “The market just doesn’t get it.” Definition of arrogance in our book. We have a tremendous respect and reverence for the collective consciousness the financial markets represent. There is little stasis which is why and where we believe opportunities exist.

For example relationships among asset classes often morph leaving past high probability decision making now in the red. Identifying those changing relationships early are an example of how to take advantage as new signals unfold. New relationships and signals are a dynamic we focus on regularly.

In general stocks advance about 75% of the time, the other 25% it descends. Down markets have a different look then up markets as equities tend to take the escalator up and the elevator down i.e. The Covid Correction erased 14 months of gains in a single month. Often vulnerable signals will form prior to the start of a downtrend signalling the probability of a correction.

100% Money Market is a frequently used strategy in the models and is effective in reducing losses and improving performance. We are in search of absolute returns and producing positive annual performance, even in down markets. So far so good.

Alpha is the spread between a portfolio’s performance and its benchmark, in our case the 60/40 Benchmark Index and the S&P 500. Just as we are attempting to generate absolute positive returns, we look to outperform these bogey’s annually. Most managers fail to regularly beat their benchmarks. This portion of an investors portfolio is often best served with low cost index funds.

The ability to leverage the major indices when probabilities present themselves along with Inverse Funds when the market is vulnerable is core to our process to create Alpha. Many competitors will claim this increases risk. We disagree. The Covid Correction in early spring of 2020 saw the S&P 500 drop 34% in less than five weeks. During the same period Alpha I lost 0.5% and Alpha II gained 15.3%. Due to the globe’s burgeoning debt levels, the probability equities will fail to bounce back quickly, as they have every time this century, is high and on the horizon.

 

An important distinction.

Not Okay To Stay Wrong!

You do not have to be market savvy to know no strategy is infallible, including ours. Contrarian consequential news will nearly always undermine even the strongest of signals. Sometimes signals just fail. We have spent our allotted time arguing with the market and now have arrived at our senses.

Humility is a character trait we are proud to possess, personally and professionally. We coined the phrase a while back “The sooner we admit we are  wrong, the sooner the relevant info reveals itself.” That maxim has saved our clients a lot of money. Hopium, like most other drugs, usually leads to disappointment.

Strategy Execution

I’ve built a quiver of chart patterns/indicators which tend to produce predictable, dependable, and profitable moves. These patterns cycle through various indices and sectors on a periodic basis. One week the Energy stocks might be in formation and next Technology, then Small Caps.

I can be nimble and opportunistic which sometimes creates a flurry of activity. Many believe activity is a sign of risk and that is clearly not true. The ability to move 100% to the Money Market fund when we are unsure removes us from harm’s way and reduces the risk profile of the portfolios.

The platform I use to allocate portfolios is the Guggenheim Rydex Funds. These funds are not designed to beat the market, but to mimic index and sectors. It is an extensive lineup including leveraged and inverse funds. The fund family does not charge fees or commissions to reallocate portfolios. Here is a link to the Fund Lineup.

Theta Research

The performance of the Max Power Alpha portfolios are tracked by Austin based Theta Research. If you would like to review their up to date analysis please visit their website.

Taking cover in money markets and Treasuries until the downtrend has shown exhaustion is the typical way to preserve capital in volatile markets. Often the down markets will provide as strong a signal as is produced in Bull Markets and using Inverse Funds allows for profiting from the corrections.

The strategy is dynamic and nimble which is number one designed to preserve capital. Many consider this counter intuitive as activity is often associated with risk. Over 40% of the time our portfolios are 100% in money market funds. Avoiding falling knives can reduce risk considerably and improve performance.

When strong bullish patterns occur the strategy will employ leverage. When patterns are not as strong a partial position will be taken. When in doubt the government money market fund is used.

A key strength I bring to the table is the ability to easily admit we are wrong. With clues from the financial markets morphing regularly, humility keeps our learning curve constantly moving up and to the right. I also believe it is an important component in keeping losses to a minimum.

Alpha I

Alpha II

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