2009 News Archive

December 3, 2009

380 Elm Street

Upward markets continued in November, as investors continue to demonstrate their disregard for risk. It seems they learned nothing from the experience of 2008 markets. Widening the gap, between soaring stock prices and the weak underlying economy, increases concern that a market correction is overdue. Our portfolios persist in a conservative position, to reduce the effect of an anticipated correction in stocks. We wait for a propitious time to buy back into the market. Bonds continue strong, with increasing share price as well as dividends adding to portfolio value.

The bearish position we hold for stocks is based on solid economic data. Most recessions are caused by trends including excessive inventory buildup and Fed tightening of cash flow. These recessions can fade more quickly. The current recession is induced by credit tightening and reduction in assets values, such as housing. With record unemployment, this type of recession affects people's attitudes toward debt, savings and spending, and causes a slower economic recovery. Respecting your reduced tolerance for market fluctuations, we continue a limited exposure to stocks in client portfolios.

Traditions and memories comprise much of our holiday celebrations. If memory is "the power to gather roses in winter", it is in our power to gather the roses of our past, and disregard the rest. Traditions form a base, but are vitalized by the changes we create over time. May your celebrations this year be enriched by the past and renewed by your present journey. All we can celebrate is this moment. Bring it our kindest, warmest fullness.

November 4, 2009

380 Elm Street

After sparing investors, braced for an October stock market fall, the month did close with signs of weakness. Despite the general euphoria the rising markets have fostered, the underlying economy remains weak. The clearest sign is that people are still losing jobs. The economy will recover somewhat without people going back to work, but until companies can stop laying people off, instead of producing work, to improve their bottom lines, the economic recovery is weak at best.

One effect of accumulating years is adjusting to the realization that times that are familiar, become currently viewed as history. Initially this realization is startling. Gradually the effect dulls to unsettling. At some point the experience must become valued. In the garden, it is again the season of reversals, with a golden earth and dark skies. It must be November, and we have again much indeed for which to feel grateful.

October 6, 2009

380 Elm Street

September markets rushed to another breathtaking close. Stocks have completed the strongest summer since 1939. Please enjoy the new higher bottom lines. The markets never stay the same. After such a strong showing, we can expect the market to change direction. Improved employment numbers are a sure signal. The economy will truly be recovering when employers begin hiring again. Until then, the market volume and soaring prices offer only temporary gains. We all feel better for the moment, but the story continues from a hidden future. Your portfolio is prepared for change.

Autumn blooms hold particular enchantment in the fading garden. Their intense colors burst upon the scene like fanciful dancers at the end of a production. They herald the end, still we look forward to each reappearance. Engaged, we succumb to their distraction. Beginnings and endings get the best attention.

September 2, 2009

380 Elm Street

The dog days of August favored the stock market, as returns swelled yet another month. Even with limited exposure to stocks, portfolios rise past last winter's losses. Although lagging stock index returns in recent months, our portfolio average returns lead well ahead of stock indices over the past year and longer term intervals. Though the present strong returns may be temporary, the lift is most welcome.

Warnings increase that the struggling economy is not supporting this growth in stock prices. At home and abroad, economies are better in some areas and fragile to crumbling in others. We are still exposed to the effects of real instability. 2010 holds more reasonable expectation for economic and market progress. 2010 seemed far away a year ago. Our position continues that the sooner current stock prices correct, the sooner we will get on with a genuine, if less exciting recovery. Meanwhile, interest rates are expected to remain low and short term bond positions hold real value for the wait. We continue to monitor all this and more and will discuss it, and our near term recommendations, with you when we meet.

Despite the extremes in this summer’s weather, blossoms spill in profusion. The event not lost on the pollinators: hummingbirds zip and pause their way around the yard constantly. One even taunted the cat, dancing as if writing calligraphy in the air, while the cat feigned disinterest, without missing a stroke of the iridescent pen. Then poof, gone. A fleeting moment captured in mind film, stored with care.

August 4, 2009

380 Elm Street

Lifting the DOW back over 9000, July markets closed on a welcome up-swell. With recent reports on the economy indicating the worst of the downslide is over, the stock market is ready for a recovery. Many warn that an undertow may accompany this incoming tide, and we will edge portfolios back into this market with caution.

While no one side of the economy signals danger, much of the basic support system remains weak and unstable. The economy is not recovering, it is just not falling as fast. Stock markets are anticipating a recovery with five straight months of positive returns in stocks. The worst in the market may well be over but we should expect a bumpy ride ahead, with unexpected drops and lifts from the market.

The gardens are lush with all the rain. Citronella-scented geraniums along the deck discourage the mosquitoes. A family of wrens has discovered the new birdhouse in the cedars. Sunflowers turn to seed factories as the late-summer lilies begin to bloom. It must be August.

July 2, 2009

380 Elm Street

June stock markets closed their best quarter in six years. The huge rally that began early in March petered out in June, bringing stock prices to uncomfortably high levels for a staggering economy. The rally lifted our spirits when we needed it most, but the word going forward is: caution. All we can really predict about the market is that it will go up and down. Many factors indicate we may be due for some down time next. Portfolios are prepared for this, keeping exposure to stocks low.

Emerging markets, commodities and technology have all led returns this quarter. These are market sectors that lead the market coming out of a recession, when demand for materials increases as demand for goods returns. Inventories are normally low by the end of a recession, so demand for goods quickly becomes demand for raw materials. Inventories are down from a year ago but not low yet. We have a way to go before this recession truly begins to turn around. Patience and distraction ease the wait.

You know the saying among those who live along the coast: what doesn’t rot, rusts. This year we have the pain but not the perks of beachfront living. Two years ago lawns turned crispy brown. Nature tosses extremes with abandon. We fine-tune our flexibility and refocus on what is really important.

June 2, 2009

380 Elm Street

Three in a row – May piled new stock market returns on top of March and April gains. Most stock indices are now positive year to date, wiping out the early months’ losses. International and emerging market stocks have led the gains this past month, along with energy stocks.

Good news is always welcome but the mistake may be to assume the worst is over. The troubles in the economy are far from solved and even these stock prices look high when stock growth prospects are dim. We continue to expect another tumble in stocks before the final rally begins to close this bear market. When and how much decline are the unknowns, so we’re holding cash, in money market funds, until prices are more appropriate to buy.

When the poppies begin to burst the garden takes on summer. Despite persistent cool temps the new season is moving in. As with the old custom at the New Year: open front and back doors, to let the old season out and welcome in the new. Not a bad metaphor for living, releasing what is done while starting fresh with what comes, especially when there are poppies.

May 6, 2009

380 Elm Street

The strong March rally continued through April, raising our portfolios back over year end values. With great timing the stock market bounce has delivered relief to investors when most needed. Whether the rally will continue, and the low of March 9 is the bottom, remains to play out. There are signals that we have another significant down side to endure before the bull rally begins. Another relapse should be the last. Better markets wait beyond, perhaps within a few months, as signals of a genuinely stabilizing economy (not just a less precipitous one) bring investors back to stocks in earnest.

The tech stock market (Nasdaq) has enjoyed a great spring and raised its one year average to -30. The other major U.S. stock indices are still negative year to date and remain deeply negative (-37,-38) from a year ago. Bonds continue strong and hold comforting long term returns compared to stocks. We have planned investments to rebuild portfolios first, then to provide stronger portfolio protection against future market volatility.

As May days swell the promise of spring, we all start life over. A repeating cycle offers renewed opportunities to begin again, to make a difference. With blossoms and birdsong comes an invitation. RSVP, with pleasure.

April 6, 2009

380 Elm Street

Market volatility continues this quarter with the worst ever January and February followed by the best March on record. As much as we would like to think the turn around has arrived, only time will reveal if we’ve seen the bottom of this bear market. For now we are braced for another downturn when economic realities return to face investors. The watch for the final upturn should soon be rewarded. The March rally reduced the first quarter market losses to -11% in the S&P index and -13% in the DJIA. Our average portfolio is down -3.2% for the quarter and up 2.8% for March.

Spring slipped in while we lamented winter's lingering. With signs of new life multiplying, the next warm day will energize us all with bursting blooms. Another winter ends. We revel in another spring.

It is time to be diverted by spring and renewals of all kinds. The market has shown it is not dead and will itself spring back to life when conditions are right. Winter does not leave by our willing it away, and patience with the cycles of the market will bring its own reward. For now enjoy the buds and blossoms, strong new shoots emerging and greening in their own time. Good stock markets will follow when we least expect.

March 5, 2009

380 Elm Street

February stock markets fell hard as worries about the economy thickened. Investors are clear about this: there is no quick fix to this thorny tangle in the economy. The defensive cash (money market) position we took around the year end has reduced our exposure to stocks. However money market rates follow the Federal rate, now at 0 to .25%. We are applying bonds to boost portfolios returns this year.

The economic stimulus will reduce the ongoing ravages from the ailing economy but the critical turn around will come from elsewhere. I’m watching the real estate sector but that depends on banks becoming functional. Everything depends on lenders functioning again. The road ahead is always dark but when it seems smooth, we don't mind. For now we need to know that we will be all right. I have every confidence that you will weather this downturn better than most. These hard times will end sooner than we now dare to expect. Meanwhile we actively seek every solid advantage for your investments, to bring your portfolio values back when stocks do recover, and maintain more stability going forward.

Seasonal changes come subtly from day to day now. Anticipation sweetens the discovery of each new signal of winter weakening. Each spring comes differently; spring always comes.

February 4, 2009

380 Elm Street

The new year continues the direction of 2008 for stocks. The defensive position we have taken with portfolios is minimizing investment losses going forward. With reduced losses, our portfolios will build from a higher position when stocks do turn around. We are not anticipating any major gains in stocks in 2009. The focus is now on bonds to give portfolios better and more stable returns.

Often the news refers to the economy and the stock market as if they were the same thing. They are related but separate. An important distinction to keep in mind is that while the economy has a long struggle ahead, some areas of the stock market will rally in anticipation of the end of recession. Long before jobs increase, this recession will ease. Before the recession eases, stocks will begin to rally. We have kept some stock positions in portfolios because no one knows when that turn will come. We will gradually add more stock mutual funds to portfolios as times seem appropriate later this year.

An investment conference last month and a portfolio design course last summer introduced us to some alternative investments and portfolio allocations that may help us weather future stock market downturns with ease. We will rigorously research some new investment options before recommending them for your portfolio. We need to understand how the investments work to avoid too-good-to-be-true schemes. The goal is to receive reasonable returns with minimal downside risk.

Daylight stretches to impress us. Definitely still winter, but with less hold on us. We know the icy grip will soon yield to crocus and pussywillow.

January 7, 2009

380 Elm Street

Forecasting the market is dangerous, especially in regard to the future. Various resources now suggest that the current recession is playing out to be deeper and longer than initially estimated. There is also evidence that stocks may go lower before a prolonged rally. Remembering that real return in stocks depends on a stable economy, we can assume that we are a distance from that rally. With this and other prognostications in mind, it makes sense to capture some of the considerable stock returns since November 20 and protect portfolios from the next drop. Our “buy and hold” strategy has developed some enhancements for these times. Thank you for the trust you place in us, to apply the best resources available for your invested savings.

As you may assume, all proceeds from sales at a brokerage go to each account’s money market. With low interest rates, this is a temporary safe haven. We will place much of this in bonds soon, as bonds are priced well now and we do not expect stocks to rally strongly until the economy strengthens. Stocks will not bounce back as they have from recent bear markets, but they will recover. With careful attention, we will work to minimize anticipated losses and gradually rebuild positions to recover all the lost growth and more.

The IRS has announced that in 2009, no withdrawals are required from IRAs for those over age 70. Any amount may still be withdrawn, and the taxes paid, but no required minimum applies this year.

2008 was one of those years that we want to release. With its share of treasured moments, it was also thornier and more tangled than most, tripping the innocent and trapping the unwary. The excesses of past years are extracting a toll today. Rebuilding confidence, then the economy, is the tall order for the new year.

Copyright © 2003-2012 Victoria M. Lechner.  All rights reserved.