New Manager Joins Theta’s Ranks Theta Research is pleased to announce the addition of an options-based strategy developed by the man who literally wrote the book on the subject. Lawrence G. (Larry) McMillan, founder and principal of McMillan Asset Management has submitted his Volatility Capture – Futures strategy to be tracked by Theta. While new to Theta Research, Larry is a long-time options investor and wrote a book that many consider to be the “Options Bible.” Theta Research began tracking of this strategy as of its inception date of November 1, 2013. Why You Should be a Theta Subscriber We at Theta Research take great satisfaction in building adatabase of investment strategies based on tactical and quantitative models.  If you haven’t yet subscribed to Theta’ database of active investment managers, here are ten excellent reasons why you should consider doing so: 1.       Access to Investment Managers and Strategies You May Not Find Elsewhere; 2.       Our Focus on Active Strategies Means Tactical Models Don’t Get Lost in the Crowd; 3.       Early Stage Investment Managers Create Ground-Floor Opportunities; 4.       Two Levels of Subscription to Choose From 5.       Constantly Growing List of Managers Means a Steady Flow of New Ideas; 6.       Third-Party Verified Performance Net of All Fees and Costs; 7.       Sophisticated Online Analytics Allow You to Rank and Evaluate Performance; 8.       In Some Cases, Ability to Reconstruct Historical Track Records; 9.       Performance Updated Monthly, So You Always Have Current Data; and  10.     Inexpensive and Easy to Subscribe, To learn just how reasonable Theta Subscriptions are, see the Pricing tab on the Theta website home page. While there, you can also click on our “Demo” link to try out the features and functionality of the Theta subscription service. Special Note - If you are a member of NAAIM or the MTA, annual subscription prices go even lower. To learn more, go to the Subscription section of our website at thetaresearch.com and check out the various options. If you have questions, contact Mike Posey at mike@thetaresearch.com or (512) 628-5201, Option #1.  

Theta Announces Another New Strategy Existing Manager, John McClure, founder of ProfitScore Capital Management, Inc. has announced the addition of another strategy. The Tactical US Equities model uses multiple quantitative models to trade US Mid- and Large-Cap stocks on a long/short/cash basis. Theta began tracking this new strategy as of its inception date of July 1, 2017. Déjà Vu All Over Again The Dow Jones Industrial Average recently crossed 22,000 for the first time ever. This blue-chip index has now more than tripled since a low set in March 2009. The Wall Street Journal recently produced an article explaining five different theories as to why the stock market continues to defy gravity (see below). As I read the article, I was reminded of the late 1990s when the stock market was on a similar tear. Then, as now, all sorts of theories were given as to why the market could continue producing double digit returns without fear of a correction or bear market. Of course, we all remember how that turned out. I have reprinted the Wall Street Journal article in its entirety below. If you were around in the late 1990s, you’ll likely remember some of these theories. If you’re new to the markets, they can serve as a warning. After the quoted article, I’ll add a few comments of my own: QUOTE: WHY DO STOCKS KEEP HITTING RECORDS? HERE ARE 5 THEORIES Wall Street Jourrnal By: Akane Otani and Chris Dieterich (#1) - The biggest U.S. corporations are on stronger footing. With most S&P 500 companies having reported second-quarter results, firms are on track to post another quarter of strong profit growth—building on gains from the end of last year, when companies snapped a five-quarter streak of earnings contraction, according to FactSet. The rebound has been broad, reflected not just among oil firms—which have recovered along with oil prices—but also in tech giants like Apple Inc. and economic bellwethers like Caterpillar Inc. Those who believe the stock market’s trajectory is ultimately determined by the rate of earnings growth say continued strength among U.S. firms should help fuel further gains in the stock market. (#2) - Economists are projecting a pickup in global growth, while the U.S. expansion remains slow and steady—a combination that investors say has helped boost multinational companies, which have been among the best-performing stocks this year. Boeing Co., Apple and McDonald’s Corp. made up the bulk of the gains that pushed the Dow industrials past 22000 for the first time. Profits at such firms may get an additional boost if weakness in the U.S. dollar persists, because it makes their exports cheaper to foreign buyers. The WSJ Dollar Index, which measures the currency against a basket of 16 others, has fallen 7.5% this year through Wednesday. (#3) - Investors are currently contending with a rare but favorable environment: an economy that is expanding but not fast enough that the Federal Reserve is in a rush to raise interest rates. The unemployment rate fell to a 16-year low in May, yet inflation has remained stubbornly below the Fed’s 2% target—suggesting to many investors that the central bank is unlikely to raise rates aggressively. Many analysts caution the so-called Goldilocks scenario is unlikely to last. But for now, “in a period where accommodation remains very aggressive, all of this is coming together to keep the markets afloat at these higher levels,” said Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute. (#4) - Proliferation of Index Funds: One hallmark of this year’s stock-market rally is the relentless flow of money into index-tracking mutual and exchange-traded funds. Some $128.6 billion has moved into U.S. index-tracking funds that own U.S. stocks in 2017 through June, while a net $99 billion was withdrawn from actively managed U.S. stock funds, according to Morningstar Inc. Buying of passive funds is partially offset by the money flowing out of active ones, but some investors warn that the rising popularity of index funds that own hundreds, sometimes thousands of stocks, translates into indiscriminate buying divorced from corporate fundamentals. One concern is that persistent index buying elevates valuations across the board and that, should market turmoil erupt, investor index buying would turn to selling, leaving the broader market acutely vulnerable. (#5) - Nowhere Else to Go: In a low-rate environment, one reason investors say the stock market keeps rising is simply that there is no alternative for returns. After an initial selloff following Election Day, U.S. Treasurys are back roughly where they began the year, with the yield on the 10-year note at 2.264% Wednesday, compared with 2.446% at the end of 2016. Many bond investors believe yields are likely to stay relatively low unless there are signs that inflation is picking up or Congress is able to push through potentially growth-boosting policies like fiscal stimulus. For now, with bonds offering paltry yields, many investors begrudgingly say stocks remain their asset class of choice—even if they are getting increasingly nervous about the long stock rally. END QUOTE While each of the above theories deserves further attention and comment, space does not permit. Instead, I want to concentrate my comments on just two of the theories in an effort to provide an expanded historical perspective. Specifically, Theory #4 above discusses how stock purchases by passive index funds are creating an indiscriminate demand for stocks “…divorced from corporate fundamentals.” In other words, when investors buy index funds and ETFs just for the sake of having a passive equity exposure in their portfolios, the underlying stocks may respond to that demand by acting more like commodities. Many investors do not realize that the purchase of passive index mutual funds and ETFs results in the underlying stocks being purchased without regard as to their merit. Also, given that many indexes are capital-weighted, relatively few stocks can drive the index, while also increasing the risks. When we couple index investing with Theory #5 that low fixed income returns have resulted in investors having no choice but to buy stocks, we get a situation where the demand for stocks increases and takes prices right along with it. If that situation exists, then we may be able to explain stock market movements in terms of commodities, where the forces of supply and demand dictate prices. The term being tossed around now as it was back in the 1990s is “commoditization” of equities. You can do an Internet search and find many theories both for and against this phenomenon, but the general idea is that demand for stocks may be affecting prices more than the underlying fundamentals. Theta Research’s owner, Gary D. Halbert, cut his teeth in the industry as a successful commodities hedging specialist. One of his most-used quotes is that when commodities prices melt up too high, they eventually tend to “fall off a cliff” on the way back down. Think what that says about stocks that now seem to be reacting more to the laws of supply and demand than financial fundamentals. So will stock prices fall off a cliff at the end of the current bull market rally? If you look at what happened during the late 1990s and 2002 to 2007 booms, the answer is probably yes. The only question is when. That being the case, doesn’t it make sense for investors and their advisors to include strategies with the ability to react to market forces rather than being a passive victim of them? Or, even better, what about strategies that employ techniques often used in the managed futures industry that attempt to take advantage of market volatility? Theta Research offers a database of actual performance posted by investment managers whose strategies include rules-based trading systems that are often found in managed futures accounts. Strategies such as hedging, long/short, traditional market timing, momentum, sector rotation, etc., etc. can be found among Theta’s featured Investment Managers, giving investors an alternative approach to a market that defies conventional wisdom. Early in my career, I worked for a life insurance company. One of the favorite catch phrases used in that industry is that people don’t plan to fail, they fail to plan. The same could be said today regarding the many passive investors who are sitting ducks for the next bear market or major correction. Doesn’t it make sense to diversify into investments that have the potential to manage the risks of a commoditized equity market rather than being victimized by it? We think so. If you agree, and want to learn more about the Theta database, contact me at Theta Research by phone at (512) 628-5201, Option #1 or via e-mail at mike@thetaresearch.com. You can also learn more about our active strategies on our website at www.thetaresearch.com. Stay active, Mike

Gary D. Halbert has been writing his Forecasts & Trends Newsletter, (now in e-letter format) for over 30 years. During that time, Gary has shared his keen insights on economic, market and even political events that can and do affect your pocketbook. With the market reaching new record highs on a regular basis, investors are reasonably concerned about how long the current bull market rally can last. Just as in the late 1990s and then again in the mid 2000s, there is no shortage of “experts” offering opinions on the answer to that question. Unfortunately, many of these opinions come from sources that do not have the depth of knowledge and experience that Gary brings to the table. If you like what you see in Gary’s writing, we’ll provide a link for you to sign up for Gary’s e-letter, free of charge, at the end of Gary’s article. All the best, Mike

Are the Markets Due for a Correction? What to Do in an Uncertain World

After the election of Donald Trump as President, the markets surged and continued to increase after he was sworn into office. In the Spring, however, the market rally took a breather as it became more evident that neither the repeal and replacement of Obamacare nor tax cuts nor infrastructure spending will be a cakewalk for the Republicans. In addition, interest rates are going up. Add to that the foreign policy crisis with Russia and Syria, and rapidly escalating tensions with North Korea. The stress on the stock and bond markets is increasing quickly and many are worried about the possibility of an imminent downward correction (or worse), especially since we haven’t had a major correction in many years. What happens in the coming months is far from certain and many investors are very nervous. Wouldn’t it be nice to have some strategies in your portfolio that are not highly correlated to the stock and bond markets, just in case the worst happens? Fortunately, there are some options I’ll share with you today. But first, let’s look at the increasing risks the markets are currently facing. Reality of Governing Sets In One of President Trump and the Republicans’ big promises was the repeal and replacement of Obamacare. As we all know, their attempts to do so have failed miserably. It’s very possible they will not be able to come together and agree on an alternative approach. So what does that mean for the economy? Many analysts agree Obamacare will eventually implode if nothing is done to fix it. Healthcare is a big part of the economy, and a failure of this magnitude could have a significant impact on the markets. In addition, perhaps one of the biggest reasons for the stock market’s surge since Trump’s election is the promised cuts to corporate and individual tax rates. Keep in mind that part of the reason the GOP started with the repeal and replacement of Obamacare is that they were planning to use some of the savings from their healthcare changes to help pay for the tax cuts. With no such savings now available, it will make passing tax cuts even more difficult. Republican leaders had hoped to have tax cuts finished by August. Now many are saying that’s just not realistic anymore. It could be the fall or even later before anything is done on this. Republicans disagree on a number of things, including the size of the cuts, how to pay for them and some more controversial proposals like the Border Adjustment Tax. The future of the infrastructure spending bill is also uncertain. This would pump billions into the economy on so-called “shovel ready projects.” It remains to be seen though if the Republicans can come up with something that can pass both Houses of Congress. These promises are a big part of the reason for the market’s surge after Trump was elected. Failure to accomplish any of these could impact the markets in a negative way. Interest Rates Are Going Up In December and then again in March, the Federal Reserve raised interest rates. They also indicated they plan to have at least two more rate hikes this year, and potentially three next year. Rising interest rates increase the costs for companies to borrow money. Many existing loans are tied to the LIBOR so when rates increase, so do the costs for companies to service their debt. Furthermore, the Fed recently warned about weakening credit demand and tightening lending standards, which will make it more difficult to get a loan. Companies often depend on loans to fund expansion projects. When the availability of credit declines, it is usually not good for the stock and bond markets. And let’s not forget that the US has a $20 trillion national debt. When interest rates go up, so does the cost to service this debt. This makes even less money available for government spending projects. Hotspots Around the Globe In addition, there are a number of global hotspots that could weigh on the markets. The limited US strike on Syria has caused concerns over escalating US military involvement in Syria and elsewhere. It has also put a big strain on US-Russia relations, which were already at a low-point. Any type of direct US and Russian military conflict could have a very negative impact on the markets. It could also weigh heavily on the energy markets. Conflicts in the Middle East often push energy prices higher. And don’t forget Russia has vast energy resources. Rising energy prices often are not good for the markets. North Korea is also a major hotspot, given that they have a nuclear weapons arsenal and a nutty leader who might just be crazy enough to use them. Any confrontation between the US and North Korea could escalate very quickly, and the result could be very negative for the stock and bond markets. Add to that the strain it would put on US-China relations, which would likely impact trade. President Trump has sharply criticized China for unfair trade practices, and any problems between the US and China, especially with growing tensions with North Korea, could lead to a trade war with negative global implications. Remember China has the second largest economy in the world. Are We Past Due for a Correction? The US has just completed its eighth consecutive year of economic growth. For reference, the average post-World War II recovery period averaged just 61 months, roughly five years. Private jobs have grown for 85 consecutive months. The markets recently reached all-time highs. The last really significant market correction was during the 2007-2009 time-frame. Many believe the markets are past due for a correction. This recovery is getting long in the tooth, so it may not take much for it to turn lower, perhaps significantly. Remember, the S&P 500 lost over 50% from 2007-2009. When the markets are at or near to all-time highs, and there is a great deal of uncertainty, they can be more susceptible to negative news or events. It often doesn’t take much to cause a big move in one direction or the other. Most everyone reading this understands how important it is to diversify your investment portfolio. With the fate of Obamacare and tax cuts unclear, interest rates rising, tensions increasing around the world and the stock markets at or near all-time highs, there is a great deal of uncertainty in 2017. This makes diversification even more important. Yet proper diversification today requires more than a passive buy-and-hold allocation to stocks and bonds, since they can both suffer when markets drop. It requires alternative investments that are not highly correlated to the stock and bond markets, ones that can potentially do well even if the markets drop. And if the markets keep going up, you want strategies that can still prosper. So what’s an investor to do? Investors Need Options and Theta Research Has Them In a nutshell, Theta Research tracks the actual performance of separate managed accounts traded by Investment Managers who employ tactical strategies. These model-based strategies are often based on quantitative methods designed to actively position portfolio assets where they can avoid much of the damage caused by a market correction. Some models even use inverse funds to “short” the markets during periods of high volatility. Once these actual returns have been documented, Theta Research also provides subscription services so that both individual investors and professionals can analyze and evaluate each manager’s performance. My RIA firm, Halbert Wealth Management, had been a Theta Research subscriber since its inception back in 1999. It not only serves as an important analytical resource for our due diligence efforts, but also as an important source of actively managed investment strategies that employ systematic trading models. Using Theta’s Professional Subscription, Advisors can produce detailed ranking reports over a wide range of time windows, allowing you to determine how the strategies performed in past market environments. The best part, however, is that every performance number published by Theta is based on the actual performance of a representative account. Theta publishes no backtested or other hypothetical performance information. Learn More About Theta’s Database of Actively Managed Investment Strategies Follow the link to learn more about Theta Research subscriptions and how you can use this resource to access top active Investment Managers. While there, you’ll even be able to run through a Demo of the system to better evaluate its functionality and capabilities. (Note that the Demo site does not have live data, but rather example returns you can use to evaluate the site.) By subscribing to Theta, you have access to a growing list of active investment managers, each with verified actual track records. In these days of market uncertainty, it’s important to know which managed accounts can both talk the talk and walk the walk of tactical model-based investment management. The active strategies tracked by Theta have the potential to do well, even if the markets drop. They also have the potential to do well if the markets continue to rise. Plus, they are often not highly correlated to the stock and bond markets and can help you diversify your portfolio away from traditional stocks and bonds. (Past performance is no guarantee of future performance.) If you have any questions or want to learn more about Theta Research, call Theta’s Marketing Director, Mike Posey at (512) 826-5553 or send him an e-mail at Mike@ThetaResearch.com. If you are worried that the stock markets are in nosebleed territory, and that the Fed is now seriously committed to raising interest rates significantly, you owe it to yourself to at least check out the active investment strategies tracked on Theta’s database. Thank you for your continued confidence, Gary

Past results are not necessarily indicative of future results.

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Theta is pleased to announce four new additions to our list of tracked models. As usual, some of these strategies come from existing Theta Managers while others have been submitted by Managers new to the Theta database. Before discussing the new programs, however, a “Happy Anniversary” wish is in order. Theta Research – 18 Years and Going Strong It seems hard to believe but this year marks the eighteenth anniversary of Theta Research. Established in 1999 by Roger Schreiner and Paul Montgomery, and later owned solely by Montgomery, Theta Research was acquired by the Gary Halbert in 2012 and moved to Austin, Texas. The Halberts are familiar figures in the wealth management industry, having pioneered public futures funds in the 1980s and 1990s. In 1996, Halbert Wealth Management (HWM), a Registered Investment Advisor firm was established by the Halberts and is where the relationship with Theta Research began. As an RIA, HWM knew that it is often difficult to find active Investment Managers among the thousands listed on various databases. Even more frustrating was the fact that performance figures in many of these databases are not independently verified. Instead, they rely on self-reporting, backtesting and other hypothetical gimmicks to show what a strategy’s performance might have been, not what it actually returned. HWM used the actual performance on Theta’s database as a resource to help evaluate Investment Managers who employ tactical strategies to enhance performance, manage risks, or both. Knowing that an Investment Manager’s actual performance had been third-party verified provided a big head start in HWM’s due diligence process. Mike Posey was chosen as Marketing Director of the new Theta while Henry Rohlfs was named its Technical Director. Together, they have expanded the range of services offered, enhanced Theta’s capabilities and grown in the number of subscribers and investment strategies being tracked. While much of the last few years of ownership has been dedicated to rebuilding the database and enhancing the software, we’re excited about the future. For Theta’s clients, it’s good to know that a valuable resource like Theta Research is still independently tracking the actual performance of Investment Managers and making the information available to those seeking actively managed investment strategies. Now, let’s explore some of the strategies that have most recently been added to Theta’s database: Models Added by Existing Investment Managers on Theta: Ted Lundgren, principal of Hg Capital Advisors in Houston, Texas is an existing Theta Manager. Ted has recently established tracking of his Behavioral Diversification strategy, a multi-manager approach. Theta has tracked and independently verified the actual performance of this model back to its inception of January 1, 2014. Existing Investment Manager, Christian J. Cyr, CPA, MBA, and Founder of Cyr Financial Wealth Advisors has established a new tracking account named the Dynamax 2X Strategy. As its name suggests, the Dynamax 2X strategy is a leveraged version of Cyr’s Dynamax 1X Strategy, which is also being tracked. Theta Research has independently documented and verified the track record of this model back to March 1, 2016. New Investment Managers Added to the Theta Database: Paul Glance, PhD, is founder and president of Glance Financial Advisors, LLC in Troy, MI, and a new Manager to Theta Research. Along with his son, Brian, Paul has established a tracking account for his Glance USO Strategy, a quantitative long/short energy sector strategy. Theta Research has independently verified the track record of this trading model back to January 1, 2017. Alpha Retirement Wealth in Gold River, CA is another one of our newest Investment Managers. Co-Founders Colbey Philbin and Matt Curtis have submitted their US RPI A+ Strategy, which is invested according to the US Risk Parity A+ Index, created by Mr. Philbin. Theta Research has independently documented and verified the track record of this model back to its inception date of January 1, 2016.