After a few good months, June may not be a winner. In fact, the broad market is now negative for 2009. The Nasdaq is still positive for the year.
Things have been very erratic and difficult lately. While things were less erratic in March, they have not been very stable since April. This makes our job ever more stressful as we look for ways to make money and other ways to avoid losing money!
During the month of June, the bond markets got scared with all the money being printed. Our dollar got weaker which caused oil prices to go up as well as other commodity goods. Then things got ugly in Iran and money started moving back to the US dollar. Adding in a general malaise in the world and the sniff of a double dip recession and bingo, all the June gains and most of May's gains went up in smoke.
The point is this recession is not over and in fact, we reported in an earlier Monday email that the World Bank is projecting a 2.9% overall decline. In March, the estimate was 1.8%. Clearly, we have a disconnect. Our leaders in Washington have assured us that the recession is over. To reinforce this thought, about 35 economists, in a survey, called an end to the recession in June. Today, the outlook is even murkier.
We bought some emerging markets and China earlier this month. We closed them out with a nice gain. Ditto for semiconductors. We held commodities for this month and closed them out with less exciting results. We have also closed out some of our high yields. The reason is the markets when they rumble can really hurt high yield bonds.
We currently have about 40% in cash, 20% in high yields, 20% in short term bonds and 20% in inverse (makes money in a down market) funds. This is in the moderate strategy. The aggressive strategy is 30% cash, 30% short term bonds, 10% high yields and 30% in the inverse positions. The conservative strategy is 60% cash. 10% inflation protected bonds, 10% corporate bonds and 20% short term bonds. Usually we do not use inverse positions in the conservative unless we have a decent trend. |
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