Archive for September, 2009

The market continues to bubble away. Since its early March lows, it has risen like a Phoenix from the ashes. It is enough to restore joy and confidence in many an investor and advisor. The sales drums are beating-a new bull market is under way-hurry up and get on board.

We suppose it is possible that a bull market has begun, but it is definitely a long shot. In 2004, we wrote a white paper stating that we believed that we were in a secular bear market that would last for many years. The point of that paper was that while markets remained in a narrow range from start to finish, the bear market included many large up (bull) and down (bear) moves over a period of years. That view has been prophetic to date, as we have had several good years and one of the largest slides in history. The paper expressed the idea that secular bear markets have historically ended when stocks became cheap (i.e. had low prices compared to their earnings). The point could be argued, but we do not believe that stocks have ever become cheap during the secular bear market that began in 2000.

We have learned a lot during the way and hope to continue learning as we move forward. However, that article featured this quote from one of our favorites, Bill Gross.

“We are condemned to live in the real world, where making money is hard.”

Those remain words to live by. Active management focused on managing risk still seems to us to be the only way to succeed in this market. Simply put, try to capture as much of the gains as possible during the good periods and try to reduce the losses during the market slides.

We wish you a warm welcome to our new blog, where we hope to keep you informed and “tell it like it is” in a manner which is rare in the financial services world. While most of the financial world is focused on the sales pitch du jour, as an independent Registered Investment Advisory we focus on our clients and their best interests. We do not sell investments for a commission, so we can focus solely on trying to make client accounts grow to meet their objectives. Our revenue is directly linked to client’s account performance, so we always need to have our client’s best interests at heart – they are the same as our best interests.

As a result, we intend to use this space to keep you apprised about how we see the economy, the opportunities for meeting your financial objectives, and direction of the financial services industry. We will pull no punches in trying to keep you informed in a unique and entertaining way. We hope you enjoy this blog as we move forward and please feel free to share your feedback with us.

Ted Schwartz, President of Capstone Investment