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Eeny, Meeny, Miny, Moe
12/31/2015
Just like the children’s rhyme that has many creative ways of continuing until the
desired result is achieved, investors in 2015 seemed to have an insatiable appetite
for stocks and made their investment decisions in a similar fashion….finding
creative ways to justify their decisions. Good economic news was good for the
stock markets …. while bad economic news was also good for the stock markets
because it meant continued free money from the Federal Reserve.
However, this game masked the real problems of what appears to be a somewhat
stable US economy but one with very sluggish wage growth and facing very harsh
international winds. Additionally, the constant concern of international terror has
the ability to derail, even if temporary, an already unstable economic footprint.
When coupled with the three hundred pound gorilla of the multitude of unknown
pockets of “excess” created by an overextended and very accommodative
monetary policy that left interest rates near zero for far too long, the risk of near
term future market decreases far outweighs the opportunity for market gains.
Stock markets that choose one day to rally on good economic news and then the
next day to rally on poor economic news are very dangerous just like a rudderless
ship. We have witnessed these market dynamics once before in 2000 when the
Internet bubble went “boom” and many of you perhaps remember the outcome.
Investors kept making up reasons to push stocks higher and higher with no
fundamental basis. Like now, we felt very uncomfortable when managing
previous portfolios during that period with the upside potential for equities and
the stock market given the associated risk and repositioned a vast majority of our
client’s capital to alternative assets like bonds and other fixed income
opportunities.
Herein lies the difference in the active investment style of Cambridge Capital
Group versus many other investment managers who utilize mutual funds and
ETFs that are, by and large, barred from making these bold repositioning
investment decisions which leaves the responsibility to the investor. We began
planning for this setback in July 2015 by assisting many of our future clients in
repositioning their portfolios even though they were maintained by outside
custodians. While we fully expect the stock markets to “retest” their lows of
August 2015, hopefully they will then began to develop a base upon which to
make a solid improvement on the back of true fundamental reasons and not
continuing a children’s rhyme until they find the answers they want.
However, this will take time and other than short term trading opportunities, we
believe that equities and the stock market is not the best asset class to employ
your capital. Therefore, we will continue to allocate a vast majority of investment
capital to bonds and other fixed income opportunities with no exposure to the
stock market while using our equity option fund to take full advantage of the
short term trading opportunities as well as developing necessary hedging
positions.
Once again, thank you for giving us the opportunity to work with you and your
family in the near future. Please do not hesitate to give us a call at 850-270-9898
if you have any questions. We do see a lot of unique opportunities in the near
future.
Cambridge Capital Group