8/31/10 Chlebina Cam: Integrated Tiger Strategy

As many of you have noticed, the market has become a treacherous landscape for long-term investors, and in our opinion the fundamentals have little to do with how stocks are valued. One measure of market risk is the VIX volatility index, which is often referred to as the Investor Fear Gauge. The VIX index spiked immediately after the Uptick rule was removed in July 2007, and has remained at elevated levels ever since. This heightened and unpredictable volatility can make long-term investing very challenging.
So what has happened to cause such a disorderly market? Well, we have identified two primary culprits for the increase in market volatility. The first is a Laissez-faire Regulatory mindset. This is evidenced by the removal of Glass Steagall, the removal of the Uptick Rule, and the general lack of regulatory enforcement. The second culprit is the recent market evolution into a free-for-all with the explosive growth of high frequency trading, dark pools, and opaque derivative venues, among other things.
It is important to recognize the forces driving the market in order to develop an effective investment process. At Chlebina Capital, we have accepted that the market dynamic has changed, and have developed a strategy that is designed to potentially take advantage of the market volatility.
Historically, we have focused on a proprietary investment strategy known as the “Tiger Strategy,” which is an aggressive industry based approach. While we believe that this is still a very effective investment strategy, the increased market volatility can cause a rollercoaster ride that is difficult to stomach. That is why we developed the “Integrated Tiger Strategy.”
The Integrated Tiger Strategy is comprised of five stand-alone strategies: The Tiger , Bengal , Fusion , Balanced , and Foundation Strategies. The key to this approach is the strategic movement of funds amongst the diverse strategies at opportune moments. During downturns, when opportunities are present, we will move funds from the Fusion, Balanced, and/or Foundation Strategies, which are designed with the intent of low volatility, into the Tiger or Bengal Strategies to take advantage of its heightened volatility. When we meet our targets in the Tiger or Bengal Strategies, we will harvest gains and redeploy funds back into the Fusion, Balanced, and/or Foundation Strategies to limit potential downside risk. When we compare the Integrated Tiger Strategy to the original Tiger Strategy, it is designed to incur less volatility while still generating greater possible returns.  
The Integrated Tiger Strategy was designed to take advantage of the opportunities that present themselves in an unpredictable market. While we cannot control the movement of the market, we can potentially leverage the volatility to our advantage.
Larry Chlebina
Chlebina Capital Management, LLC
Securities offered through Securities Service Network, Inc., Member FINRA/ SIPC . Fee-based advisory services are offered through Chlebina Capital Management, LLC., a registered investment advisor.