1st Quarter Market Summary 2014

Print Friendly Version - First Quarter Market Summary Madness of Crowds EXECUTIVE SUMMARY • Overview of Historical Bubbles • Significant amount of IPO activity • Slight increase in stock and bond prices for the first quarter • New Leadership of the Fed Reserve “If history repeats itself, and the unexpected always happens, how incapable must Man be of learning from experience.”  -George Bernard Shaw During the holiday break I re-read portions of the book “EXTRAORDINARY POPULAR DELUSIONS AND THE MADNESS OF CROWDS.” By its title, you might think it was written during America’s most dramatic market disaster of the 1930’s, or more recently in the early 2000s. Actually, it was written… Read more »

4th Quarter Market Summary 2013

Print Friendly Version - Fourth Quarter Market Summary The Price is Right In the 70s Bob Barker was the host of a popular game show called, The Price is Right. Contestants would compete to guess the correct price of the item displayed. I watched this show as a youngster, and it dawned on me recently that contestants on the game show and investors share a noteworthy commonality. The contestant succeeded by appraising the closest value of an item, the contestant that had the most accurate price estimate received an opportunity to win the prize. Contestants with better knowledge of prices had a better chance of winning than those who didn’t. Investors succeed by accurately assessing the… Read more »

3rd Quarter Market Summary 2013

Print Friendly Version – Third Quarter Commentary US Equity markets posted a solid quarter, as illustrated by the S&P 500 generating a 5% return, while the Dow Jones Industrial Average returned 2%. For the year, US equities are up over 19% as measured by the S&P 500, while corporate earnings over that time period are up less than 4%. A rising stock market without a corresponding level of increased earnings is not sustainable. We remain concerned about the general return opportunities in the stock market over the next 7-10 years. We believe that history has shown the most important determinant of future returns is the relative price at which you… Read more »

2nd Quarter Market Summary 2013

Tapering or Tampering In mid June Federal Reserve Chairman Ben Bernanke signaled to the markets that the Federal Reserve (Fed) would consider tapering bond purchases sooner rather than later. Originally, the markets believed that bond purchasing by the Fed (known as Quantative Easing-QE) would continue into 2014 uninterrupted. (The objective of QE is to reduce interest rates by reducing the available supply of bonds that can be purchased by the private sector.) The Chairman was trying to alert the markets that as the economy improved the Fed would start withdrawing from purchasing bonds. Currently, the Fed has been purchasing up to $80 billion of treasury securities and mortgages every month…. Read more »

1st Quarter Market Summary 2013

Déjà Vu… Again? The first quarter of 2013 was a welcome surprise. Equity returns as measured by the S&P 500 and the S&P Dividend Index were 10-14% respectively, while international markets as measured by the MSCI World Index were below 7%. The next logical question is, “What’s next?”  Before we get to that question, let’s give you a short quiz. Knowing that the stock market as measured by the S&P 500 and many other indices has averaged  8-12% over the last 100 years, what do you think returns on stocks have averaged since 12/31/99? What do you think returns were for the S&P 500 (dividends reinvested) from 12/31/99 to 12/31/2012?… Read more »

4th Quarter Market Summary 2012

A Smooth Sea Never Made A Skillful Mariner I don’t know about you, but occasionally I read a quote that leaves me with a feeling of, “Hmm. That sums it up.” The quote above is one of them. The 2008 economic and market decline certainly provided those of us in the financial world a chance to become more skilled sailors. The question is did we blow it off as a 1 in 100 year event or did we look for clues that help us foresee similar future events. In other words, are we researching methods to make our ship safer for rougher seas or did we continue using the same… Read more »

2nd Quarter Market Summary 2012

What Really Matters When It Comes to Investing? I selected this heading for this quarter’s investment summary because quite often I’m asked by clients “What is going to happen to the economy?” Recently, I’ve returned the question with a question. “Why do you ask?” The general reply with an occasional look of surprise is “Doesn’t the economy have something to do with my investments?” And the answer is yes; the economy affects your portfolio return. However, this leads to the next question: “Do we need to be able to forecast macro events to become excellent investors and is it possible to forecast the economy in the near term?” In my… Read more »

4th Quarter Market Summary 2011

What’s Normal? Bill Gross, the famous bond manager for PIMCO, coined the term “The New Normal” after the 2008 market decline. His theory was economic growth would be less than the historical average for the foreseeable future. This was a consequence of the housing glut and ensuing financial crisis followed by the high debt levels of national governments. There is historical evidence that when national debt climbs higher than 80-90% of GDP (gross domestic product), economic growth slows for up to 7-10 years, or for a prolonged period of time. (Note: The US debt ratio now averages 80% and Europe’s stands at 88%.) Gross also felt that the Federal Reserve… Read more »

3rd Quarter Market Summary 2011

Playing Defensive The irony of financial reporting is that no sooner than reports are generated the markets move in another direction. This was certainly the case for the current reporting cycle. The 3rd quarter decline of global markets ranged from 13-20%. US large cap stocks held up better than US small-mid and global stocks. The combined concerns of global debt issues in the US and Europe and the concern the US economy could fall into another recession generated fear as investors fled stocks and went into bonds. However, as bad as the 3Q was, October has been a pleasant surprise. A good portion of the 3rd quarter decline was erased… Read more »

2nd Quarter Market Summary 2011

Investment Approach: The constant process of analyzing return and risk “If I only had an hour to chop down a tree, I would spend the first 45 minutes sharpening my axe” -President Abe Lincoln It has been a few months since we’ve publicly shared our thoughts on our portfolio management approach. We’ve been quite busy with our research as we follow Greek bailouts, US Debt Ceiling issues, Market Valuations and the current state of the economy. You’ve probably noticed that we’ve been making allocation changes in your accounts. Those changes are like Lincoln’s 15 minutes chopping the tree. I’d like to share some of our thoughts about the work we’re… Read more »