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Quarterly Investment Commentary: January 2010
Quarterly Investment Commentary: January 2010
Quarterly Investment Commentary: January 2010
January 2010
As for domestic
stocks, they are
slightly overvalued
and there is a virtual
floor (courtesy the
Fed’s commitment to
“do whatever it
takes”) underneath
current prices. There
Why then doesn’t the government appear to be is an equal amount of upside and downside, but
worried about the consequences of their we have been (and will continue) trimming
actions? I offer several possible reasons. First, equity positions as stock prices continue to
hubris. They actually believe that the same advance. We would look to materially reduce
experimental financial engineering that fueled stock exposure if prices advance another 15% or
the last round of excesses can be initiated from more.
within the government’s laboratory with an
exemption from real world rules. Second, Even so, we favor larger cap stocks with
incentives. Even if they know their actions will international exposure over mid and small
not succeed, they do not consider themselves to capitalization companies that are dependent on
be in the position to tell the truth. People in the tired U.S. consumer.
power manage the mass’ perception, which
generally means communicating that everything
There is definitely a case to be made for a but it does ensure our country’s economic
“double dip” in stocks. Indeed, we have progression. Our nation is incredibly buoyant.
chronicled here before how a -30% or greater We are mobile and entrepreneurial. It is
drop in stock prices is conceivable. We do not important to not underestimate that resilience.
feel that kind of a pullback is probable at this
time, even given the government’s present Investors need not be discouraged by price
course. If events do play out differently and downturns, but encouraged. That is counter-
stocks fall precipitously, we believe it will be intuitive. During times of turmoil it is easy to
temporary in nature and we would be equity want to wait on the sidelines until things get
buyers if prices drop far enough. One must keep better. But that attitude is already reflected in
in mind that stocks should only be viewed as prices. I know of no investors who consistently
long-term investments. and successfully pick market tops and bottoms.
There is an adage that says that the only people
The greater likelihood in our minds is that the who have bought at the highs and lows are liars.
dollar continues to drop vis-à-vis developing That does not mean that many do not still try.
currencies. It is possible that stocks could Some in their frustration with traditional
continue to go up even in the face of a devaluing technical timing tools have turned to alternative
currency. As such, we are maintaining our metrics. I recently heard of one gentleman who
bullish view on commodities. uses astrology to predict stock market
movements. Another relies on the migratory
As hard as we are on the government’s policies, pattern of the African elephant to divine market
the fact is that crises are inevitable. direction. No kidding.
Acknowledging that does not make them less
painful. Reality is, however, that crisis creates The lesson is that investors will always face
opportunity—for the buyer. But you have to be a difficulties, fears, and opacity in their decisions.
buyer. We do not advise trying to predict market There will always be very good reasons not to
tops and bottoms. We believe an all-weather invest. The present time certainly has its fair
approach that participates in the good times and share of them. America has not had to deal with
does not get wiped out in the bad times yields the shift of power from the west to the east
very satisfactory results over time. before. It is understandably a challenging time.
The reality has not changed. The only way to
The destructive behavior we witness most often create wealth is to invest and stay invested.
is the timing penalty. Investments go up and
people wish they had owned it before so they
buy at the high. Then when prices fall they get
discouraged and bail out. One of our missions as
a firm is to give our clients a longer-term Your Investment Team,
perspective in order to prevent that common
kind of injurious investor behavior.
Conclusion
Douglas E. Voisard, CFP®
One reason we get fired up about encroaching
socialism is because we believe freedom is our
country’s greatest asset. Freedom drives
innovation and allows capital to flow and change
directions when needed. Freedom does not
guarantee that we will never have recessions, Brian McClard, CFA
Voisard Asset Management Group • 146 Monroe Center NW, Suite 820, Grand Rapids, Michigan 49503
800.343.9041 • dvoisard@voisardgroup.com • bmcclard@voisardgroup.com