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.?

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