I grew up as a fan of the space program. When Sputnik was launched, I was in awe. Late at night, I’d watch for the moving star and listen on the shortwave radio for the “beep, beep” as it passed overhead. I started watching launches at a time when it was likely that the result would be a dud and continued watching them until the U.S. space program led the world.

The race to the moon (begun in 1960 under President Eisenhower) was the best of times. The Mercury, Gemini, and finally Apollo programs delivered excitement, drama, and pride of being an American.

This weekend, we celebrated the landing on the moon 50 years ago. Man first stepped on the moon that day in late July, and by the time Apollo was done 12 men had walked (and some even drove) upon the moon’s surface.

When the race to the moon started, most of us fans thought that the voyage would involve a single rocket-powered vehicle lifting off from a launch pad on Earth and then landing on the moon. We imagined it would be something like the SpaceX rockets today: take off and touch down, all by a single rocket.

According to a NASA monograph, early on in the Apollo program, this “direct ascent” approach was the leading contender for the methodology to get us to the moon. But as the program developed, engineers learned that that approach would not only make it harder but also make it unlikely that President Kennedy’s end-of-the-decade goal would be met.

By 1962, the lunar-orbit rendezvous method was chosen instead. This approach dictated that there would be three different space vehicles to accomplish the goal of being first to the moon.

You needed the launch vehicle (and the amazing Saturn V—the most powerful rocket ever—proved more than sufficient), the Service and Command Module (SCM) (which covered the distance from Earth to the moon while being capable of circling both) and the Lunar Exploration Module (LEM) (which took the astronauts down to the lunar surface and back to the SCM).

Engineers discovered that to deal with the harsh surroundings of space, they needed to use different vehicles for different environments. A one-size-fits-all solution would not work for going forth into the unknowns of space.

Portfolios built to face the unknown

Although nowhere near the grand scope of the space program, each time we launch a client’s portfolio we realize that it, too, is taking off into the unknown. To be successful, it needs to be able to withstand a future containing the challenges of many different market environments.

To do this, we discovered, like the Apollo engineers, that different vehicles must be present in the portfolios to reach our goal. No single strategy can fully prepare us for the unexpected.

We have learned that, like the Saturn, you need a strong core strategy to put your goal in reach. While the Saturn made it possible for astronauts to reach their twin goal of escaping the gravity of Earth and reaching space, the core portion of a portfolio also seeks to attain two goals: capturing a reasonable amount of the return from the asset classes available and providing risk management.

Many try to obtain risk management simply with diversification among asset classes. At Flexible Plan, our QFC Multi-Strategy Core (which launches August 1) and QFC Fusion 2.0 (a low-cost version of Fusion that also launches in August) solutions use more tools to build five suitability-based core portfolios for our clients. In addition to asset-class diversification, we use hedging, leverage, and dynamic (not passive) allocations among multiple asset classes and actively managed strategies to deliver additional levels of risk management.

New turnkey, dynamically risk-managed solutions

On August 1, we will also be debuting four new QFC Multi-Strategy Explore solutions. Just as Apollo needed the Service and Command Module and the Lunar Exploration Module to finish the job of reaching the moon, explore portfolios seek to deliver different answers for different environments to complement the core portfolio. The QFC Multi-Strategy Explore solutions complete a portfolio by each delivering solutions for different types of financial markets and client goals.

Like the QFC Multi-Strategy Core solution, each of the QFC Multi-Strategy Explore solutions is a Quantified Fee Credit (QFC) strategy, meaning they use only our subadvised Quantified Funds. By doing so, they can deliver advisory fee credits to lower the cost of professional investment management.

Both the QFC Multi-Strategy Core and the QFC Multi-Strategy Explore solutions allocate among multiple dynamic risk-management strategies. We do this to meet the dual goals of risk reduction and the delivery of returns compatible with different client goals and changing financial markets.

Both turnkey multi-strategy solutions allow Flexible Plan to relieve clients and their advisers of the task of selecting which and how much of each explore strategy to use. The difficult job of choosing to use new strategies as they are developed and deciding to drop old strategies that are underperforming shifts to us.

When the Saturn V rocket blasted off the launch pad at Cape Kennedy, it carried with it all three vehicles of the Apollo program. This is like our QFC Fusion 2.0 service. It carries both core and explore strategies. The new multi-strategy offerings allow advisers and their clients to choose the amount of core to employ (we recommend at least 65%) and what portion of the portfolio to allocate to the explore component.

In choosing the explore portion, you can choose one to four of the strategies and allocate as you choose among them. We have preserved maximum flexibility while diversifying the strategies in each Multi-Strategy Explore option.

This last point is important. In the past, investors would choose single strategies for the explore portion of their portfolios, which, in effect, places all of their eggs in one basket. And if a strategy stopped performing or the market environment changed, they could be slow to change the strategy. With the new multi-strategy solutions, we use multiple strategies in each portfolio, and we take on the burden of picking the right strategies to use in any given market environment.

Three levels of risk management

When building a spacecraft, engineers have learned to have many redundant systems in case any important function onboard fails. For example, the LEM turned out not only to be an excellent lunar landing craft, but it also ended up being used as a “lifeboat” to save the three astronauts of Apollo 13.

Similarly, our multi-strategy offerings are designed with the safety of redundancy in mind. They deliver three levels of risk management:

  1. The dynamic risk management employed within the funds used in each strategy.
  2. The active management between the funds of the strategies themselves.
  3. The dynamic allocation employed among the strategies by the multi-strategy offerings themselves.


In 1982, George Low, manager of the Apollo Spacecraft Program Office, wrote, referencing aerospace engineer John Houbolt, “that had the Lunar Orbit Rendezvous Mode (LOR) not been chosen, Apollo would not have succeeded.” John Houbolt had been the proponent of the LOR multi-vehicle methodology when it was a minority opinion in Congress and at NASA. By sheer force of persuasion, he made it happen.

Sitting in the crowded mission control room right after Neil Armstrong spoke the immortal words “The Eagle has landed,” NASA’s master rocketeer Wernher von Braun found John Houbolt’s eye among all of the others. He gave him the OK sign and said to him simply, “John, it worked beautifully.”

One can only hope that our next lunar program, the Artemis program (in Greek mythology, Artemis is the twin sister of Apollo), will find equally innovative ways of accomplishing its moon mission. Whether it is using the lunar-orbit rendezvous method or some other approach, I’m sure that, like our multi-strategy solutions, it will involve multiple modules to meet the demands of different environments in an uncertain future.

Market update

Stocks rocketed to a new high on low volume last Monday (July 15), but then floated back to Earth like a command module on the end of a canopy of parachutes. For the week, the Dow Jones Industrial Average lost 0.65%, the S&P 500 Index fell 1.23%, the NASDAQ Composite declined 1.18%, and the Russell 2000 small-capitalization index tumbled 1.41%.

Bonds gained ground, and gold continued its breakout move to over $1,450 by midweek before settling at $1,425.37 per ounce on Friday. The week’s high was the highest level for the yellow metal since 2013. It reflects the beginning signs of inflationary pressures and the anticipation of an accommodative Federal Reserve. The surge in gold prices has left it somewhat overbought.

Still, Ray Dalio, the billionaire founder of the world’s largest hedge fund, wrote last week that he believes that “it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio.” Most investors are underweighted in gold, “meaning that if they just wanted to have a better-balanced portfolio to reduce risk, they would have more of this sort of asset.”

Our All-Terrain investors are not to be counted in this underweighted group. Each of the five suitability-based All-Terrain portfolios has had substantial investments in gold during the present run-up in its price.

Interest rates resumed their relentless move lower, which had been interrupted by a post-July-Fourth yield surge. Comments from dovish Federal Reserve Board members last week sent the bond market even higher, although it still is below it holiday peak.

Comments from the Fed definitely increased the bond market’s hunger for a rate cut. Not only did the odds of a rate cut increase, but futures markets suggest that the odds for a 50-basis-point cut are now three times higher than for the usual 25-basis-point slice that has historically initiated a change in the Fed’s rate-setting posture.

We have been championing a reversal in the Fed’s position in recognition of the economic slowdown that has been playing out since late last year. So, it is surprising that just as we begin to get better news on the economy, the Federal Reserve looks like it is going to finally lower rates.

Last week saw a wide array of better-than-expected economic reports. The Philadelphia Federal Index and the Empire State Manufacturing Index, the retail sales report, and even the homebuilding sentiment reports surprised to the upside. While the positive reports were not enough to pull the Citi Economic Surprise Index out of negative territory, it has been rallying for some months now.

Earnings reports have also been full of positive surprises. By the end of last week, 70% of reporting companies had beaten analyst expectations on earnings. Less positive, however, was the beat rate on revenue growth, as it languished at the 56% level.

This week we will see most of the big tech firms’ reports. The question is, will they follow Microsoft’s blowout report or Netflix’s disappointment? The answer will probably set the table for the rest of second-quarter earnings-reporting season (and perhaps the stock market, as well).

Last week’s decline in stocks did help work off some of that market’s overbought nature. As a result, the market breadth as measured by the net number of advancing issues slid its way out of danger territory for most sectors.

Unfortunately, the overbought price measures remained on fire at week’s end for all of the sectors except Energy. In addition, with breadth being weaker than price, the stock indexes were primed to sell off again Monday (July 22), and they did.

Short-term indicators reacted to the recent weakness and are now mixed. We have a short-term sell on the more sensitive of the two, while the other is just keeping its head above water.

Our intermediate-term indicators and Market Regime indicators remain conducive to further stock market gains. As a result, our intermediate-term timing strategies remain heavily in equities.

I do believe these, like our shorter-term measures, require watchfulness in the near term as a number of studies suggest we are at a critical juncture. For example, while a reversal of the yield-curve inversion is encouraging, as I have pointed out before, its return to a positive mode has often been the true starting point for a recession. This was the case the last two times a recession occurred.

In addition, the sheer magnitude of the bull market this year (20% gain) leaves little room, historically, for further gains. The S&P chart suggests resistance, and the number of stocks above their 50-day moving average has just registered a sell signal, as it did at the beginning of May.

Finally, as we search back through the stock-market charts of yesteryear, 1998 sticks out as the one most closely resembling this year’s. That year was good for stocks but, beginning in July, a number of bad events took their toll on stocks, sending them into a swoon that lasted until early October.

With the August–September period also being a rough patch on our Political Seasonality Index (available post-login in our Solution Selector under the Domestic Tactical Equity category), it is especially important to be invested in dynamically risk-managed strategies in case any losses turn a mild correction into something more.

This is especially true of investors’ core portfolios. Traditional diversification measures normally prove adequate for corrections that are 20% or smaller, but if that downturn turns into a “super bear” (corrections of more than 20%), such measures have been inadequate.

Space has been called “the final frontier,” but the financial markets also offer unlimited opportunities and frightening challenges—and, of course, the markets are a lot closer at hand.

All the best,



In 2012, pictures were taken robotically from lunar orbit of the Tranquility base site of Apollo 11. Amazingly, you can still see the footprint paths of Armstrong and Aldrin exploring the lunar surface, as well as the LEM left behind.

Wikipedia recounts,

“In 2009, NASA’s robotic Lunar Reconnaissance Orbiter, while orbiting 50 kilometers (31 mi) above the Moon, began photographing the remnants of the Apollo program left on the lunar surface, and photographed each site where crewed Apollo flights landed. All of the U.S. flags left on the Moon during the Apollo missions were found to still be standing, with the exception of the one left during the Apollo 11 mission, which was blown over during that mission’s lift-off from the lunar surface and return to the mission Command Module in lunar orbit. …


“In a November 16, 2009, editorial, The New York Times opined:


“‘[T]here’s something terribly wistful about these photographs of the Apollo landing sites. … Perhaps the wistfulness is caused by the sense of simple grandeur in those Apollo missions. Perhaps, too, it’s a reminder of the risk we all felt after the Eagle had landed—the possibility that it might be unable to lift off again and the astronauts would be stranded on the Moon. But it may also be that a photograph like this one is as close as we’re able to come to looking directly back into the human past. …


“‘There the [Apollo 11] lunar module sits, parked just where it landed 40 years ago, as if it still really were 40 years ago and all the time since merely imaginary.’”

Jerry C. Wagner is Founder and President of Flexible Plan Investments, Ltd. Formerly a tax and securities attorney, Mr. Wagner recognized early on that technology and hedge fund techniques could be applied to help individuals successfully invest, while managing their downside risk. After spending time pioneering new techniques in market analysis, designing quantitative methodologies, and managing investment portfolios, Mr. Wagner founded Flexible Plan Investments in February 1981.

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