CI Outlook - Archives

October 2010

October 5, 2010

 

 

 

US Dollar Index

It has become accepted wisdom that the stock market will move in an inverse relationship to the dollar.  That is exactly what happened last month as the dollar index fell and the stock market rose sharply.  Although the policy confusion in Washington appears to be the perfect backdrop for continuing dollar weakness we are beginning to grow cautious about an immediate extension of the dollar’s drop.  Just as dollar strength became extended in June we believe the current decline is getting overdone.  With so much money betting on a continuing fall in the dollar it is probably time to become cautious.   If the dollar were to stabilize the momentum buyers furiously crowding into stocks would look for the exits.  That is the risk we are hedged against.

 

While we are cautious we do not want to sit out a meaningful market advance.  Therefore we will continue to hold the Volatility hedge while we commit more cash to the market.  Where appropriate we bought Inergy, a propane distributor which is a growing force in natural gas storage.  NRGY, an MLP, yields over 7% and we believe the distribution will grow as the demand for natural gas storage grows.  With more shale gas coming on line daily gas storage remains in short supply.  Again, where appropriate, we purchased Bristol – Myers a well known pharmaceutical company with a decent yield.  While some of their drugs are going off patent, new more promising compounds are in late stage FDA testing.  Not only do we like the prospects but we believe the small size of this company may be appealing to potential acquirers.    

With the dollar in free fall and elections just around the corner we will remain restrained in our investing outlook.  However we have several other high grade growth oriented securities under review for purchase.  If the conditions become right we will make those commitments where appropriate. 

Thank you for your patronage.  Please call us with any questions, concerns, or comments.

 

CJ Brott                                  Karen Burns

 


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