Objective research and reviews to aid investing decisions
 Looking for information on debt consolidation loans? Want to know more about reverse mortgages? |
A reader suggested that we add Jim Rohrbach, president of Investment Models, Inc., to our graded gurus list. According to his web site, Mr. Rohrbach's stock market timing service (based on the proprietary Rohrbach Index, or RIX) is "designed for timing retirement no-load mutual funds and individual stocks by avoiding stock market crashes and helping investors keep their IRA in bull markets and out of bear markets using technical analysis timing models." He advises that: "The stock market can be timed!!! Don't believe the 'experts' who tell you that it can't be done." We cannot locate a public archive of Jim Rohrbach's past stock market commentary, so we cannot evaluate him in the same way we have evaluated many other gurus. Instead, we examine his self-reported recent and long-term trading performance records, with conclusions as follows:
We focus on Mr. Rohrbach's recent self-report, because it provides insight regarding exact timing.
The following chart shows Jim Rohrbach's buy and sell signals over the period 3/24/03-12/31/06. This sample of 8.5 round trips is not large enough for confident statistical inference. It does appear that these signals capture the large upward moves in the stock market. The efficacy of trading, however, is questionable since buys occur at higher prices than the preceding sells half the time (four out of eight). Note that all paired buy-sell trades generate short-term capital gains. This trading frequency is apparently consistent with that of past years.
The next chart compares returns over the period 3/24/03-12/31/06 for various alternative investments, including the RIX-guided UltraBull ProFund (ULPIX) that Mr. Rohrbach chooses for representation of his results, as follows:
The returns for the RIX-timed and buy-and-hold ULPIX are comparable over the past few years. Because the market has mostly been rising over the sample period, the leveraged ULPIX outperforms the unleveraged SPY. ULPIX only slightly outperforms the unleveraged IWM. Note that the RIX-timed ULPIX consistently generates short-term capital gains, so it would have substantially underperformed buy-and-hold ULPIX and IWM in a taxable account.
The self-reported long-term performance suggests that RIX timing increases raw returns over buy-and-hold when results include periods of sustained market decline. Depending on the size of the account, the extra return may cover trading costs and fees due to Investment Models, Inc. of $395 per year. If the fund is held in an untaxed retirement account (as intended by Mr. Rohrbach), there may be an advantage to using his service.
Note that a self-reporting offeror may choose start and stop dates for performance calculations that capture unusually good performance. We cannot verify whether that is the case for Mr. Rohrbach's data.
In summary, Jim Rohrbach's timing service may offer an advantage to investors using sizeable tax-free accounts, but buy-and-hold probably outperforms RIX timing for taxable investing.
See Jim Rohrbach's reactions to the original review, along with our comments.
See Guru Grades for a snapshot of the accuracies of various experts in predicting the behavior of the U.S. stock market, including links to detailed individual evaluations. Since we could not do a comparable analysis for Mr. Rohrbach, he is not included in the snapshot.
