Current Letter To Clients {Part I}

It's late Summer.  I will be taking some time off doing the yearly trek to the Rhode Island office.  During the rest of this week I am going to serially publish our latest investment letter that was recently sent to clients. Today is part I.  We'll be back to our regular assignment some time next week. 

 Solas!                                           Summer Doldrums!

July 22, 2011: Summer Edition:

Stocks roared out of the gate in 2011, tacking on nearly 7% into February. Since then markets have essentially gone nowhere. Through June, the S&P 500 has gained about 5%. The average NYSE listed stock had about a 4.5% return. Stocks also experienced two corrections that wiped out most of 2011s gains since those February highs. Each time though stocks rebounded back to positive territory. Currently markets are locked in a trading range between 1,250 and 1,350 on the S&P 500. An illustration of this is shown {below}.

Summer’s doldrums, that period of time when vacations and a lack of news lock the day to day movement of prices into that famous random walk seems to have arrived early this year. These patterns seem to make no sense until some event asserts itself into a new trend. The current news strikes me almost as a repeat from last summer. You could review my letter from last spring and see pretty much the same highlights. Then for example investors worried as they do now about a slowing economy, debt in the Euro-zone was also a major concern and the jobless rate was as intractable then as it is now.

Chart showing trading range, the gains from last year and our current money flow readings.

*Long ETFs related to the S&P 500 in client and personal accounts.