MoniResearch Newsletter Feature Article July/August 2000

Marathon Investment Programs

Fritz Harnsberger’s background has some parallels with that of Bill Keyer, most notably a long and successful career in a field unrelated to money management, followed by a transition to the field because of the influence of a family member .

Harnsberger Graduated with a B. S. degree in Mechanical Engineering from Cal Poly Pomona in 1975. There followed a 17 year- career doing research and development for the medical device industry. His most notable achievement was the development of an artificial lung used during open — heart surgery. Harnsberger proudly points out: "We sold $80 million worth of them."

Harnsberger’s father was a stockbroker and consequently Harnsberger had been "on the sidelines" of that field all his life and considered it a hobby. In 1992 he was approached by a colleague with marketing talents seeking to start a money management business but lacking the quantitative skills needed to develop a timing model. Harnsberger had those skills and knowledge and so partnership was born and continued until 1997. During this time returns averaged 21-22% per year.

But in 1997, the partner decided to move into the hedge fund business while Harnsberger preferred to manage money for individuals using mutual funds. The parting of the ways was amicable and, in fact, Harnsberger continues to run money for his former partner’s hedge fund.

Harnsberger’s specialty has always been sector fund rotation. He feels that this offers the best opportunity for generating consistent returns and he emphasizes this characteristic to clients. Gil Blake, one of the money managers profiled in the book " The New Market Wizards" is known as ‘Mr. Consistency,’ and Harnsberger notes: " When I read the book I felt that we could have been brothers."

I inquired into his methodology. As with most sector rotators, his methodology is based on relative strength and price action, seeking to identify the particular sector(s) that are advancing the fastest. Since May 1999 Harnsberger has been trading the Rydex sector funds. One interesting wrinkle is that he uses a spreadsheet to monitor the price action of the stocks comprising each Rydex sector fund throughout the day. Therefore, at any moment in time he knows the net asset value (NAV) of each of the Rydex sector funds even though Rydex does not publish this value until after the market close. This is an integral part of his decision-making process because, statistically 40% of the model’s profit is captured by the next day’s price action.

Harnsberger’s email address is marathon@silcom.com.

MoniResearch Newletter July/August 2000 800-615-6664