The Quest for Yield View
July 2010 - The stock market’s abrupt decline in May and June was a rude awakening for investors who had started moving cash back into stocks. Unfortunately, the S&P 500 Index was down more than 11 percent in the second quarter. While the market has clawed back some of that loss in July, economic uncertainty and stock market volatility have reinforced our view that stocks are unreliable in the short run. Therefore, we have turned to a strategy of trust preferred securities combined with select high dividend stocks to provide the highest probability for a respectable total return.
Tidal Wave of Taxes View
May 2010 - With the federal deficit at record levels and the new breathtaking costs of healthcare reform, it seems increasingly unlikely that Congress will extend the tax cuts enacted in 2003 by the Bush Administration that are set to expire at the end of this year. Investors will be faced with some tough decisions, as a result.
Cash Pays Nothing View
February 2010 - What a difference a year makes. We’re all breathing a little easier after the tremendous stock market rally in the second half of 2009. Portfolio values have recovered dramatically from the March low and the economic picture is slowly improving. However, there is great debate about whether the rate of improvement is sustainable. And so, while we are relieved, the economic uncertainty that looms in 2010 makes strong stock market performance anything but a sure thing.
The Best Defense is... View
October 2009 - The market rally of the past 6 months has provided an important boost to portfolio values and investor psychology. Since the market low on March 9th the Dow Jones Industrial Average is up more than 45 percent. (UIA portfolios are up, on average, more than 70 percent since the low; Intelligent Growth is up over 90 percent).
The Preferred Strategy View
July 2009 - Last March, the sky was actually falling. Home prices were cascading downward, layoffs were increasing at a dizzying rate, bank nationalization was imminent (if you believed the national news), and the US economy contracted at a 6 percent annualized rate. So it wasn’t surprising when, on March 9th, the stock market reached a recession low point – down more than 50 percent since its peak in October 2007. The worst decline since the Depression.
Are We There Yet? View
April 2009 - When the stock market began to rally off the March 9th low point, one could almost hear the collective sigh of relief from investors. There’s no doubt, it felt good to see the market going up on a consistent basis. Not surprisingly, the rally left many people wondering, “Was this the bottom?”
The Honest 10 Percent View
February 2009 - Despite slowly improving conditions in credit markets, company profit forecasts point toward very difficult economic conditions in 2009. Indeed, companies have been announcing profit warnings and layoffs almost daily. The stock market is in for a rocky ride, as we’ve seen so far in January, and faces a nasty recession for possibly another twelve months until it starts to recover.
Look Past the Recession View
November 2008 - The S&P 500 hit its lowest point in five years at the end of October. For the decade, beginning 1/1/2000, the S&P 500 is down more than 30%. These dismal results are not caused by a normal recession, but rather, they stem from a financial panic that is only now repairing itself.
Financial Crisis Abating View
September 2008 - There are a number of major themes so far in the third quarter: financial sector stressed to the maximum, Freddie Mac, Fannie Mae, and AIG “rescued,” Lehman Brothers fails, commodity prices drop, the economy stays weak, as a result the market drops sharply, then recovers with the Paulson plan.
Be Careful... View
July 2008 - There are a number of factors driving the market these days. The general result is an anxious, and sometimes, gloomy period for the stock market. Let’s look at a few of the economic underpinnings to see if there is a reasonable path to take despite the difficult circumstances.
The Bottom? View
April 2008 - On March 17th the Fed basically told one of Wall Street’s famous firms, Bear Stearns, that JP Morgan Chase was going to buy it. Last year Bear Stearns shares traded just under $100/share. After the subprime mortgage crisis did its work, the sale price was $2/share but later was raised to $10. Many feel that this Fed imposed sale signaled that big financial companies would not be allowed to fail, if failure would have a cascading effect on financial markets.
Weekly Update View
UIA provides Weekly Market Updates to its clients by email every Friday afternoon.
Do Not Fight the Fed View
December, 2007 - On December 11th the Fed did what it said it would do in August, “act as needed” to address the credit problems in the financial markets. Interest rates were reduced for the third time since September. There was a mixed reaction to the reduction. The price of crude oil went up several dollars a barrel with the expectation that lower interest rates will help worldwide growth. The stock market took the opposite view and the Dow promptly declined almost 300 points. Who is right? Here is the information that many are using to reach a conclusion.
Recession Unlikely View
November, 2007 - On August 31st, Fed Chairman Bernake said the Fed would "act as needed" to address the spillover impact of the subprime mortgage mess. And it did. On September 18th, the Fed reduced interest rates by one half of a percent. It had to do so again at the Fed meeting October 31st. Another cut is likely at the December 11th meeting although inflation would be the argument to leave rates where they are.
The Revenge of Congress View
July, 2007 - In June, Congress put forth tax proposals that hurt all financial stocks. Congress was trying to raise taxes on a successful hedge fund, Blackstone, which was structured as a limited partnership. In the process of going public, Blackstone released information that showed it was very profitable. The reaction of the tax committee chairmen was almost immediate.
Two Down - One to Go View
June, 2007 - In the next twelve months, don’t be surprised if the stock market in China has the sharp correction that former Fed Chairman Greenspan suggested recently. We see this as the largest unaddressed problem confronting investors. In 2006, the Chinese stock market went up 130%. It is up 55% so far this year and has tripled in the last seventeen months. Granted, the economic growth rate in China was 11% annualized in the first quarter of 2007 vs. 1.3% in the U.S. That level of growth is very valuable to their stock market; however, a wave of retail speculation by new Chinese investors has occurred. When a large number of people take out loans on their homes and put the proceeds into the stock market, things often end badly.
The Subprime Correction View
April, 2007 - Was the correction at the end of the first quarter all about the impact of subprime mortgage default rates going up? Let's look at a series of economic factors and you can make up your own mind. The quick answer is "sort of." Is the correction over? "It seems so."
Interest Rates vs. Growth View
January, 2007 - During the last two quarters, the Federal Reserve led the market to believe that it had slowed economic growth enough to stabilize inflation. The tool the Fed used was to raise interest rates 17 times in two years. The Fed bludgeoned the economy from an annualized growth rate of 5.6% in the first quarter of 2006 to 2% in Q3.
Investment Styles
