Current Commentary

J. Pierpont Morgan had a stature in the financial world somewhat akin to that held by Warren Buffet today, only grander.  When the U.S. Treasury was so distrusted that it could not float bonds, Morgan led a syndicate in 1893 to finance the Treasury’s needs.  When a panic gripped the New York Stock exchange in 1907, what we would call today a “systemic breakdown”, Morgan organized powerful banks to purchase shares of key, financially healthy stocks.  This renewed investor confidence and the crisis ended.  Out of these events, Congress created the Federal Reserve banking system, so that the nation would never again rely on the good will of a single man or small group of financiers to avoid financial disaster.

Quarter End Commentary July 25, 2011Through June 30, 2011, our five year composite track record, net of all fees, through June 30, 2011 shows that we produced an average annual return of 6.07% for our discretionary clients during a tumultuous time in the financial markets.  By contrast, the Standard & Poors 500 stock index averaged only 2.94% per year.  This [...]

 July 7, 2011

WHO KNEW?
Certainly not dour Bill Gross or perennial bear Nourial Roubini, who until ten days ago were featured in gloomy headlines and media interviews.  As usual, the media choose to tell yesterday's story. They were in love with tech stocks before they tanked in 2002, with silver before it tanked six weeks ago and with real estate before it tanked 4 years ago.  To me, yesterday's strong rally, coming as it did after Moody's downgraded Portugal's sovereign debt to "junk" status, threatening yet another European financial crisis, was pretty strong evidence that we are in a new Bull upleg for equities. 

“Sell in May and Go Away” is the common wisdom of equity traders, and after 36 Summers in this industry, I agree that for traders, this is useful advice. My desire is to emulate the success of value investors who are nearly all long term position holders, so selling in May, just because the Summer is often challenging for stock valuations, does not carry much weight with me.  This year was a little different. Oil prices have been rocketing, the dollar collapsing and the political climate in Washington is unlikely to tolerate further monetary stimulus by our Federal Reserve bank.  So beginning about a month ago, I became less tolerant of client equity holdings that failed to hold important technical support (yes, I use charts too).  We reduced a long time holding of a forest products company and a major player in software, thus raising client cash from a level of virtually zero to about 6% of portfolio values.

Year End Roundup

The quarter ending December 31, 2010 was a blowout for stocks and commodities, so it may be difficult to recall that stocks suffered a mid-year bear market - a loss of 16% between April and August. This was spawned by a few factors, fears about a financial collapse of European banks and even nations the most prominent. Sentiment was not helped by the Administration’s coordinated attacks on a prominent Wall Street bank, part of a transparent effort to garner support for sweeping financial regulatory reform struggling in Congress. Then there were the incessant calls for a “double dip” recession from perennially bearish economists, who it seems were dead wrong. Your performance since inception has exceeded that of most asset classes, especially stock, which suffered two mammoth bear markets over the past decade: a decline of about 45% during the Tech Wreck a (2000 to 2002) plus another plunge over 50% during the Banking Crisis of 2007 to 2009.

 Even if the Recession is Over, the Recovery will not Cure Structural Weaknesses in the US' Economy December 10,2010  Reproduced below is part of the December 2010 Commentary issued by PIMCO's Bill Gross. I'm sharing thisas it expresses, in trenchant terms the reality of the financial challenge facing a generation of Americans here and now.  Shortsighted and misinformed policies pursued by politicians [...]