May Letter To Clients {Part IV}
Where Are We Going? {Mid-2009 Game Plan}
We manage portfolios based on clients’ personal criteria. This is influenced by factors such as a client’s risk profile, portfolio size; legacy positions held in accounts, tax considerations and targeted rates of return. What follows is therefore a broad statement of our thinking, a general statement of how portfolios are currently positioned and our investment posture at this time. Client portfolios may not exactly match our general analysis discussed below.
Many of our investment indicators have recently turned positive. This does not mean that an all clear is sounding but it does signal to us that conditions are improving. For much of this spring we have carried lower than normal cash positions in accounts. With the market’s recent advance we have where appropriate slightly trimmed certain investment positions. This is because we think stocks could pause in their advance for awhile. We could raise more cash if conditions warrant it in appropriate client accounts.
Our current strategy is similar to our last letter. That is: (1) Reposition into sectors that we think will benefit over the course of this year. (2) Reposition our core broad market ETFs. We have done this by splitting these sectors, one portion looking for longer term value while the other portion is utilizing in appropriate accounts some of our Targeted Investment Growth strategies to look for shorter term investment opportunities. (3) Take advantage of market dislocations which have given rise to attractive dividend yields. In general our investment focus has continued to be on ETFs.
While our crystal ball is cloudy even on its best days we do have three chief scenarios. Briefly here is their synopsis and our general strategy for each:
1) Market faces a serious decline taking us back to our recent lows. Given what we currently know we think this is unlikely. We believe that it would take an unexpected event {natural disaster, foreign crisis or a massive terrorist event} or an overlooked set of data points for this to occur. We have targeted levels where we would attempt to raise cash in risk appropriate accounts should this occur. Please note that an unlooked for event-something like 9.11.01, could lead to a sudden and severe market decline, making attempts to raise cash problematic.
2) Stocks continue to rally and move substantially higher over the summer. We also assign little likelihood to this given our current advance along with an anemic economy. However, our current investment posture would benefit if this should occur.
3) Market in a trading range. Stocks stay locked in this trading range through summer, evidence of economic improvement leads to a resumption of the advance later in the year. We think that this is the likeliest event. Again we have price points of where we would raise cash into any further decline for risk appropriate accounts and have ear marked certain sectors that we believe could do well in this kind of environment. These include commodity related investments, industrial and material sectors, agriculture and technology.
We manage portfolios based on clients’ personal criteria. This is influenced by factors such as a client’s risk profile, portfolio size; legacy positions held in accounts, tax considerations and targeted rates of return. What follows is therefore a broad statement of our thinking, a general statement of how portfolios are currently positioned and our investment posture at this time. Client portfolios may not exactly match our general analysis discussed below.
Many of our investment indicators have recently turned positive. This does not mean that an all clear is sounding but it does signal to us that conditions are improving. For much of this spring we have carried lower than normal cash positions in accounts. With the market’s recent advance we have where appropriate slightly trimmed certain investment positions. This is because we think stocks could pause in their advance for awhile. We could raise more cash if conditions warrant it in appropriate client accounts.
Our current strategy is similar to our last letter. That is: (1) Reposition into sectors that we think will benefit over the course of this year. (2) Reposition our core broad market ETFs. We have done this by splitting these sectors, one portion looking for longer term value while the other portion is utilizing in appropriate accounts some of our Targeted Investment Growth strategies to look for shorter term investment opportunities. (3) Take advantage of market dislocations which have given rise to attractive dividend yields. In general our investment focus has continued to be on ETFs.
While our crystal ball is cloudy even on its best days we do have three chief scenarios. Briefly here is their synopsis and our general strategy for each:
1) Market faces a serious decline taking us back to our recent lows. Given what we currently know we think this is unlikely. We believe that it would take an unexpected event {natural disaster, foreign crisis or a massive terrorist event} or an overlooked set of data points for this to occur. We have targeted levels where we would attempt to raise cash in risk appropriate accounts should this occur. Please note that an unlooked for event-something like 9.11.01, could lead to a sudden and severe market decline, making attempts to raise cash problematic.
2) Stocks continue to rally and move substantially higher over the summer. We also assign little likelihood to this given our current advance along with an anemic economy. However, our current investment posture would benefit if this should occur.
3) Market in a trading range. Stocks stay locked in this trading range through summer, evidence of economic improvement leads to a resumption of the advance later in the year. We think that this is the likeliest event. Again we have price points of where we would raise cash into any further decline for risk appropriate accounts and have ear marked certain sectors that we believe could do well in this kind of environment. These include commodity related investments, industrial and material sectors, agriculture and technology.
*Long ETFs related to the S&P 500
{Tomorrow Part V & Conclusion}
posted by CR English at 6:37 AM
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