Q What is Macro Trend Investor and how is it different from other financial newsletters?

A The mission of Macro Trend Investor is to give investors solid, actionable portfolio recommendations that should do well in any economic climate. We intend to do this by focusing on key themes:

  • Select growth-oriented investments that capitalize on durable, long-term macro trends. The themes that we intend to follow most closely are the rise of Generation Y (the “Echo Boomers”), the graying of the Baby Boomers, and the development of the urbanized middle class in emerging markets such as Africa, China, India and Brazil.
  • High-quality income investments that should continue to generate consistent returns in even the most volatile of markets.
  • Contrarian investments and trades that attempt to identify false trends and position portfolios accordingly—on the long or short side.
Q What kinds of investments will Macro Trend Investor recommend?

A We will be recommending individual stocks and bonds where appropriate as well as ETFs and mutual funds. Other, more exotic investments such as preferred stock, real estate investment trusts (“REITs”), and master limited partnerships (“MLPs”) will also be considered when we consider them to be priced attractively.

Q Do the ideas behind Macro Trend Investor work?

A Absolutely. Let’s start with the emphasis on income. In his excellent book Behavioural Investing, James Montier said that “Over the long term, dividend yield has provided over 50% of the total return to equities.”

And if dividends are reinvested, the numbers get even better. In his groundbreaking book The Future for Investors, Wharton professor Jeremy Siegel found that “From 1871 to 2003, 97 percent of the total after-inflation accumulation from stocks comes from reinvesting dividends. Only 3 percent comes from capital gains.”

Income investments can lose money, of course. Any investment can. But we firmly believe that a solid stream of income can mitigate the erratic booms and busts of the market over time and allow investors to generate a respectable return.

Academic studies also confirm that using demographics to identify growth investments is a winning strategy. In 2005, professors Stefano DellaVigna and Joshua Pollet published what we believe to be one of the most insightful academic papers in the history of academic finance: “Attention, Demographics, and the Stock Market” (available at the UC Berkley website).

DellaVigna and Pollet wrote, that “Cohort size fluctuations produce forecastable demand changes for age-sensitive sectors, such as toys, bicycles, beer, life insurance, and nursing homes. These demand changes are predictable once a specific cohort is born.”

Using this insight, the professors proved empirically that changes in demand based on demographic trends can add 5%-10% in excess returns over the broader stock market.

So, we have based Macro Trend Investor on methods that have been proven to be effective over the long term.

Q What is the difference between Macro Trend Investor and Macro Trend Insights?

A I have two fundamentally different products with similar names: Macro Trend Investor (formerly the Sizemore Investment Letter), which is a paid investment newsletter, and Macro Trend Insights, which is a free e-letter.

When I recommend a stock or ETF in Macro Trend Investor, you can expect regular follow-up. I track the recommendations throughout the month and issue regular updates if anything material changes. These picks are intended for my regular subscribers, and I view the individual picks as pieces of a larger portfolio.

Macro Trend Insights, however, is written for a more casual audience, freely available to anyone browsing InvestorPlace.com. While it reflects my basic investment philosophy and strategy, it is less comprehensive and customized. There are no in-depth monthly issues, model portfolios, or promises of follow-up on stocks and funds I cover.

Q How much money do I need to follow the Macro Trend Investor strategy?

A If you’re using a low cost Internet broker, someone like Interactive Brokers, Scottrade, or Ameritrade, commissions are low enough now to where you really can implement the full portfolio with a very modest amount of money. I would say with as little as $20,000 to $30,000 you could implement what we’re doing in the portfolio, buying every stock without commissions becoming problematic.

However, I’m not suggesting you have to do that. If your portfolio is smaller than that and you do have to pick and choose, I would say this: diversify across strategy. So don’t buy only emerging market stocks, or only energy stocks, or only income stocks—spread your bets across the different strategies we’re pursuing.

Q How do you protect against unexpected downside in the portfolio?

AWe use stop losses and trailing stops on all of our positions, and I regularly update these stop losses to keep our risk in check.

In some cases, we can even go short. Now, I have not been very active recommending shorts over the last couple years. Why? Because we’ve had a raging bull market. It hasn’t made sense to play the short side. That said, we certainly will when conditions warrant.

Q How do you use macro trends to find investment opportunities?

A See Using Macro Trends to Find Investment Opportunities for a thorough answer to this question.

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