Words of Wisdom

Today, in response to questions and concerns by certain Bear Market pundits, it is essential for clarity of thought

Something bad can always happen: Terrorist attacks, pandemic flu, acts of god

It appears, however, that the odds are in favour of this economic recovery taking hold.

There has been significant financial easing:  monetary and fiscal.

Short term interest rates are almost zero, and the yield on the ten  year treasury is 3.73%

the yield curve is sloping in the right direction:  up:  banks can fund at the short end, lend at the long end and profit from the spreads.   Investors will seek higher yielding securities than cash as a result, to increase their investment returns.

While the markets have rallied significantly from their March 2009 bottoms, good companies will continue to thrive.

Earnings will have to come now from a better economic environment, however, and not just cost cutting.

It will be even more prudent going forward to seek out such companies and avoid the tendency to simply “buy the market”.  While an indexing strategy works in a raging bull, it is much more in question in a sideways market.

Active security selection will rule the day, and portfolio construction must take this into consideration.

I will continue to seek out managers adding value, and invest in companies that will thrive in what may prove a difficult environment to some.

A passive strategy of buy and hold will simply not do.

feel free, as always, to contact me with questions or concerns.