Editor's note: Mary Rowland's column, "Beyond MPT," in the July issue focused on technical analysis firm Dorsey Wright & Associates (DWA) and generated about 40 letters from readers, some of whom suggested the article wasn't balanced. What follows are a few of those letters, as well as a response from Mary Rowland.

Some Clarification
Your last two columns have been of particular interest, but I've also appreciated your writing on life insurance/annuity matters.
First, I'm very familiar with Dorsey Wright.  I am a professional member of the Market Technicians Association, and our firm, TABR Capital Management, uses technical and quantitative work exclusively to manage over $160 million for our clients on a discretionary basis.  Don't be hard on yourself-I wouldn't expect anyone after a couple of hours to understand the nuances of point-and-figure work.  You were correct in stating that substantial training would be necessary.  Since 1983, I've read countless books, studied dozens of trading systems and methods and continue learning to this day. Wouldn't this be true of any field where one is attempting to become an expert?

I'd like to clarify a comment for you. You indicated that a few advisors criticized the money management arm for not publishing performance figures. I think you may have this backward. The money management arm in Pasadena is headed by Mike Moody, a good friend of mine, and they have published real-time numbers and have done so since their inception. They manage real money, charge real fees and comply with SEC audit processes. Instead, it is the research division headed by Tom Dorsey in Richmond, Va., that has continually published hypothetical results of their various models.

I have no desire to convert your thinking-our position is that technical analysis is the only element necessary in managing money. Perhaps it's not if one is willing to endure losing 50% of their capital in equity markets every 10 to 20 years, but I've yet to find a client willing to submit to that plan. In our view, managing downside risk is the key to success, especially in retirement where one is taking withdrawals.  Buying and holding and asset allocation won't cut it on its own-that is like playing the piano with one hand. I should also add that point and figure is not part of our modeling process, but it is a very helpful tool. Many technical approaches work, and each person needs to find one that they are comfortable with.

Bob Kargenian, President
TABR Capital Management
Orange, Calif.

Dorsey Wright Fills A Void
Thank you for a great article in Financial Advisor.  I am a CPA and financial advisor. I was, for two decades, a buy-and-hold disciple. During the 2008 debacle, the buy-and-hold philosophy failed, in that risk management simply was nonexistent. Its failure came in the form that neither I, nor my clients, slept soundly for a year. Sure, in the end, many of the portfolios are back or near back to where they started, but is that good enough or just bare survival?  Wouldn't it have been great to say my clients are up 10%, 20% from where they started?

During the debacle, I searched desperately for a risk management system that would allow me to incorporate my buy-and-hold philosophy, which I still believe in for the long run, with a downside management, or risk management edge, to try to give myself the best of both worlds.  If I could only protect the downside and let the upside take care of itself, long-term results would be dramatically improved.

Dorsey Wright fills that void beautifully. I am a long-term investor, not a short-term trader, so my downside protection is limited to major swings. I am 100% confident that what happened to me and my clients in 2008 will never happen again. I've effectively protected my clients' downside once since the debacle, and I actually received phone calls thanking me.  Having this system in place, which is far from infallible, gives me an effective tool to be conservative when necessary and aggressive when appropriate. At least it gives me some objective basis for making decisions. I'm a big fan and the price is remarkably affordable.

Mark Mauro, CPA, PFS
Somerville, N.J.

Help With The Storm
In 1996, a friend introduced me to point and figure (PnF) charting through the daily reports of Dorsey Wright & Associates. If I had not known about this technical tool for portfolio management, I may have left the business many years ago. Instead, I have an independent office, where most of my assets are fee based and managed by me on a discretionary basis.? PnF charting is a technique requiring years of practice to become a craftsman.  In the first couple of years, my impatience/reluctance to believe in the theory, and most of all my hard- headedness, probably were responsible for my not performing as well.?Luckily in 1998, I started "getting it." I also attended a training seminar at DWA. As a result, I highly improved my management style.?

Unfortunately, the financial advisors at the major wirehouses are not using technical risk management. The broker is rewarded with trips and bonuses based on how many new assets he brings to the firm, the number of accounts he's opened in a year and whether his yearly commissions increased year over year.

Aren't the clients the foundation of our business??Like many others at the major wirehouses, we all drank the Kool-Aid [believing the wirehouses'] managed programs provided the best institutional managers in the world. Almost all of the managers were buy-and-hold theorists.  If a client invested through the wirehouse, they could invest a minimum of $100,000. If they walked into the money manager's office without going through the wirehouse, the minimum investment would be, in most cases, $1 million.

The major wirehouses would state to their sales/financial advisors in the sales meetings, "Do you know how lucky your clients are to have access to these managers? They're the best in the world!" The Kool-Aid was flowing knee-deep in the meetings.?In late 1998, I noticed my discretionary management was outperforming the so-called experts. Hardly any of these managers managed risk, meaning they didn't move to defense and increase cash when the markets began technically giving negative signals. Luckily, the PnF charts, along with the daily reports provided by DWA, gave me a compass to navigate risk management for my clients' assets.

Financial advisors who tried PnF charting or other forms of technical analysis for a month or two weren't giving the process time to work, nor did they commit their time to becoming a craftsman of this art.  Many of them were pressured by their employers to increase assets, create more commissions and open accounts instead of properly managing their clients' risk.  Most clients will refer new business if you are managing their risk properly.? Many financial advisors have their cookie-cutter diversification theories, but won't adjust with the changing market risk environment that's been partially created by a deluge of  so-called expert information accessible through cell phones,  computers and other methods.  Too many advisors and investors react to the news instead of being proactive with technical analysis.??

Is PnF technical analysis perfect?  No! But it has kept many of its craftsman properly navigated through many storms.? If you question Tom Dorsey's comments regarding PnF charting analysis, you may want to consider attending one of the educational training programs and reading his book.  Stay with the plan for a minimum of three years, and let us know what you think then.

Name Withheld
Plano, Texas

Response From Mary Rowland
In my last column, I discussed-or at least intended to-the point-and-figure technical analysis work of Dorsey Wright & Associates in Richmond, Va. I thought I produced a balanced article.

However, I received at least three dozen e-mails suggesting otherwise. Many of them demanded that I apologize for the ignorance I displayed in that column. Worst of all, Tom Dorsey, who spent more than an hour with me explaining the DWA system, posted a response on the FA Web site claiming that I misquoted him.

My July column about DWA included both positive comments-(most of them) and negative ones-a few. I will attempt to set the record straight as best I can.

First off, I do owe Tom Dorsey an apology, chiefly because I interpreted his use of "advisor" and "broker" in the way that I myself use them. To me, an advisor is a CFP who acts as a fiduciary and does complete, holistic financial planning for clients. A broker sells products. I see in rereading the column that I made that distinction, which Dorsey did not make. When he said DWA counsels brokers but not advisors, he did not at all mean to make the distinction that I made in the way I wrote it. I also wrote that "he does not have a high opinion of advisors." Again, I made a distinction he did not make. I believe that when he said "advisor," he meant something more akin to "therapist." Of course, I always attempt to be cautious and completely accurate.

He also challenged my report that one money manager said the firm doesn't publish written performance numbers. "Performance numbers are readily available in numerous places like our money management brochure and Morningstar. ETF returns are available at www.invescopowershares.com, mutual fund returns at www.arrowfunds.com," he said.

Although I do not know enough about technical analysis to make any claims on its worthiness, I do know something about business. Tom Dorsey was very generous with his time and his explanations. I do not believe he is a person with a secret agenda. He struck me as an honest, optimistic businessman. I was also impressed to learn that DWA supports 16 families and, that it has had zero percent turnover since it was founded in 1986. Thanks to all of you who wrote to me. At FA, we love to hear from readers. I learned a good deal. But I do not plan to write another column about DWA. If you have comments or complaints, please send them as letters to the editor at FA Magazine. Surely some of them will see print.