Jeff Miller Interview

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Jeff Miller

This month we feature Jeff Miller who is the President/CEO of NewArc Investments; a registered investment adviser based out of Naperville, Illinois.

  1. Describe your current role and what you do?
    [Jeff] I am an investment manager, working primarily with individual accounts. We have a small team, so we all play various roles. I am in charge of overall strategy, most stock analysis, business development, and more. I do quite a bit of writing. This helps me to develop and focus my investment themes and increases our overall visibility.

  2. How did you get into the finance game?
    [Jeff] During my first career as a college professor I had a standing offer from two different options trading firms in Chicago -- friends and former students who had done well and thought that my quant methods would be useful. My hope had been to combine teaching with public service in Wisconsin. At some point, the policymaking there in taxing and spending took a turn away from objective analysis. I wanted to use data to improve results, so it was time for a change.

  3. Describe your trading/investment strategies and why it works for you?
    [Jeff] We currently have five different investment strategies with a range of risk/reward profiles. Our bond ladder is much better than a bond mutual fund. Our Felix ETF model trades pretty frequently, and can get out of the market or short if needed. We have two long only stock programs. Our Great Stocks method emphasizes value on an adjusted P/E basis and changes regularly according to my ideas about the best current themes. The process goes from theme to sector to stocks, with strict screening. Our new Aggressive Stock Program includes ideas that have high risk and even higher reward. You would not bet the ranch on any one of them, but a basket makes sense. Finally, our Enhanced Yield program targets an annual 9% return with much lower risk than stocks. We do this by choosing relatively safe dividend paying stocks and writing near-term calls against the positions. This has beaten the target for two years, mostly from the call sales. It does not rely on a climbing market. This is a good anchor for most portfolios.

  4. Who are some of the people you admire or look up to in the investment arena?
    [Jeff] Warren Buffett would be #1. I am generally more impressed by those who have sound, long-term judgment than those who constantly pitch their own products -- especially the crowd that does only fixed income.

  5. What best piece of advice would you give the Scutify community?
    [Jeff] Try to remain open-minded and receptive to different approaches. No pundit knows your personal situation, so beware of strident advice -- especially scare tactics. Do not treat your investing as a poker game, trying to time the market with all-in and all-out moves.

  6. What is your #1 investment book that you swear by and why?
    [Jeff] I like The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren Buffett and Lawrence Cunningham, a collection of his letters to shareholders. I also like Jeremy Siegel's Stocks for the Long Run. These books are more helpful for most people than technical works on stock-picking or systems.

  7. Most memorable moment in your investing/trading career?
    [Jeff] There have been many key moments where standard methods and rules might not apply. You cannot always depend upon your models or on a few past examples. If I had to pick one, it would be the 1998 Long Term Capital Management crisis. There was a lot of counter-party risk and no one knew what would happen. The Fed rounded up the big Street banks and twisted arms to buy out the LTCM positions. Jimmy Cayne refused to go along for his "share" which may have affected attitudes toward him later.

    This was much different from the recent financial crisis. Here those who made mistakes -- including Nobel prize-winning experts -- lost their money. The bailout was privately funded and eventually profitable.

    Jim Cramer incorrectly predicted a market crash, saying it was like 1987. My own models said to sell everything. If I had followed this advice, I would have been out of business, selling at the bottom and starting over with new clients. Instead, I reduced position sizes to control risk, and I captured the very significant rebound with most of my holdings.
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