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Changes In The Wind   Investment Strategy Update Letter Q4 09
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Changes In The Wind Investment Strategy Update Letter Q4 09


There are winds of change a blowin\'. The current bear market rally may be peaking now. What comes next and what to do?

There are winds of change a blowin\'. The current bear market rally may be peaking now. What comes next and what to do?

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  • 1. Changes In The Wind To Our Friends of Silver Oak, In our continuing effort to respond to the changing economic and investing climate, we have updated our portfolio models along with our clients investment policies and thought that we might share some of our thinking with you. We believe that it is Joel Framson & Eric Bruck, the appropriate to be shifting our strategy to catch Principals   what we see as a shift in the prevailing winds. The economy, while showing definite signs of growth and recovery, is still a long way from justifying the stock market’s current levels. Nevertheless, after "The primary purpose of some signs of economic recovery, and partly due to Financial Planning the miniscule yields on Treasury bonds, investors and have become emboldened to take on more risk in Wealth Management stocks. So far, they have been rewarded for doing should be to so. create and sustain a better life." We at Silver Oak are not ready to jump back into the US stock market. With our 2008-2009 strategy and Silver Oak Wealth Advisors, LLC tactical implementation, we have on average almost doubled the US stock market return over the 12 months ending September 30th, 2009, and with 70% – 90% less risk. This is inclusive of the market’s Click here to learn remarkable gains since March 9th. more...   We are now seeing a few new investment trends emerging that we feel could benefit our clients. These trends include: 1) the weakening dollar; 2) the genuine strengthening of many emerging market economies; 3) the fear (not necessarily the reality) of imminent inflation due to the flooding of world
  • 2. markets by the fed with newly printed dollars; and 4) selectively, some global opportunities in parts of the equity markets. Accordingly, we are adding some of these elements to our portfolio models (in the higher risk bucket), substituting them for other positions which we believe have run their course. We have researched a number of investment vehicles that we expect will capture the higher targeted returns that these trends should produce. The target expected return ranges for these updated portfolio models will be similar to our current investment strategy. We believe that these changes are opportunistic and warranted in order to maintain those return ranges for a couple of important reasons. First, due to exceptional opportunities in the individual bonds we purchased over the last year, our “lower risk bucket” contributed significantly to our good portfolio returns. However, the discounts available during the past twelve months in investment grade bonds are no longer readily available. Therefore, while we expect the lower risk bucket will continue providing good income and a good foundation, there will not be an appreciation element to enhance our total returns. Second, with a somewhat reduced level of economic risk today compared to a year ago, the risk/reward ratio is now more favorable for certain investments, which will all benefit from demand as well as from the weakening dollar. We additionally want to take advantage of imbalances in the shifting relative values of global currencies. Global demand will also provide a longer term growth opportunity for certain stocks that are positioned to benefit from the demand in energy, alternative energy, water, health care and other parts of the economy. As always, your questions and comments are welcome.
  • 3. Best personal regards, Eric & Joel