Some of the variables to considered when estimating

Money Matters/RPOA market timing performance

 

1) Moraif apparently manages some of his client’s money, while other clients control their own brokerage accounts while acting on direction from Moraif. It is unclear if Moraif has always managed some client’s money, or started offering this service at some point in time after his first market timing call on 11/27/2007.

2) Moraif does not disclose the buy and sell prices of client shares that may be under management, nor what securities are invested in or recommended. We are left to estimate based on assumptions.

3) Buy and sell price estimations depend on what time of the day the trades were executed. Securities such as index funds and stocks trade during the day. Mutual fund prices generally settle after the close of trading and generally at the closing price of the day.

We shall assume that clients who own stocks and index funds via self-managed brokerage accounts would likely make their trades at the open of trading via market orders. Some clients may own mutual funds that generally settle at the closing price of the day.

As for money managed by Moraif, he has at times indicated it may not be traded all at once (such as at the open of trading). It may instead be traded during the course of the day. For these situations we may use the average price of the day to estimate a buy or sell price.

On other occasions, it appears as though Moraif has invested in mutual funds, and so we shall assume that these investments settled at the close of trading for the day. A Bogleheads forum poster (screen name zbxb006) claimed in Feb 2015 that Moraif recommends mutual funds.

4) We shall use the S&P 500 total return index as the benchmark for analyzing Moraif’s market timing performance. Unlike price return indexes, a total return index includes reinvestment of dividends. This is important because when you sell off stock securities, you are no longer earning dividends.

5) We are not factoring in decreased returns due to taxes, which vary by investor. When you pay taxes sooner than later, that tax money paid represents money that can no longer continue to grow and compound. Depending on tax laws, heirs who would otherwise not be subject to taxes, may inherit less when you pay capital gains taxes (by selling).

6) When Moraif (RPOA) puts managed money into mutual funds, we are not factoring in decreased/increased returns due to fund over/underperformance versus benchmarks (S&P 500 index, total bond market index, etc), nor fund management fees anf turnover (expense ratio) that may surpass those of low cost index funds (such as IVV, BND), nor differences in dividend yields.

7) Moraif charges his management fee, apparently on a quarterly basis, and based on assets under management (including bonds). However, for simplicity on a spreadsheet, we have instead subtracted 1.25% on Jan 1st of every year. This fee may vary depending on the valuation of the client assets under management. According to RIA Intel, Moraif's firm charges an annual fee based on assets managed “generally equal to 1.25%.” According to a Better Business Bureau complaint Moraif charged a customer 1 1/4% to manage $73,000.

8) Any applicable annual 'program fees' (if any) were not factored into calculations, particularly when the Pershing 0.30% program fee was implemented beginning in April of 2022, affecting clients who use them as the custodian of their money.

9) It is unclear if on some occasions Moraif invested the stock sale proceeds into bonds. For 2016 we have assumed that proceeds were swept into bonds. For all other market timing calls we shall assume that the stock sale proceeds sat in cash.

10) During Moraif's 2020 market timing call, he stated that the stock sale proceeds were placed in a money market account, presumably earning a tiny amount of interest.

11) During Moraif's (RPOA's) 2022 market timing calls, stock and bond sale proceeds were placed in a money market account, reportedly earning about 2% annualized interest for half of the market exit, and 4.7% annualized interest for the last half. This money was out of equities for about 9 months and 10 days. Therefore we can estimate increased returns of about 3.35%.

 

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