2010Apr19 Spring is here. Batter up!

2010Apr19 Spring is here. Batter up!

The first quarter of 2010 has come to a close, and we have ushered in the beginning of Spring. There are many events to look forward to this time of year -- new blossoms on flowers, seasonal cookouts, warm weather outdoors, and the official beginning of the baseball season. It is time to pull out the baseball mitt and turn attention to America’s favorite pastime. In the off season some veterans have decided to hang up their cleats for the next phase of life and others are starting careers with a new team. It would not be the beginning of baseball season without the baseball “experts” pontificating about which team will prevail over all at the end of the season. This is the funny part. How in the world can anybody know at the beginning of April who is going to win the World Series in October?

The baseball season is a marathon. Teams play 162 games during the regular season. With so many variables in play, there is absolutely no way that any expert, let alone an ordinary baseball fan, can determine with any degree of certainty which team will be the World Series champion. While it might make for good television ratings or great water cooler conversation, would you want to attempt to pick a winner at the beginning of the season and be held to that selection at the end of the season? Probably not. What if the star player gets hurt? What if the brilliant rookie prospect turns out to be a bust? You are stuck riding that selection into the sunset. Why then, would it make sense to invest your money this way?
 
At any time you can find financial experts on television talking about why this stock or that stock is going to be the best performing over the next five or ten years, or even over the next year. But think about how much can change in even a year’s time, let alone a decade. From the beginning to the end of 2008 the S&P 500 lost 38% of its value. Similarly, from the beginning to the end of 2009 the S&P 500 gained 23%. And those are just one year time periods. Think about ten years. Who would have imagined in 1999 that the decade of 2000’s would post the first loss for the Dow Jones Industrial Average since the 1930’s? This is why it is so important to have flexibility in the financial markets, but more importantly have a logical, organized game plan for navigating the markets.
 
We do not accept the buy and hold philosophy of investing. We rely on the most basic economic principle of supply and demand to guide investment decisions. We believe this principle to be the most reliable process for creating a proactive balance between wealth accumulation and wealth preservation. Supply and demand relationship of multiple asset classes gave early warning signs in 2008 that the sellers were gaining control of the market. In the Spring of 2009, buying demand regained control of the stock market.
 
Just as any good general manager of a baseball team does, we continually review the roster and determining which players we want to have on the field to give us the best chance of winning. The line-up will change from time to time as a player may get injured or get in a batting slump and be better off on the bench. With that said, I wanted to leave you with some market thoughts as we head into the second quarter of the year.
 
Market Thoughts
 
For US markets, the majority of stocks continue to trade in overall positive trends, as do all of the major indices. For instance, nearly 80% of the stocks on the New York Stock Exchange are back in a positive trend after slipping in mid-January.
 
The international equity markets have also turned back up. This strength has primarily been in the emerging countries rather than more developed areas of the world. Much of Western Europe is lagging the rest of the world in performance. The trouble in Greece is just the latest financial mess to explain Western Europe’s underperformance.
 
While domestic and international equities continue to dominate other asset classes, there is action within the commodity area. For much of the past year and a half, the “metals,” such as silver, copper, aluminum and gold have been the best performers within the commodity area. One of the most widely followed and traded commodities in the world, Crude Oil, has surged. Recently, Crude Oil moved to $87 per barrel, which is the highest level Crude has seen since October of 2008.
 
Lastly, the medium and smaller companies have had better returns than the large company sector. It appears this trend will continue. For us, continually monitoring the relative strength of asset classes and exchange traded funds provides an objective view of markets and risk. As long as you have a flexible asset allocation policy, it is easier to find opportunities than it is to make up lost money.
 
Our objective is to search and protect. Identify opportunity and protect capital. If that is compatible with your investment objectives, call us for an exploratory discussion.