In 1991 Billy and Akaisha Kaderli retired at the age of 38. Now, into their 4th decade of this financially independent lifestyle, they invite you to take advantage of their wisdom and experience.

Sy Harding Interview

Billy and Akaisha Kaderli

Retire Early Lifestyle: Sy, tell us about your background and experience before you started The Street Smart Report.

Sy Harding

Sy Harding: My original career was in engineering, where I had considerable success in working quite quickly up the management ladder at a small high-tech company, becoming vice-president and a minority partner in my 20’s. I sold my stock in that company to found my own small high-tech company, built it substantially over a five-year period and sold it. After a two-year sabbatical I founded another high-tech company, built that significantly over another five-year period, and sold it to a NYSE listed company. I then turned my attention to investing and markets, founded Asset Management Research Corp., and began publishing my research and market recommendations via a newsletter, and currently via an online website.

REL: You have been advising serious investors for 24 years. How have the markets and investors expectations changed in those two decades?

Sy: The biggest changes have been the huge increase of economic and market information available to investors, the arrival of discount brokerage firms making trading inexpensive, and more recently the arrival of exchange-traded funds, making portfolio changes easy. As far as changes in investor expectations, they have been dramatic. The unusual ten-year bull market of the 1990’s resulted in investors believing that making big profits was easy and didn’t require much work, while the two serious bear markets of the last ten years has scared many away from the market altogether.

REL: What can you tell us about your investment style and strategy? Does being in a secular bull or bear market affect your models?

Sy: We have two investment strategies. We have a ‘Seasonal Timing Strategy’ based on the clear history of the market making most of its gains in the winter months, and experiencing most of its serious corrections in the summer months, not every year but so often that it has significantly out-performed the market since we introduced it 12 years ago. And we have a non-seasonal Market-Timing Strategy that uses traditional technical and fundamental analysis. Experiencing cyclical bull markets of several years duration within a secular bear market usually of 17 to 20 years duration makes a significant difference, since 110 years of history clearly shows that buy & hold investing does not work in long-term secular bear markets.

REL: You have sidestepped the recent double-digit downturn in the markets. What was your reasoning for getting out? Did you profit from the downside?

Sy: Our Seasonal Timing Strategy provided a typical exit signal on April 20, which allowed us to keep our profits from the bull market of the winter months, while the market topped out April 29, and the S&P 500 lost 18% of its value in the subsequent correction. Our Market Timing Strategy, because it is basically a trend-following strategy, gave its exit signal a bit later on May 9. We moved it into ‘inverse’ exchange-traded funds that are designed to move opposite to the market, and made significant double-digit profits from those in the correction. We also had the portfolio 20% invested in bonds which rallied strongly as the stock market declined. That position also produced a double-digit profit as the stock market declined.

REL: Gold is rising at a rapid pace and has had quite a run over the last couple of years. What is your opinion for its future gains or losses? What about other commodities like silver and oil? Do you advise subscribers on these investments?

Sy: Gold has been one of our frequent investments over the years, and we have often been ranked in Timer Digest’s Top-Ten Gold Timers. But we took our profits from our last buy signal for gold in May, too early, and missed out on its last spike-up. We stayed away from it as we thought it was dangerously overbought, and potentially in a bubble. Given the problems of global debt crises, political uprisings in various parts of the world, and uncertainties of inflation/deflation, all of which we expect will be with us for several years, I am long-term bullish on gold. But I’m currently still standing aside from it, believing it is short to intermediate-term overbought, with too much investor excitement over it. We do not advise subscribers on commodities except for gold. Individual commodities require a different expertise and knowledge, for instance of rapid supply/demand changes, growing conditions for soft commodities, etc. And commodity markets are dominated by the trading departments of the commodity producers themselves, which have much more information than an outsider can hope to have.

REL: How much of your work is based on technical or fundamental analysis and could you give a brief explanation of how you incorporate these into your recommendations?

Sy: We are deeply involved in technical and fundamental analysis. Our Seasonal Timing Strategy is pretty much a simple mechanical timing mechanism, its one entry, and one exit signal per year being based on the calendar and just one technical indicator. But our non-seasonal Market-Timing Strategy is based entirely on technical chart analysis as well as analysis of the fundamental economic conditions in which the technical indicators are functioning at any given time. It’s difficult to provide a description in a few sentences. But our technical analysis utilizes charts and data showing for example, overbought/oversold conditions, support/resistance levels, money flows in or out of various sectors, trend reversal indications, investor sentiment, insider buying or selling, and so on. It is designed to go after gains from intermediate-term rallies and corrections usually of three-to six months duration.

REL: I understand you have a couple of different portfolios that investors can work with depending on their risk tolerance. Briefly describe them and their ten year returns.

Sy: We have a Seasonal Timing Strategy (STS) portfolio. I introduced the strategy in my 1999 book ‘Riding the Bear – How To Prosper in The Coming Bear Market’, in which I predicted a serious bear market was right around the corner.  Its performance since has been remarkable. The market topped out in early 2000 into a serious bear market in which the S&P 500 lost 50% of its value. It then rallied back to its 2000 peak in the 2003-2007 bull market, only to experience the equally severe 2007-2009 bear market in which it again lost 50% of its value. And currently, in spite of the new bull market that began in 2009, the S&P remain s 20% below its peak in 2000. It’s become known as ‘the lost decade’ for investors. But our Seasonal Timing Strategy is up 12% over the last year, 31.3% over the last five years, 81.9% over the last 10-years, and 151.0% over the last 12 years. We don’t have a specific performance record for our non-seasonal Market-Timing Strategy portfolio as in the past we provided numerous alternative investments at each signal. But it has performed well enough to have us often in Timer Digest’s Top-Ten Market Timers rankings. (We are currently the #1 Bond-Timer of the last 12 months).

REL: Your newsletter is published every few weeks. In these fast moving markets many changes happen daily. Does the subscriber receive notifications if changes to their investments need to be made?

Sy: Our newsletter is published (online) every three weeks. But as far as communications with subscribers are concerned it has been surpassed by an in-depth ‘Mid-Week Markets Update’ every Wednesday, an in-depth Gold, Bonds, Dollar, Inflation’ Update, and an in-depth ‘Global Markets Update’ every two weeks, as well as a hotline whenever we have a change in signals or recommended holdings.

REL: What about markets outside of the US? Do you follow and recommend them from time to time?

Sy: We follow about 20 global markets outside the U.S., and have recommended some of them at times through the years, although our main focus is on the U.S. markets.

REL: These are certainly challenging times for investors worldwide. Do you have any closing advice to help them with their investment choices to produce better future returns?

Sy: My major concern is the history of individual investors (as opposed to professional and institutional investors), becoming overly confident when the market is rising and thus unwilling to heed warning signs of a coming correction. They then typically give back so much of their previous profits in each serious correction that they become angry, distressed, and ‘swear off the damned market for good’, not becoming interested again until the next rally or bull market has made most of its easy money gains. And yet the stock market remains the best investment area going for those who pay attention, better than real estate, art, collectibles, or what have you. 

REL: We would like to thank Sy for taking the time to answer these questions for our readers.