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Decouples Therapy

The popular term from about a half-decade ago was "decouple" — a scenario in which the global economy and stock market would lose the weight of the United States and no longer be dependent on U.S. demand to spur growth. This would lead to wild riches for those smart enough to focus abroad. This strategy, of course, is reminiscent of another popular investment concept, the “New Economy” versus the “Old Economy," because in 1999, tech stocks were leaving value stocks in the dust, and the smart move was to own a bunch of tech and growth funds.

April 2012 Performance Review

Fund investors continue pulling money out of stock funds. We see around $10+ billion a month come out of ordinary mutual funds – an investment class that is in long term decline. If it wasn’t’ for 401k assets, there would be big problems in the mutual fund industrial complex. ETFs continue to bring in money to offset these losses in total fund assets.

Taxing Times

It’s tax time, everyone’s least favorite time of year. Even those receiving refunds are pretty grumpy about the whole endeavor. But since the average tax rate Americans pay  will be one of the lowest in the last fifty-plus years, we should be celebrating.

March 2012 Performance Review

Stocks remained strong in March. Investments considered safe havens did poorly, from bonds to precious metals. Even the market volatility measure, the VIX, slid as the stock market’s potential downside seemed to shrink. There will be no double-dip recession, and perhaps no collapse of Europe. Even though investors optimism on US stocks continued to grow, the underperformance in what typically would do well as investors embraced risk - emerging markets - continued.

Up, Up, and Away

Wall Street has a way of swinging from irrational fear to exuberance based on marginal changes in the underlying economy. With the news of the Dow back to its pre-Lehman high (but still off its all-time highs) and the Nasdaq back above 3,000 (but well below 5,000), you wonder if the only money to be made will be from trading on the exuberance and fear swings.

February 2012 Performance Review

Typically emerging market stocks rebound faster than the US stock market when the market heads back up (like we saw in January) but there seems to be some fears around that the emerging markets era of outperformance is waning and the US may be more insulated than faster growing markets from Europe’s ongoing troubles. 

Less than Zero

The biggest long-term problem facing investors right now isn't U.S. debt, or even European debt. It’s the likely near-indefinite future of very low returns on the lowest risk investments: CDs, money market funds, Treasury bills and notes, savings bonds, and even shorter-term corporate and municipal bonds. Any assets with a maximum downside of 5% or less probably have a likely upside of less than 2% per year for the foreseeable future. 

January 2012 Performance Review

The big gains in foreign markets doesn’t quite wipe out last year’s losses, but it’s a good start to the year. The bond market highlights this re-embracing of risk. Higher risk bonds topped the list in January with emerging market bond funds up around 5%, followed by high yield bonds up over 3%. The safest government bond funds were roughly flat to slightly up. 

A Look Back at 2011

The year 2011 delivered plenty of volatility and little reward for stock investors. Equity returns were largely inversely related to risk – the smaller in size or more foreign the stock, the worse it performed. It was the same story all year; Europe teetered on the edge of a debt collapse while the U.S. economy teetered on the edge of recession.

December 2011 Performance Review

For 2011 our Conservative Portfolio was up a respectable 3.5% while our Aggressive Portfolio’s winners couldn’t overtake the drag of foreign markets and financials, giving us a 0.41% loss for the year. A drop of less than one-half of one percent may compare favorably to most global portfolios (the Morningstar Global Allocation category was down about 4% for 2011), but we consider it a disappointing result.