Narwhal Capital Management

It is a common Wall Street saying that bull markets climb a wall of worry.

If everyone is bearish, pessimistic, and they are out of stocks and/or at reduced tactical allocations relative to stocks due to all the bad news and their worries, who is left to sell?

Perhaps this is the reason why bull markets climb a wall of worry.

The Iraq War is over/ending.  Obama says all troops to be home for the holidays.  Let me say to all the service members, “Thank you for your sacrifice.  We couldn’t be what we are today without men and women like you.”

http://news.yahoo.com/iraq-war-over-us-troops-coming-home-obama-212231415.html

I always think it is fascinating to analyze the market and then watch the TV and listen to non-financial people to see what they are talking about.

It seems most people these days are talking about Europe, politics, and Occupy Wall Street.  But what is being over-looked?  Perhaps:

The fact that bank debt is at an all-time low ( http://www.cnbc.com/id/45466176 ).

The fact that consumer confidence just jumped the most in eight years (http://www.bloomberg.com/news/2011-11-29/u-s-consumer-confidence-rises-by-most-since-april-03-amid-holiday-season.html).

The fact S&P 500 earnings are at an all-time high (http://www.bloomberg.com/news/2011-11-08/u-s-stocks-may-surge-to-catch-up-with-profits-chart-of-the-day.html).

For sure, we need to watch Europe and we need to be aware of all the risks.  But we also need to be aware that some pretty darn good things are taking shape as well.  Does this make sell-offs buying opportunities?  Hmmm…

Valuations on the stock market look pretty solid, especially in light of the other available investment options.  Particularly bonds.

Just like the Bill Murray movie “Groundhog Day”, we seem to be living the same day/cycle over and over and over again.

I mentioned the market was in a trading range on 8/12/2011…we are still stuck in that range.  Bouncing off the low and falling from the high.

I mentioned on 9/1/2011 that earnings were good and should be good for quite some time, but that the real issue was a crisis on the political front that centered on lack of leadership.  Well, earnings this earnings season have been great.  BUT, the market is set to sell off this morning (after a great run up in October) because the political leaders in the EU are backing out of a deal they struck just a few days ago.

This is exactly what I mean by the political crisis.  Business leaders and market participants need a firm framework upon which they can run their operations.  This here today, gone tomorrow concerning political plans/ideas is not the way to set down this framework.  Until this ceases, strap in for volatile markets and trade/invest appropriately.

As I noted in my last post (and the 8/2 and 8/12 posts), the actions being taken by the government leaders have not resulted in a boost to confidence in the business community and/or investor community.  We’ve got S&P 500 earnings at SKY HIGH levels, but very low P/E ratios.  Why?  I believe the answer is simple: lack of confidence in leadership.

And now it appears that in addition to Geithner, a noted banking analyst seems to share my sentiments (http://www.cnbc.com/id/44640346).

And this doesn’t even touch on the latest round of chicken Congress is playing http://news.yahoo.com/spending-congress-cant-agree-easy-stuff-073155630.html .

We’ve got the earnings, now we just need the leadership.

A few posts ago I mentioned that we are in the middle of a political crisis rather than a valuation crisis or a banking crisis, like we saw in the late 1990s and 2008, respectively.

 Apparently, someone agrees with me.

 http://www.cnbc.com/id/44515524

I’ve known this fact for quite some time, but on my ride into work today it occurred to me that probably very few people realize this.

According to Standard and Poor’s own data, the S&P 500’s trailing 12 months earnings are $85.25.  Never in history have as reported earnings been higher.

Staggering to think about…at least in my mind.  All this talk about how awful the economy is, how terrible the business environment is…yeah, if you are an individual and/or consumer!!  If you are a corporation your balance sheet is probably flush, your staff is lean, your margins are most likely high, and your earnings (per the S&P data) have never been higher.

Oh yeah…and if you are a healthy company with a strong balance sheet, you can borrow money for next to nothing!

I guess, it ain’t such a bad time to be a CEO right now.

As I am sure you all know, the market has been crazy lately.  However, recently the S&P 500 has bounced off of the 1,120 level twice.  Market technicians would call this a double bottom.  Increasingly interesting, this level was the previous top of the June/July trading range.  I’ve noticed that as the market moves higher previous tops can end up providing nice levels of support for the market’s fluctuations.  Perhaps we are putting in a new trading range with the 1,120 being the floor and 1,200 to 1,250 being the top.  I am not a technician, but I’ll use any tool I can to get a handle on the market’s moves. 

As I said, I am not a technician (that is, I don’t read charts in an attempt to predict what the market will do next).  Rather I am a believer in fundamental analysis.  However, I do believe markets will travel in trends until new information is revealed and makes the next trend.  For example, I could see the market pattern emerging that keeps the price on the S&P 500 index within the band I just mentioned (1,120 to 1,200-ish), a techinician would call this the trading range.  The difference is that I believe that when the fundamental data emerges it will  push the market out of that range either up or down and make a new techinical pattern.  In essence, I try to perform fundamental analysis in order to see that “techincal breakout” before the techincians do and, therefore, take advantage of their self-fulfilling trading habits.

Perhaps that previous paragraph doesn’t make sense to everyone…but I hope the next one does.

In the early 2000’s we had an issue with over-valuation of capital market assets.  The “crisis” that caused that bear market was simply irrational exhuberance within the investment community.  The crisis that hit the market in 2008 was a real crisis within our financial system.  I truly believe we stared a complete financial collapse right in the face.  This new “crisis”, in my opinion, is one centered on our political system and the egos of our politicians.  Valuations don’t appear to be extreme one way or the other, so it isn’t the 2000’s all over again.  And it doesn’t seem like our financial system is on the brink of collapse (of course, time will tell on that one…but I don’t see it at this time).  But we simply can’t seem to get anything done in Washington.  It is deplorable to me.  And this is the issue with the market and perhaps it affects confidence among market movers and players.

Well, it appears that in a few hours we will have our debt deal.  I supposed if you’d asked me a month ago if this would be a positive or a negative for the market, I’d have said without question, “positive”.  But the way in which the whole thing was handled, frankly, makes me sick.

Multiple politicians throwing around the idea of a U.S. default on its debt obligations, the President saying our political system isn’t “AAA”, and the Speaker of the House storming out of a meeting, and seemingly, pouting for a day or two.  What in the world are these people doing?!?!?

I believe the credibility of our nation has taken a HUGE hit on this.  Not the fact the we  raised the debt limit mind you, but the behavior of our elected officials.  We are net debtors to foreign investors.  Therefore, we need capital from them in order to function.  But we publicily tossed around the idea of defaulting on our obligations.  Oh yeah…we have a budget deficit and we need to borrow more money quickly. 

I suppose this doesn’t change the investment strategies all that much as our proprietary models have been telling us to take money off the table for a number of months now…and we have.  But being an American, this simply frustrates me. 

However being a professional investor charged with managing money, I can’t let my nationality and/or emotions cloud my judgement.  Decisions need to be made, and will be made, with prudence, logic, and rationality tied in with each clients long-term objectives.  But c’mon guys (and gals) running our country, put your ego aside and run this country well.  We need you now!!!

Well, we had the market sell off prior to the Greek debt can getting kicked down the road.  And once it was offically kicked, the market rallied.  It looks like the market is going to sell off prior to the US debt ceiling debates coming to a conclusion.  Again, could this set up a market rally if the ceiling is raised?  It is something to think about for sure.

Also, bear in mind it is becoming earnings season.  I certainly hope companies can make boat loads of money with lean staffs and extremely low interest rates.

The market seems to be gyrating with the news of the day regarding Greece and, to a lesser extent, the United States budget fight.  These issues have served as an over-hang on the market and have been a big influence on the markets recent dip.  But ponder this…If the Greek situation gets a short-term fix and then the United States irons out its budget issues, what happens to the stock market over the short-term?

With the news of the economic recovery slowing down, it appears that the hot money that was flowing into commodities and economically sensitive stocks is now flowing out of those sectors.  Investments in these sectors have taken it on the chin, while yields on bonds have continued to fall as money appears to be flowing towards these safer investments and their prices are rising.  This is the classic flight to saftey trade, or the “risk off” trade as the experts de jour seem to call it these days. 

To me this is classic short-term profiteering moving the market.  These quick fix guys pushed prices up too high during the recent “risk on” rally and now we need to keep our eyes open for them giving us the chance to buy quality long-term investments at reasonable prices as their “risk off” trade will most likely take things to far the other way.

What would we long-term guys do without these short-term traders opening so many doors for us?

Commodities have been the “hot dot” going back to the 2005-ish time frame.  Silver had an epic run just a few weeks ago…up and then down.  It seems the “fast money” was/is playing silver and other commodities.  However, long-term trends appear to be unstoppable for these precious materials.  Perhaps it makes sense to accumulate these things on weakness?

Wednesday April 27th is the normal FOMC announcement concerning their interest rate decision.  HOWEVER, this time the Fed Chairman Ben Bernanke will be holding a press conference after the announcement is made.  This has never been done before and all signs point to this as a precedent going forward on future Fed Rate Decision Days.  What does he have to say?  Why does he feel this is important to do?  Historic stuff!!

I saw this posted on CNBC today and it is spot on.   http://www.cnbc.com/id/42270774

 The tried and true mathematical rule that every portfolio manager (and investor) needs to realize in order to succeed over the long term is that losses are more painful than gains are beneficial. 

BUT…as this article highlights many people get that backwards.  Mixing this rule up and chasing gains with little regard for risk control can devastate a portfolio’s long-term return potential.  Note the NASDAQ in the context of where it was in 1999 and where it is now.  Note the current struggles with the real estate market, especially in places like Vegas and Florida.

Do you think it is any mystery why Warren Buffet jokes around (kind of) that he has two investment rules?  #1–Don’t lose money.  #2–Don’t forget rule #1.

As I mentioned in the interview with The Street.com the banks have started increasing their dividends, this should pave the way for more lending and a more robust economy.  However, there are a couple of things to bear in mind: 1) Earnings are no longer below trend and 2) Valuations are still a bit too high for a breakout bull market. 

With this in mind, we need to be aware of the potential for a pullback in the markets…BUT…with all the stimulus in the economy I would not be surprised in the least bit if earnings go well beyond trend to the upside.  This should have a two pronged effect.  #1–the market should go higher and #2–P/E’s should contract if earnings growth outpaces market growth.

If you’ve been reading our newsletter this is the same thing as the market riding the inflationary wave, which I’ve been talking about.  The trick is riding the wave and capturing as much upside as you can until the wave breaks.  Obviously, risk must be reduced the bigger and bigger the wave gets in order to protect portfolios from the break.

Despite pretty exciting news regarding the health of the U.S. economy, the stock market looks a little wobbly.  Today, the ADP report showed a gain of 217,000 jobs.  Yesterday there were reports of auto sales being up 20% and a key manufacturing index hit a 7 year high.  And throw in the fact a major investment bank stated on February 28th that the global recovery is “here to stay”.  Seems like pretty good news, right?  Then why is the market weak?

Obviously, we’ve got some global socio-economic issues taking place in Egypt and Libya.  But beyond that it is important to understand that all the actions taken by our government over the last few years have been aimed at stimulus, low rates, and easy money.  On the back of the inflationary wave, the S&P 500 has rallied and rallied hard.  Up darn near 100% from its low in March of 2009.  But what happens if the economy recovers enough to motivate the Fed and Treasury to take away the easy money punchbowl? 

Of course, only time will tell but our research suggests continued prudence is in order for the forseeable future.

The Univeristy of Michigan Consumer Senitment Indicator for February was released just a few minutes ago.  It is up to 75.1, which is well off of its recent low of 55.3 in November of 2008.  However, this is still way below the average reading for the index, 86.99.  In a nutshell, the mood of the US consumer is getting better, but is still below their historical average mood.

We follow the sentiment indicator as we feel the mood of the consumers has a relationship to how much investors are willing to pay up for stocks and this relationship should have an impact on P/E’s.

Of note, March of 2009 was the bottom of our recent market sell off and this occured one month after the Sentiment Indicator bottomed out.  If this market is due for a pullback, perhaps it will be when sentiment approaches its peak…and that just might be when it starts to approach its historical averages.

Simply something to watch and consider.

Citigroup announced earnings yesterday and disappointed The Street as the only made $1.3 billion for the quarter and results for fiscal year 2010 showed a profit of $10.6 billion.  On this news, the stock fell 6.4% yesterday.

Wells Fargo and Goldman announced today.  Wells Fargo made a record profit of $3.4 billion for the quarter, which matched The Streets estimates for the year.  While Goldman beat estimates and made $2.23 billion for the quarter.  Nevertheless, both stocks are currently selling off on the news with Wells Fargo down 1.39% and Goldman Sachs down 2.9%.

I find this fact interesting for one main reason.  It highlights that the extreme pessimism surrounding the bank stocks has faded away.  Looking back on the quarterly results over the last few years, banks, for the most part, have absolutely blown away The Streets earnings estimates.  Bottom line…The Street was too pessimistic.

This has set a precedent that if a bank doesn’t aboslutely annihaliate the expected number the stock will sell off.  Frankly, this doesn’t bother me too much.  If banks are making money that is a good sign for future dividend hikes and more robust lending programs and this should set the table for a more sustainable economic recovery.  If, in the meantime, these banks sell-off, maybe that opens the door to some value buying.  Time will tell on that one.

Regardless, these types of earnings announcement tell me there is more visibility regarding business activities (as the estimates and the actual numbers are fairly close) and this feels much more “normal” to me.

First off, Happy New Year!!  I hope your 2010 was great, but I hope your 2011 is even better.

Secondly, and more importantly, remember the news and trades driving the market prior to the 2008 financial meltdown?  Emerging markets were leading the day, specifically emerging markets that were fueled by commodity exports.  Have you seen the prices on commodities lately?  Are we back to the way it was before the crisis?  Are we back to normal? 

Probably not, but we are getting closer.  Banks need to lend more, but if I was a bank CEO I wouldn’t lend at a normal pace until my shareholders were allowed to receive a normal stream of dividends.  After all, management’s job is about enhancing shareholder value, right?

Just a few things to keep your eyes on.

I have just read a great report and seen an amazing chart.  Merrill Lynch on December 7th put out a RIC Report (Research Investment Committee) that reviewed 2010 and discussed predictions for 2011 and in that report they have a chart on the bottom of page 3 that really highlighted some incredible stuff.

They show exactly when QE1 started and when it ended and when QE2 started and how the market reacted to those stimulus/easing packages.  For their market proxy they used the equally weighted Valueline Index of US Stocks.  When QE1 started this index was right around 950ish.  When it ended about a year later the index was right around 2,600ish.  WOW!!!!  That is about an 173% upward move in just about one year. 

Now, when QE1 ended (according to Merrill Lynch) that same index contracted over 10% in just a few months.  Most likely due to this phenomena the Fed enacted QE2 and this index has popped to over 2,700 (about 10%)  in just a few months. 

To me this clearly illustrates the markets dependence on stimulus and liquidity, which undoubtedly form the foundation for an inflationary burst.  In fact, I talked about the potential plan of our National Leaders to try to inflate their way out of our economic quagmire in the last Quarterly Client Newsletter.  

If you have an interest in hearing more about my thoughts on this inflationary burst, contact me at mplumart@narwhalcapital.com to read my latest report, “Should we embrace inflation?”

As I mentioned in our last newsletter, this market is like a roller coaster.  Up on good news, down on bad news.  All happening so quickly it may make you sick!  Frankly, I am unsure if this trend will stop anytime soon.  As I type this, for the year the S&P 500 is up over 5% on a price basis.  Not too bad I suppose, but with all the price swings I’d bet most investors aren’t overly excited about this gain.  Like I said, they might be getting sick of this ride.

From January 19 through February 8th, the S&P 500 fell over 8%. 

Only to be followed by a gain of over 15% through April 23rd.

Quickly to be followed by a downdraft of 15% by July 1st.

Which was promptly followed up with a gain of about 9% through August 6th.

Which, of course, was then proceeded by a drop of over 6% through August 30th.

Following that market drop, a gain of close to 17%, which ended on November 5th, presented itself.

And right now (November 16th), our current down swing is pegged at around 4%.

Fickle, flighty, fleeting, and moving at lightening quick speed.  Stay tuned for the next big move!!

Bernanke let loose with another blast of quantitative easing.  The markets sure seemed to like it, as stocks added to the gains they posted over the last few months.  And the S&P 500 did make that run for 1,200 that I discussed a few weeks back.  In fact, as I type this the S&P 500 is at 1,223.   Also, rumors abound that some bank stocks might be allowed to increase their dividends in the not too distant future.  

Everything sure seems to be coming up roses, doesn’t it?  But perhaps a cautionary tone needs to be sounded.  Per my research, earnings are nearing trend and any further earnings gains should prove more difficult to come by.  Also, valuations are not so cheap now. 

I suppose we need to be happy with these recent gains, while at the same time not allowing ourselves to be lulled into complacency.  I find the VIX to be a great gauge of complacency.

Well, it is earnings season again and the numbers are rolling in at a good clip.  Yesterday on my way into work Bloomberg Radio said that 85% of the companies that have reported earnings so far have beat expectations.  And I’ve even seen a few that have beat the revenue expectations.  Perhaps this combined with elections hopes have fueled that S&P 500 run towards 1,200, which hit a short-term peak yesterday at aroung 1,194…close to 1,200 but technically not there yet.

But as has been the Standard Operating Procedure as of late, the good news has been accompained with some bads news.  In fact, today we got news that Housing Starts came in below expectations while Consumer Confidence was above expectations.  Some good…some bad.

This should lead to a continued roller coaster of a market, which should frustrate a good many investors.  Approach this market with eyes wide open, rational expectations, and a disciplined strategy and you will most likely be able to deal with these frustrations just a bit better.

With the Obama Adminstration giving the appearance that it is going with more Pro-Business advisors, the Fed standing at the ready for Quantitative Easing Part II, and the earnings of companies continuing to come in at very solid levels, it appears the S&P 500 might want to make a run at 1,200. 

We will see if this actually occurs or not, but with the elections on the horizion and Summers out and Emanuel rumored to be the next out the market appears to be very much buying on the rumor/expectation that the November elections will be market changing event.

Could this prove to be a buy on the rumor, sell on the news type of deal?  Perhaps.

Breaking news just over the wires from the NBER (National Bureau of Economic Research)…

The Great Recession has just been announced as having officially ended in June of 2009.  This, perhaps, would be more useful information if it wasn’t presented for public consumption over a year after the fact!!!

We are still witnessing the same things.  Good earnings, balance sheet improvements, and a sideways (at best) market.  The weight of the economic uncertainty is holding down the market and that seems to make sense to me.  Naturally this leads to P/E compression and, again, this makes sense and follows historical precedent.

The key will be buying or selling when the market’s moves don’t make sense.  However you choose to frame that thought is fine by me; buy on the bad news, sell into strength, buy low, sell high, etc.

In our newsletters we’ve been talking about two main things unfolding in the coming months,

1) P/E Compression and 2) an economic test

The P/E compression appears to happening quite clearly.  Again, this can lead to frustration as companies post solid earnings but yet their shares decline or stay flat.  This will test and try people’s patience and will be a War of Attrition, if you will.

On the economic test, here is what we’ve said in our newsletter…

An economic test will occur with tougher year over year comparisons in late 2010.

This could prove to be a double dip recession, the key will be how deep it is and how long it lasts.

Frankly, this is the wait and see part of the test.  No one knows if we will dip again or not.  People are placing bets on one side or the other, but I sincerely doubt anyone knows for sure what is going to happen.  This uncertainly is precisely the reason for the contracting P/E’s. 

With all this in mind, our eyes and ears are wide open to incoming data in an attempt to find clues regarding this test.

Again, corporate CEO’s appear to be doing an excellent job as the earnings their companies are posting, in general, have been quite good.  However, employment is lagging as one of the tricks in the CEO’s bags appear to be cost containment.  Frankly, I see nothing wrong with that as Business 101 says add revenue before expenses.  But maybe that is a Catch-22 as in order to get revenue up in a consumer driven economy, you need to get the unemployment numbers down. 

Regardless, I think the CEO’s will continue to do what is best for their companies bottom line and as investors in publicly traded companies we want nothing more.  We can leave it to the leaders at the governmental level to mange the economy as a whole in these “unusually uncertain” times. 

All in all, our basic thesis (which we’ve discussed in our newsletters) that earnings should be good but multiples should remain low appears to be playing out.  And until the employment numbers get better, this market should be range bound.  Therefore, active management just might be the trick to profits in our current environment.

Well, the market has bounced as the bearish Investor Intelligence Survery suggested it might.  But now we are beginning earnings season.  Frankly, this is one earnings season where I feel the visiblity in regards to the numbers these companies are going to report is quite low.  But in a day or two we should get a real sense of the impact slowing stimulus monies have had on revenues and earnings.

I always find the “mood” of the market interesting.  After the big downdraft in the market in January of this year, the percentage of bearish investors (according the the Investor’s Intelligence Survey) was at a pretty high level.  Interestingly enough, the market rallied for a number of months in a row right around that time.  Now with all the uncertainty surrounding the market, that same survey shows the bearishness concerning the market is even higher than it was at its trough in the first quarter.  Time will tell if we are due for a relief rally or not, but it is certainly worth paying attention to.

With all the crazy headlines bombarding us each and every day, it is very easy to become emotional concerning the market and investments. Now, there is absolutely no doubt that these headlines warrant attention, consideration, and serious deliberation. But the key to surviving and thriving in volatile and emotional times is, frankly, prior due diligence.

If I woke up one day and saw headlines say that Europe was going to collapse under the weight of its debt load, North Korea was sinking South Korean warships, the U.S. economy might be running out of steam, and saw that the stock market experienced a brief “flash crash”, I would be scared out of my mind. But having done intensive due diligence on the markets for well over a decade, I feel pretty darn good concerning the context these announcements are surrounded in and, therefore, I feel pretty darn good concerning the condition of portfolios and clients financial plans.

In fact, seeing these latest market movements reminds me a lot of late 2007. Frankly, these markets don’t look anything like one another but they still have some things in common. In late 2007, the S&P was up double digits and people were generally very bullish. And now, the markets are down for the year and people are generally bearish. But what is similar is the fact that I think we are in for a test and that test will be similar to the test of 2007 which had its epicenter focused on the importance of due diligence. The due diligence we performed at that time led us to believe that we were going to need to be under-weight stocks despite the bullish mood of investors. Despite that bullish mood our due diligence paid off and our under-weight relative to equities and clients long-term strategic allocations paid dividends as the market turned very bearish, very quickly.

Again our due diligence paid off in early 2009, as we switched our under-weight position relative to equities to over-weight and fortunately for us the stock market rallied. Well, if you’ve noticed in your portfolios lately…we’ve been selling and trimming stocks into this rally for quite sometime and now we are under-weight stocks once again for clients in general across the board.

So, you see we aren’t waking up today and seeing the headlines and having an emotional reaction to the news of the day. Instead, we have been analyzing the market constantly for years and as we began to feel this latest bull market was going too far, too fast we trimmed our client’s holdings. And now as the market is in a highly emotional and volatile state, we have cash on hand to buy if we see attractive opportunities. This is not to say that the market might not fall further because it just may do that. However, for equity accounts that cash that gives us firepower to buy assets on the cheap also provides a buffer to limit some of the damage a falling market can have on portfolio values. While in balanced accounts, we have bonds and other fixed income assets to further buffer the accounts and provide other benefits, such as diversification.

Without doubt, these are historic times. But we think we can manage the stress and volatility by being proactive in portfolios and by reminding clients of a few key financial planning elements which can help them to survive and thrive in these crazy times. They are: debt control (or elimination), portfolio liquidity, and diverse forms of income and cash flow. In short, if you keep your debt low, your portfolio liquid, your income high, and you stay proactive in terms of your due diligence, you should be in prime position to weather any financial storm.

As always, please call us at anytime to discuss anything that is on your mind.

Well if the Greek situation wasn’t enough, yesterday’s trading “glitch” added some fuel to the fire of anxiety. You’d think an Ivy League MBA’er would know how to type “million” and not mistake it for “billion”. But, evidently not.

Regardless, we put up good job growth numbers this morning and the “glitch” is being fixed. We need to have the Greek situation see some resolution before market fundamentals can be the sole focus of the trading day.

The market is extremely jittery given all the uncertainty regarding the economic conditions of many countries in Europe. Add in the idea that the economic recovery in the U.S. might run out of steam as the stimulus monies are withdrawn and that jittery feeling only gets more intense.

Of course, we don’t have specific answers as to how things will play out over time. But as we mentioned in our latest quarterly newsletter, we feel that trimming stocks into the market’s rallies makes sense given all of this uncertainty. In fact, we have been doing this for clients, wherever possible, for some time and we feel we are in fairly good shape to take advantage of the market if it gets more volatile.

Due to numerous requests by clients to have a more frequent and timely form of communication concerning the market and economic situations, we have decided to launch a blog on our website.  This blog is aimed at providing frequent updates to our clients, without the annoyance and intrusion that blast emails sometimes cause.  So in the future if you are wondering what we are thinking regarding the markets and the timing of your curiosity doesn’t line up with the delivery of our quarterly newsletter, simply log on and get caught up to speed on our thoughts.  And as always, if you have specific questions for us we are always a call or an email away.  With that in mind, here are our thoughts as of Wednesday April 8, 2010:

It is our belief that the markets run on fear or greed.  Now at times differing degrees of fear or greed take over, but nevertheless it is one of the two that rule that day.  2008 was a year full of fear, while 2009 saw a waning of that fear.  Perhaps greed is starting to rear its head as the high quality stocks appear to be underperforming and the low quality companies seem to be putting up some eye-popping return numbers.  Given the run of the markets over the last 12 to 15 months, this isn’t unexpected.  Lots of the low hanging fruit has been harvested and the people who missed this latest bull run are searching for ways to make up ground.  Fishing in the low quality waters might be a way to generate some returns to make up for lost time, however that is generally not our style.  If this low quality run persists, we most likely will underperform the market.  But this isn’t a major concern of ours, as we believe that given the current economic environment high quality is the place to be over the long run.  And that is exactly how we invest…for the long run.