Q2 06 Size Up

A quarter or two ago I started to recap my quarterly performance as measured by a generic version of client portfolios that I keep on Yahoo Finance. The holdings are representative to be sure but may not be exactly the returns a client may get, although it is close. The number this quarter for the portfolio is somehow too good so in addition to giving results of that portfolio I will also give numbers (percent not dollars) of two client accounts, one that tilts more conservative and one the other slightly more aggressive. There may be clients that have done better or worse than any of the numbers. I’m not sure if I made a mistake with the generic portfolio or not. The goal here is to provide some accurate numbers of how all the things I write about play out. If you even care about such things, feel free to take the under. For the quarter the S&P 500 Index was down 1.90% (closed on 3/31 at 1294.87 and today at 1270.19). If you add the dividend in, I believe 1.7%, that would add 42.5 beeps and so the S&P 500 total return was down 1.475%. The more aggressive client was down 0.0006% (less than $200). The more conservative client was down 0.8%(this clients has more in fixed income). The generic portfolio on Yahoo Financewas up 0.44%. While I think the difference is not huge the small decline is more representative. From those numbers fees would need to be subtracted. Quarterly fees range from 25 beeps to 37.5 beeps (I do not know the fees of every account...

YeHayNow?

Fed Funds 5.25% Two Year Treasury 5.17% Ten Year Treasury 5.17% 30 Year Treasury 5.22% OK, too much time with this curve could be a problem. An inverted curve is something I have been concerned with and writing about for a while. We have had minor inversions a couple of times and the consequence is not yet known (maybe there is no consequence coming) but an inverted curve that represents a deeper inversion for a longer period of time is a threat. This is something to stay in touch with. The history of this is not good. Nothing is certain but no matter how bullish you may be you need to always assess potential...

What Next?

You have a lot of split decision on what comes next for the market. The perma bulls are bullish and the perma bears are bearish. It is times like now that I often talk about. My opinion is that sustained strength seems unlikely but so what. I have been writing about not making an extreme bet. Every so often someone will come on the tube and talk about having 50% in cash or some bigger number. That is a tough place to be for anyone. Something I have noted in the past ( but was far from the first to observe this) is that markets bounce off the bottom fast and hard. This repeats over and over. Lagging a huge move is one thing but missing it is something else. I do not know if a bottom is in, I don’t think so but I don’t know. Fortunately I don’t have to be correct and depending on what you have done in your own portfolio neither do you. A method of consistency and moderation is the path of least resistance. There are articles here and there about people scrambling to get long yesterday. That is a tough position to be in, feeling like you have to buy right this...

Silliness Aside

A reader asked the following; Please let us know your long term view on the Market. Do you think this rally is a fake, or does it have legs? It is hard to believe that FED is done. But looks like the market things that it is the end. My thought process here may be difficult to feel good about. My original thought for 2006 was down a little. I still think that. Part of the assumption included the Fed stopping, whether I guessed correctly as to when or not, the Fed was going to stop this year. Perhaps today was it or not. Either argument is easy to build but the last 25 beeps isn’t thing, I would focus on a few hundred beeps in between the first one and the last one as doing most of the fill in the blank. My reasons for expecting down a little include length of the current economic cycle, length of the current stock market cycle, slowing earnings, rising rates, the likelihood the Fed goes too far, a weak dollar (which has its own long list of causes), year two of the presidential cycle and there may be one or two more. These are valid concerns. The bullish case is also valid. All of these things, bullish and bearish, are all in the realm of normal market action. No matter what I think I have to manage to what is going on and not make too large a bet to my clients’ detriment on any on outcome. It is not clear to me that anything is truly new. Who didn’t know...