CI Outlook - Archives

January 2009

January 9, 2009

There is no doubt last year was one of the worst on record.  And there was no place to hide as stocks, bonds, and commodities fell here and around the world.  In fact the most worrisome feature of the decline was its worldwide character.  That risk of systemic meltdown contributed to the total destruction of investment confidence.  This was most aptly demonstrated by investor willingness to accept negative interest rates on US Treasury bills, rather than hold riskier assets.  Notably as the year wound down investors calmed down and confidence began to return.  In fact the last few weeks have been notably less volatile than the previous few months.  We are becoming convinced the market lows of November will hold.  Thus, cautiously reinvesting cash reserves will be our investment task this year. 

We will base our investment decisions on our macroeconomic outlook.  It has two important parts.  First we think that economic growth will not return until later this year, at the earliest.  Secondly we believe the extreme amount of government economic stimulus being created by our government will eventually produce unexpectedly high rates of inflation.  That inflation will be detrimental to bond prices and beneficial to commodity based investments.  In the meantime the ongoing slow economy will not allow for corporate profit growth. This will choke off stock market appreciation until such time as investment confidence in a more imminent economic recovery takes place.  Therefore our ideal investment will have two components, current income and the ability to benefit from inflation.  If the market stays in the trading range we expect, the current income component of our investments will allow us to wait until the market recovery begins.  The inflation component will give us capital appreciation in an environment of flat PE ratios and higher interest rates.  We will purchase these investments for as prudence and market conditions allow. 

As 2009 begins we want to thank you for your business.  Also we would like to review your portfolio and current investment needs with you.  We will be calling you to set up an appointment to meet and do so in person.  We look forward to seeing you at that time.

CJ Brott                          Karen Burns

 


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