2012 Looks Better For U.S. Stocks
January 18, 2012 Leave a Comment
Not Another 2008
October 17, 2011 Leave a Comment
PVG Asset Management Corporation
October 2011
Not Another 2008
We are becoming more constructive on the markets. The lack of new negative economic or political news, growing negativity on the part of investors, market volatility without a renewed decline, along with the passage of time since early August are all positives in our opinion.
In hindsight, stock and bond-market investors, including professionals, were spooked during the third quarter by Standard & Poor’s decision to downgrade the U.S. government’s debt rating, the Congressional debate over raising the government’s borrowing limit, and by the Federal Reserve’s decision to leave interest rates near zero until 2013 to combat slowing economic growth. Debate among European policy makers about how to solve deteriorating government finances and whether to add capital to banks also sparked fears that a misstep could lead to a new financial crisis.
Panic spread quickly after the market fell through the price ranges it had established early this year, as shown on the chart below. The S&P 500 Index dropped 14% during the quarter as investors’ dumped stocks and mutual fund holdings. This was the worst decline since the fourth quarter of 2008, yet most damage occurred during just 3 trading days, shown by the arrow on the chart below, during which the market fell by over 10%. Stocks since have fluctuated wildly in a whopping 12% range as seen below, not including an unsettling collapse on October 4 that was reversed on the same day. Composite market prices are now near levels experienced during the summer of 2010.
As prices declined and fluctuated, attitudes turned extremely negative, perhaps because investors’ feared a continued decline, such as occurred during the 15 months from October 2007 through March 2009 when the market lost 50% of its value. For example, the chart to the left shows how active professional money manager’s sentiment fell from cautiously bullish to a point where they were borrowing money to short stocks by early October. (Note: Extreme negative sentiment is a highly reliable indicator that we are near a market bottom. The chart shows that professional sentiment was as negative as it was at the 2009 market bottom at the beginning of the chart.)
We doubt the economy and the markets are repeating 2008. Unlike late 2007 and early 2008, corporate America, including the banking sector, is fairly well capitalized and liquid today, and extremely productive judging from profit levels. The housing problem lingers, but is no longer a crisis. Consumers have reduced and continue to reduce their debt. Federal, state, and local government debt is huge and still growing. This problem will probably hinder American growth for a generation as politics takes its course. However, we doubt any big surprises related to debt are likely, except perhaps on the positive side as governments begin to deal with their problems. Europe also seems to be dealing with its debt problems and a Greek default along with possibly even another country would not be a big surprise.
Rather than a renewed recession, as many including ourselves feared for the second half of this year, empirical data suggests that the economy continues to slowly grow. This slow pace, partially due to the lack of tail-wind from expanding public and private debt, may unfortunately turn out to be normal in the future. While not great for us, it might surprise some investors how dependent China and commodities, for instance, are upon the developed world for their prosperity, a developed world that is now growing slowly.
To repeat 2008, investors’ would also need to become even more negative and continue liquidating stocks and equity mutual funds as they have for the past eight months. This can certainly happen. However, after selling stocks and commodities, panic buying spiked the gold price higher to an early September peak as is normal during periods of peak fear. The price has since been falling. Investors also fled to US Treasury bonds, driving yields to historical lows, even lower than at the 2009 market bottom. During mid-September the US government would pay you only 1.7% annually on a 10 year investment. Those investors who took advantage of the government’s offer have since lost 4% of their capital. In contrast, stock dividend yields are now a relatively attractive 2% for the entire market and “earnings yields” (a measure of valuation) are over 8% compared with 2% treasury yields, something that rarely happens and seems to coincide with rising markets in the future. And although corporate profits are far from depressed, many security valuation measures are back to levels seen during the last market bottom of 2008-2009.
Although our economic views changed little during August and September, market sentiment swung surprisingly negative during August. Portfolios declined, although less than the markets. (Equity Income and Long/Short portfolios declined a fraction, as expected, but of course have less upside as fear subsides.) Now, however, conditions are entirely different, as suggested above. Stocks are inexpensive relative to bonds. We see compelling equity opportunities and are cautiously participating. Consistent with the problems our economy faces, we continue to manage market risk, in preparation for any new unpleasant surprises.
Regards,
Patrick S. Adams, CFA
Joseph N. Pecoraro, CFA
An added note: Loss Averse Growth investing which includes managing market risk addresses the problem of volatile markets. However, it is an investor tendency to say “no more” as markets fail to reward as during the last eleven years, and when economic problems seem unsolvable as they may appear today. Billions of dollars have left equity mutual funds, particularly over the last eight months. It would be wise to remember that it is always during difficult gloomy times when markets present the most opportunity. Several examples illustrate this fact. At the end of 1932 stock prices were off 90% and the economy was in depression. Midway through 1942 a new war was not going as well as everyone expected. Toward the end of 1974, we know from experience that investors’ were pretty depressed. Markets had gone nowhere since 1966 and had recently fallen 50%. Investors were focused on a recession, inflation, a losing war, and a presidential crisis. However, skillful investors of the time, willing to accept market volatility and uncertainty, were extraordinarily rewarded each time. It is just conjecture, but perhaps we are at that point again. We remain optimistic about the future.
Hedge or Make a Bet
February 21, 2011 Leave a Comment
Two contrary views on the outlook for markets
Buttonwood
Jan 20th 2011 | from PRINT EDITION
INVESTORS could visit two very different worlds on January 17th, provided that they worked in London. In the morning Goldman Sachs held its global strategy conference in its Fleet Street offices; in the afternoon the strategy team at Société Générale, a French bank, held a seminar in a Grosvenor Square hotel.
The presentations differed vastly in manner, as well as matter. The Goldman team was formally dressed in suits and ties; its book of graphs was bulky enough to be an aid in fending off muggers. The SocGen team appeared to have dressed either for an outward-bound course or a company disco; its slidebook could fit into a back pocket. The regulatory disclosures accompanying just one Goldman speech were longer than the entire supporting material presented by Albert Edwards, SocGen’s global strategist.
The overall messages could not be farther apart. In the Goldman world the forecast is for eternal sunshine; visitors to the SocGen world would need to carry an umbrella and a gas mask. But at least SocGen visitors could smile while they suffered; one slide focused on the resemblance between Ben Bernanke, chairman of the Federal Reserve, and Rudolf von Havenstein, president of the Reichsbank during Germany’s hyperinflation.
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Goldman believes that global economic growth will be stronger than expected this year, inflation will stay low and investors in American equities will earn returns of 15-20%. In America, consumer spending will grow by 3.5% as unemployment falls while businesses will improve their profit margins, even as commodity prices rise.
Goldman’s view of the world seems dominated by its faith in the emerging economies, notably the BRICs (Brazil, Russia, India and China), an acronym coined by Jim O’Neill, a strategist who has been promoted to head its asset-management division. Western observers constantly underestimate this development, in Mr O’Neill’s view; for example, the value of Chinese consumption has risen by $1.6 trillion over the past decade and could rise another $400 billion this year.
Equities are cheap in Goldman’s model, which focuses on the risk premium over government bonds. There is no graph of the cyclically adjusted price-earnings ratio, another valuation measure, in its presentation book, although the subject did arise in questions at the conference: David Kostin, a strategist, said Wall Street was slightly above fair value on this measure. That will be a surprise to anyone who follows the website of Professor Robert Shiller at Yale (www.irrationalexuberance.com). It puts the ratio at 23, about 40% above the long-term average.
Indeed, all four speakers at the SocGen event used a chart of the cyclically adjusted ratio. In the past it has been a very useful long-term tool. Andrew Lapthorne, SocGen’s quantitative strategist, points out that buying equities when valuations are at current levels has delivered average historic real returns of just 1.4% a year.
Mr Edwards and his team have long propagated their “Ice Age” thesis, in which deflationary pressures drive down the valuation of equities relative to government bonds, as occurred in Japan. At times, for example during the dotcom bubble in the late 1990s, this view has been wholly out of fashion. But if Mr Edwards can be dubbed a perma-bear, most investment-bank strategists tend to be perma-bulls.
Which group is right? There was no sign that investors were playing favourites; both meetings were packed. The mood is not yet reminiscent of 2000-style euphoria or 2008-style despair.
In Goldman’s view the bears are not taking sufficient account of the growth of the developing world and are focusing too much on crises in small countries like Greece and Portugal. Fiscal and monetary stimulus will cause the world to recover, as it has many times in the past.
The SocGen case is that the outlook was fundamentally changed by the financial crisis of 2007-08. The debt-fuelled model is broken. Central banks are trying to revive it again, by keeping interest rates low so that asset prices will rise and consumer confidence is restored. But the result will just be another bubble and another bust. In the words of Mr Edwards: “Basing economic growth on loose monetary policy driving up asset prices is simply doomed to failure.”
Buttonwood is inclined to side with the SocGen team. But in the short term, cheap money is a potent force. Experience suggests it can drive asset prices well above the levels that cautious investors are willing to stomach.
February 2011 Investment Comments
February 15, 2011 Leave a Comment
PVG ASSET MANAGEMENT CORPORATION
The Roller Coaster Continues
A decade ago stocks achieved a high that was only briefly touched in 2007, and has yet to be seen again. Extreme stock volatility has allowed investors to feel good for some years during the last decade – while stock prices were rising. But brutal repeated declines have taken us back to where we started, or worse, each time. The markets make one think of Sisyphus, who in Greek mythology was punished by being compelled to roll an immense boulder up a hill, only to watch it roll back down, and to repeat this throughout eternity. We are long term growth investors, but believe we need to protect ourselves from a market that is following a path similar to the eighteen years of the 1960s and 1970s when most investors lost money.
2010 was similarly a roller coaster ride, a microcosm of the last decade, as the chart below shows. October, November, and December were the good months. Investor attitudes toward stocks expectedly improved. Or perhaps it is the other way around. Money is again pouring into stock funds. But as one can see, stocks have made minimal headway from their April peak and were down 16% from that point during the summer. It was only August, when the Wall Street Journal reported that 66% of Americans believed that the economy was going to get worse or expected renewed recession that stocks turned higher. In contrast, “safe” bonds (second chart of long term US Treasury prices) turned lower, eventually losing 13% of their value in four months. Municipals mirrored the treasury market.
The story is much the same in every market. European, Chinese and other Emerging Market stocks, and even commodities, have remained volatile and failed to make new highs. We are seeing money slosh from market to market (from foreign stocks to commodities to US stocks, for example), in search of a return. We suspect most investors can report little or no gain since 2000 and 2007 when prices (S&P 500) were nearly 20% higher than today.
PVG continues to report that Loss Averse Growth investing has succeeded in smoothing out these wild market swings. Our goal has been to produce positive returns while protecting our client’s assets from the repeated market declines, rather than tracking the market up and down. Over time, our returns are compelling when considered in light of the reduced risk to which we have exposed our clients.
From the inception of Loss Averse Growth investing on 9/30/02, we have generally kept pace with the market. The introduction of hedging to our approach in 2005, using inverse exchange traded funds instead of cash, has allowed us to substantially outperform the S&P 500 stock index. And, we have delivered positive or absolute returns even when our results lag, as during the recent upturn. Throughout this long secular bear market, one of the worst in history, avoiding or hedging market risk has been valuable service for clients since our returns continue positive, as our composite returns below show.
|
% Gross Performance through 12/31/10, before fees but including transaction costs |
|||||||
|
Account Type |
2010 |
12/31/07 |
10/31/07 |
4/30/05 |
9/30/02 |
||
|
1 Year |
3 Year |
Last Market High |
Hedging Begun |
Inception |
|||
|
Stock Growth |
7.7 |
1.4 |
31.9 |
-3.1 |
77.3 |
||
|
ETF Growth |
3.0 |
4.1 |
38.0 |
2.0 |
92.4 |
||
|
Stock Balanced |
10.0 |
11.5 |
29.8 |
7.5 |
75.3 |
||
|
ETF Balanced |
6.7 |
11.2 |
40.4 |
8.6 |
86.4 |
||
|
S&P 500 Total Return |
14.8 |
(-8.6) |
21.9 |
(-13.1) |
81.1 |
||
Traditional money managers, who have ridden the market up and down and up, remaining 20% or so below their peaks, must feel a lot like Sisyphus who experienced an eternity of frustration with the boulder rolling away, just when he neared the top of the hill. We have not been perfect, and are continuously adjusting our approach and management tactics to allow us to take advantage of the shorter-term market moves that have become more common than we expected.
Looking to the future; when can we expect more market stability? When can we expect sustainable new highs for the markets? This year we think it safe to assume a continuation of volatility, much like last, and plan to take advantage of opportunities as they arise. Longer-term we are unsure.
The problems facing the global economy and particularly the U.S. do not need rehashing. Excessive private and public debt built up recently and the last 20 years will continue to bedevil economic and business growth, public finances, employment, currencies, asset prices, and public affairs for years to come. A weakened world economy will continue to be subject to shocks such as we have seen over the last decade. For example, aggressive U.S. monetary policy, instituted as a response to our domestic problems, is driving inflation higher in emerging markets, to the detriment of their security markets. We are also concerned about baby boomer investment behavior as they approach retirement. Whether they retire early or late, and where they move their investment dollars, will affect both economic conditions and stock and bond prices.
The good news is that economic problems are being recognized, even if there is no quick or painless fix. Politicians, prodded by constituents, are talking about ways to deal with debt, unfunded liabilities for pensions and health care, national competitiveness, etc. It will not be smooth or to everyone liking, but these problems can be solved over time.
Innovation driven growth is also driving segments of the American economy, and periodically presenting investment opportunities for PVG – when prices fall. Innovation driven growth has always been part of our economy, even during past difficult economic times. For example, during the depression of the 1930′s, autos, electricity, and appliances were growth industries. And, during the troubled 1960s and 1970′s mini-computers and micro-processors were growth industries. These days the list is long: Photonics, mobile computing, augmented reality, business analytics and intelligence, software as a service, sensors, LED lighting, virtualization, genetic science and health diagnostics are just a few areas of continued growth, and investment targets for PVG and our clients.
Economic and market predictions for 2011 are common now, as they always are at the beginning of a year. History suggests most will be wrong; particularly the consensus that stocks will gain 10% and bonds will be risky as defaults and rising interest rates take their toll. Rather than another prediction, we have a disciplined, unemotional investment approach; Loss Averse Growth investing that has helped us navigate volatile markets since 2002. As we enter 2011, we are very concerned that investors are chasing stocks again, but believe that our approach will continue to allow us to protect and grow your assets.
Regards,
Patrick S. Adams, CFA
Joseph N. Pecoraro, CFA
Buy and Hold is Risky in Todays Market
April 25, 2010 1 Comment
April 18, 2010
How to Play the Bubbles Like the Pros
Over the last 13 years, investors have experienced some of the largest financial bubbles in history. Asian currencies rose and fell, technology and Internet shares suffered staggering losses, oil and other commodities rode a wild roller coaster, and the collapse of the housing market caused trillions of dollars of damage.
Already, some see signs of new real-estate bubbles in markets like China, Australia, Canada and even smaller countries, such as Israel. Rather than aberrations, there’s reason to think that financial bubbles have become more common.
And markets are more volatile — as was evidenced on Friday when news reports of Securities and Exchange Commission charges against Goldman Sachs Group precipitated a sudden and sharp selloff.
How can investors deal with the new environment?
Analysts offer a range of suggestions, including dropping buy-and-hold strategies, holding more cash and purchasing a range of downside protection, such as options and so-called inverse exchange-traded funds.
Competitive Investing
Among the reasons so many markets are surging to sky-high levels before tumbling to painful depths: Investors are able to chase almost any kind of trade today, thanks to new products, such as ETFs. Pressure has never been greater for investment pros to keep up with competitors, encouraging them to ape their rivals’ trades. Also, more pros have embraced “momentum” investing, buying investments as they move higher, and selling them as they fall, to try to ride the moves.
Meanwhile, globalization and other developments have pushed inflation lower, encouraging central bankers to drop interest rates so low that many investors have turned to cheap borrowed money for their trades, fueling financial bubbles. The free-flow of trading information also may have made markets more volatile and prone to wild trading.
“The size of the bubble is in direct proportion to the ease with which news and rumors can be spread and the ease with which people can then trade on these rumors,” says Aswath Damodaran, a professor of finance at the Stern School of Business at New York University.
The new environment presents unique challenges. It’s often hard to identify a financial bubble. The surge in gold over the past few years strikes some analysts as dangerous. Global markets often move in lockstep today, making it harder to avoid a sharp downturn.
But investors who adopt a perpetually worried outlook will miss out on big gains — such as the 76% rise for the S&P 500 index since the market bottomed out just over a year ago.
Rather than predict how long markets will climb, or when they might tumble, a better idea is to embrace new strategies. For one thing, it’s no longer safe to buy an investment and store it away. Taking profits after a big runup once was the mark of a timid investor; today, it’s a sign of smarts.
”One of the lessons from 2008 is that buy and hold is a much riskier proposition,” says Jack Ablin, chief investment officer of Harris Private Bank.
Staying Liquid
Just as important, investors need to make sure they’re not stuck in hard-to-sell holdings if they might need to raise cash in the short term. Too many investors were caught in 2008 in investments that turned out to be quite illiquid, such as high-yielding money-market funds that held risky debt.
![[Lede18]](http://sg.wsj.net/public/resources/images/OB-IE787_Lede18_NS_20100417180657.gif)
Buying protection and having ample cash on hand also are musts. Some analysts recommend inverse ETFs, which provide a return that’s the inverse of global markets or sectors. If markets tumble, these ETFs should rise in value.
An investor who is convinced that his portfolio will do well over the long haul and is unwilling to sell shares, but is still worried about a short-term market tumble, might place 5% of the value of his portfolio in shares of ProShares Short S&P500, an ETF that climbs when the Standard & Poor’s 500-stock index falls.
That could provide cushion in an abrupt tumble. Investors holding heavy doses of shares of smaller companies can purchase the ProShares Short Russell2000, which rises when the small companies in the Russell 2000 drop.
These ETFs sometimes don’t track markets exactly, especially when trading gets volatile, so they’re not a perfect solution.
Another option is to choose a “tactical asset” or “tactical-allocation” mutual fund, or one that shifts among various assets, in an attempt to avoid getting caught in a painful downturn. One example: the Pimco All Asset Fund.
Cash at the Ready
The simplest form of protection is holding ample cash. Today, money-market funds pay puny returns, but that’s not a steep price to pay for both safety and the ability to re-enter a market after a tumble.
”Investors must be more willing to employ cash as a legitimate asset class,” says Mr. Ablin.
Investors need to have more cash on hand than in the past, argues Jeff Fishman, who runs JSF Financial, a Los Angeles-based financial-advisory firm.
In the past, he recommended that investors hold cash equating to three to six months of living expenses. But on the heels of the markets’ turbulence over the past decade, he now advises they hold cash amounting to six to 12 months of living expenses, especially since banks have slashed or eliminated home-equity lines of credit to many individuals, something many relied on as a safety net.
Mr. Fishman is a fan of shorter-term tax-free bond funds, such as the Vanguard Short-Term Tax-Exempt Fund and the AIM Tax-Free Intermediate Fund, as good places to stash short-term funds.
Write to Gregory Zuckerman at gregory.zuckerman@wsj.com
April 28, 2010 Investment Comments
April 29, 2010 Leave a Comment
Looking for Low Risk Opportunities: We continue to buy growth investment opportunities for client portfolios. Since current prices do not seem particularly attractive, however, we are protecting assets by hedging against global economic and market risks like the US public and private debt overhang and sovereign European debt problems that could lead to lower prices.
In summary, the US economy has experienced a relatively small rebound over the past six months, compared with previous recessions. Furthermore, this rebound was generated primarily by government deficit spending, not a significant improvement in private sector finances and demand. International economic and business conditions also continue weak, and subject to negative surprises.
In contrast, market prices seem to be in boiling over as at least some investors push stocks higher, perhaps due to hope that portfolios may recover bear-market losses, which as the chart below shows, has not happened yet for typical investors.
At the beginning of this decade, we predicted a range bound market without new highs for a lengthy period. This prediction has proven correct as valuations and corporate earnings have shrunk. Even with the S&P500 Stock Index rebound, it remains down approximately 23% from its 2007 and 2000 highs. Unlike many managers who prefer to ride these market waves up and down, PVG successfully avoided most of the 2007-2009 decline with comprehensive risk management, and can wait for lower risk growth opportunities to fully reinvest client funds. We suspect newer clients will see the benefits of risk management as this year progresses.
Cautious Outlook: We anticipate lower risk investment opportunities sometime this year, within the price band already established over the last decade.
One reason is that we doubt overall market valuations will expand much if at all this year. Aside from fundamental drivers of valuation changes, like the downward direction of interest rates since 1982, we expect demand for stock to continue gradually declining. For instance, over $50 billion was withdrawn from equity mutual funds last year. Following unbridled enthusiasm for stocks, during the 1920’s and 1950s and 1960s for examples, valuations fell as stock demand declined, re-enforced by “disappointing results” that tends to perpetuate the trend. Similar negative factors may be at work today, as the market fails to make new highs, compounded by the large close to retirement baby boomer generation and issues like huge consumer, federal, state, and local debt levels, and unfunded pension liabilities.
Recent news headlines suggest economic optimism about recovery from one of the worst recessions on record between 2007 and 2009. For instance the Wall Street Journal reported: “Evidence mounts of strong recovery”. Despite this optimism, history suggests that recessions caused by debt driven financial crises as we have experienced are generally followed by weak recoveries. This is probably why the Federal Reserve Bank and the Treasury have maintained tempered economic forecasts and historically low interest rates.
The recovery has been weak so far. US Gross Domestic Product fell more during the 2007-2009 recession than in either 1973-75 or 1981-82, and has recovered less. Assuming GDP grew 3% (annualized) in the first quarter, which is the consensus, then it will be up 2.8% (not annualized) in the nine months since the recession ended, compared to 3.8% after 1975 and 5.6% after 1982. And the composition of this growth may not be sustainable. Much has come from normal but temporary inventory rebuilding. Consumption gains for items like automobiles, however, are largely due to consumers and state and local governments taking advantage of federal stimulus dollars, and recently a reduction in consumer savings rates, even though consumers continue to have extreme levels of debt and worry about retirement.
We further believe consumer spending will not provide its historical growth stimulus because consumer wealth has been reduced by lower stock and home prices, and because new credit is difficult to obtain or unwanted by many. Furthermore, the banking system, in the process of rebuilding reserves, is less able and willing to offer loans.
We suspect the spread between household debt and personal disposable income, shown on the chart to the left, will probably continue contracting and be a drag on economic growth.
Similarly, the Federal fiscal stimulus is now peaking. And public debt, like consumer debt, will also eventually need to be paid down from historically high levels, as seen on the chart below. This is a widespread problem not limited to the US government. States are in financial trouble. Europe’s debt levels may lead to sovereign debt defaults. Many also believe China has hidden debt issues related to its record breaking stimulus that has also led to industrial over-capacity and unsustainable stock and real estate speculation. Governments simply have more limited ability to stimulate than they had a year or two ago.
Economies, corporate sales and earnings, can grow while private and public debt contracts and taxes increase, but experience says they don’t grow rapidly.
This is an economic environment that will be subject to surprises, not all positive. As a result, there is the likelihood of continued severe up and down stock price swings, similar to what we have experienced for the last decade.
Great Investment Opportunities Anyway: Even with this investment environment we see opportunities – when prices become attractive. For instance, companies that create value through new products that increase productivity and lower costs should do very well. Many of these companies are technology driven such as those participating in internet applications, unified communications, data storage, visualization, cloud computing, and energy conservation. The health care sector is also likely to experience significant growth as 30 million new customers are driven into the system by recent health care legislation, and the biotechnology sector should benefit from its ability to improve health outcomes while reducing costs. Larger multi-national companies have the benefit of healthy balance sheets that allow them to continue a degree of global expansion and acquisition of more innovative smaller companies. And, some natural resources like domestic natural gas have growth potential due to cost and environmental advantages. Growth investing has always done well during past periods of slower economic growth, and we expect similar opportunities to continue.
As we commented above, however, identifying business growth is just part successful investing under current investment conditions. Prices must also be attractive prior to establishing significant new investments in our client portfolios, rather than merely assuming substantial market risks by maintaining fully invested and un-hedged portfolios. Currently, as commented, we anticipate that lower prices and more attractive prices could result from continued European debt problems, slower US growth during the second half of this year, or some surprise element such as economic problems in China. The partial, but substantial, recovery of stock prices from their lows last year, and current extremely bullish attitudes of many investors, may reflect hope that the worst of our global economic problems are behind us. It may also be a warning of potential risk.
In summary, growth equities are an attractive area for investment, but portfolios will also require careful buying and comprehensive market and security management to preserve assets from the inevitable bear market declines that tend to repeatedly occur during economic periods like we are now experiencing. To reiterate the arithmetic of bear markets: Most managers, who were down around 50% from the highs of 2007 to the lows of 2009, were unable to achieve the 100% return necessary to fully recover during the big rally of the last twelve months. This illustrates the importance of a loss averse growth strategy that includes patiently waiting for lower risk opportunities even at the risk of missing some period of high returns. This approach is more difficult than riding the market waves up and down. But we believe multi-year investment returns will be enhanced more by avoiding negative surprises than by participating fully during the euphoric and hopeful upturns like the one we have recently experienced.
Please give us a call with any questions.
Patrick Adams, CFA
John Johnson, CFA
Joseph N. Pecoraro, CFA
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