Changes In The Wind Investment Strategy Update Letter Q4 09
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
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.
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
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
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