Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
The Carnegie Counselor T TH HEE C CAAR RN NEEG GIIEE IIN NV VEESST TM MEEN NT T C CO OU UN NSS EE LL N NEEW WSS LL EE T TT T EE R R Winkers2012: on Wall Street Another Typical Year We entered the year optimistic for equities due to the strong earnings being produced by corporations worldwide. Not Thisofpast a number of difficult headwinds one our year research sources foretold the pending globalcaused waterspoutsthat in would the financial markets. distractions unfold over the last ninety days. The pursuit of democracy in the Middle tumbling or challenging First andEast foremost was the self-inflicted decades-long dictators in Egypt, economic drag out of Washington Tunisia anduntil Libyathe was notday even that waited final to enact suggested entering the year. Unrest policy to avoid the ‘fiscal cliff’. While has spread to Jordan, Lebanon and the band-aid agreement only delayed Sudan, and by Independence Day some tough be decisions, waiting they might celebrating theiruntil own the final deadline pushed the country independence. If we had known an through an economic dead-zone that earthquake/tsunami/nuclear threat was unnecessary. most of the would take placeFor in the third largest year, we were subject to a cavalcade economy in the world, we would have of political been more pundits cautious.promoting Even this their event candidates. After to spending record wasn’t sufficient distract athe steady progression of stock prices. Similar amount on political ads, we ended the to a with racehorse withgovernment blinders (winkers year the same leaders in Australia), the market maintained that brought us to the precipice. a steely focus on earnings despite the The Federal ReserveThe spent the was year the many distractions. result showering economy second bestthe first quarterwith gain money. since 1998QE withIIan advance 5.9% for After didn’t work,ofwe received the III S&P 500 index for to thespend first three QE and then a plan months of 2011. $40 billion a month buying up mortgages. While this did drive the The singular obsessionagency with earnings yields for government paper is nothing new for the folks that down to treasury yields, it did little manage money. For many Corporate a decade, to stimulate the economy. the knowledge of the direction of earnings beenbond the catalyst for stock earnings has slowed, yields fell, hiring prices moving higher or lower. Like was weak and growth in consumer most investment firms, we use outside spending has waned. Other news events research analysts that provide us the included the devastation of Superstorm earnings data for the companies we Sandy, the tragedy at Sandy Hook Elementary, the largest tech IPO ever inSimilar Facebook, the known as the totrader a racehorse ‘London Whale’ who lost $3 billion for blinders JPwith Morgan, the Supreme(winkers Court upheld the Affordable Care Act, the Olympics inthe Australia), and possible end of the civilization according to the Mayan Calendar. market maintained Furthermore, overseas growth slowed inaChina, the U.S. Ambassador steely focus on was killed in Libya, Europe remained mired despite the inearnings a recession where Spain and Greece both had unemployment rates above many distractions. 20% and the Middle East continued to reset the bar upwards on the term “instability”. It was a particularly tough follow. The financial media is in a tizzy year managing stocks and bonds. covering the case of Raj Rajaratnam, Or was it? manager of the Galleon hedge-fund Group, whoturn couldn’t quite wait for the While each of the calendar public data on earnings and paid for has its particular quirks, every year FOU F IRRTSH T Q QU UA A R T E R 2 00 11 21 In the news In the news Carnegie Ranked By Crain’s Carnegie Investment Counsel was recently ranked #11 in Carnegie wishesBusiness’ you Happy Crain’s Cleveland Holidays andList a Happy New April 11, 2011 of Largest Year. As we reflect on 2012 Money Managers. and look into 2013, while Carnegie was also fastest the markets andthe economy growing firm managers continue to among change, the with$100 million or more under importance of friends and management. Thank you for family remains. your referrals and confidence. Enjoy and celebrate in your Spring is Here own special way. Now that the snowy days on the Lakeall Erie gone we –From ofShore us at are Carnegie look forward to great baseball, great weather and hopefully even greater financial markets— Enjoy! insider information (allegedly). He’ll likely go to jail, trying to earn outsized is challenging due to the various profits for his clients. While we He’ll are very insider information (allegedly). economic calamities that inevitably committed to you, we’ll be pursuing likely go to jail, trying to earn outsized arise. Every quarter different only public data for brings our research to very profits for his clients. While we are obstacles that force Carnegie to weigh avoid a similar fate.we’ll be pursuing committed to you, the anddata potential on to onlyrisks public for ourimpact research portfolios. Macroeconomic dynamics When the stock market ran to its avoid a similar fate. may change the in weightings of asset highest ground 2007, it was propelled the market record earnings classes and industry sectors. Weits When theby stock ran to produced by publicly traded companies attempt to makeincalculated bets to highest ground 2007, it was in 2006. The accumulated earnings propelled by the record earnings minimize risk based upon the income of the or S&P in 2006 were produced by500 publicly traded needs growth objectives ofcompanies a$87.72, client. an all-time record high, sending the by in 2006. When theThe bestaccumulated laid plans areearnings altered market above 1,468. This earnings of the S&P 500weinchallenge 2006 were $87.72, outside forces, our current number dipped to $60.80 in 2009 an all-time record high, sending position and, if necessary, adjust the to but rebounded in 2010 to earnings $83.66. market above 1,468. This the new environment. When a credit This yeardipped the forecast for earnings number to a$60.80 in earnings 2009is rating changes for bond or to top the previous record exceed but rebounded in 2010 to and $83.66. are reported for a stock, it stimulates a $95 in earnings according to research This year the forecast for earnings is series of decisions as to the impact on from Standard & Poor’s. If this were to top the previous record and exceedto client values and for theinquiring future. happen, we’llnow getaccording more calls $95 in earnings to research as to why we don’t own more from Standard & Poor’s. If thisstocks. were to We know through behavioral finance We’ll likely hit the earnings number happen, we’ll get more calls inquiring that have own short memories. despite thewe horrible housing market, as toinvestors why don’t more stocks.Itthe is easy to look back at the late 1990’s persistently hightheunemployment, and We’ll likely hit earnings number and those in were easy years beingsuggest entrenched another war. the despite the horrible housing market, when everyone lots of money. persistently highmade unemployment, and The Federal Reserve hasasnot yet Realistically, they were difficult as being entrenched in another war.pushed interest rates higher, despite rise any other time period. Therethe were of prices for food and fuel. The Federal Reserve has notThis yet has pushed negative quarters, scandals, IPO frenzy continued to higher, hinder to the returns on interest despite the with. rise and highrates valuations contend bonds notes for of prices forinterest-bearing food and fuel. This has And ofand course, performance is always clients needing income. While bond continued to hinder onand relative; if the marketthe wasreturns up 38% prices have started to head south, it bonds and interest-bearing notes for we only delivered 35%, the pressure has created an opportunity for us to clients needing While to perform was income. amplified. Thesebond short pick uphave some bondstoathead prices not seen prices started south, it memories can work to an investor’s in years. Particularly, municipal bonds has created an opportunity for us to favor by quickly forgetting pain have up been dropped hotthe cakes pick some bondslike at prices not from seen of the 2008-2009 periods. It iscash always mutual needing to raise as in years.funds Particularly, municipal bonds important, though, to remember investors have started to bail from bond have been dropped like hot cakes from the lessons learned while navigating funds. Our strategy to to limit thecash impact mutual funds needing raise as through tough economic periods of falling have bondstarted prices,to if possible, isbond to investors bail fromand funds. Our strategy to limit the impact of falling bond prices, if possible, is to own individual bonds and hold them to maturity. Therefore, maintaining that cycle iswill eventuallyand return. goodthe quality paramount duration own individual bonds and hold them Considering the stock market wasThis up we can live with, generally short. to maturity. Therefore, maintaining 9-16% (depending upon the index) successful strategy has been the catalyst good quality is paramount and duration and bonds delivered 4-6%, in a few for can a significant in short. referrals into we live with,increase generally This years youover might 2012 our firm thelook last year. successful strategy hasback beenatthe catalyst and it an easy year. However, for aconsider significant increase in referrals into we differently ourknow firm over the lastsince year.every year presents obstacles. Just like Whilespecific bond prices waterspouts on Lake Erie, the events have started to head of last year appeared prices ominous and While bond downright scary, but they blew over south, it has to created have started head We know through behavioral an opportunity for south, it has created finance that investors have short memories. us to pick up some an opportunity for bonds at prices not in five with littlepick effect. We believe us to updosome years when we look back at 2012, we’ll seen inatyears. bonds prices be amazed at the low ratesnot of interest. We are positioning bonds to maintain seen in years. values by keeping maturities low and The fine balance of owning maintaining quality. The year-end deal stocks vs. bonds is paramount to out of Washington solidifies income, performance. While the headwinds The fine balance of owning capital gain, dividend and estate taxes, for bonds are strong, bonds areto stocks vs. bonds is paramount which are much needed certainty for still importantWhile for portfolios by performance. the headwinds investors, accountants and attorneys. providing necessary income and for bonds are strong, bonds are We can now put cash While to work in the stability of principal. still important for portfoliosstocks by market knowing the rate of taxes on may appearnecessary to be Secretariat in the providing income and profits. year thetoU.S. economy Belmont bonds this stabilityThis ofcompared principal. While stocks ismay expected to continue its slow year, appear we’ll continue to use bonds to be Secretariat in the recovery, is steady and housing to protecthiring your downside since Belmont compared to bonds this isunexpected improving. A tremendous amount of events do occur. Enjoy year, we’ll continue to use bonds the spring that has finally arrived; cash around thedownside world is looking to protect your since for a we’ll keep focusing onoccur. yourU.S. portfolio productive home, the stock unexpected eventsand do Enjoy without winkers. We continue to be the spring that has finally arrived; market might continue to be the safest grateful for your trust in our service. we’ll keep on your portfolio haven. We focusing look forward to another without winkers. We continue to be year helping you meet your financial grateful for your trust in our service. objectives, knowing 2013 will have its share of challenges. 25550 Chagrin Boulevard, Suite 101, Beachwood, OH 44122 As a truly independent investment management As a truly independent Did you firm, know... and planning investment management Carnegiecan Investmentof Carnegie and planningdispose firm, Counsel has a rich history your old, confidential Carnegie Investment of providingJust careful and documents? callhistory us or Counsel has a rich responsible drop them offmanagement and weand will of providing careful of your financial assets have them picked up by responsible management to reach your short and our third-party shredding of your financial assets long-term goals. service– of charge. to reachfree your short and long-term goals. For more info, contact: 800 321-2322 For more info, contact: or 800 321-2322 [email protected] or [email protected] 216-367-4114 / 800-321-2322 www.carnegie-capital.com 25550 Chagrin Boulevard, Suite 101, Beachwood, OH 44122 216-367-4114 / 800-321-2322