In this issue, rather than focus on one topic, we'll quickly cover a variety. We think all will help you not only by adding to your perspective on current issues for investors and investment advisors, but also call attention to what is catching our eye lately at Emerald.
KAHNVERSATIONS - here's something we plucked out of a recent Quick Takes Pro newsletter, which is published by Michael Kahn, who as GreenThought$ readers know, is also a member of Emerald's investment team:
There is a lot of news and a lot of market movement in every asset class yet technically we are seeing less information, at least in the stock market. Trading volume is fading fast and given record consumer inflation reports, more global conflict, crude oil falling fast, foreclosures climbing and bearish sentiment tumbling this is rather ominous. Why are stocks not changing hands? Are they rising just because selling pressure is gone or because there is true demand?
We think subscribers know our opinion - the former. Credit crunch problems have faded from the news somewhat so we suppose Mom and Pop investor have decided to hang on for the duration. It is the lack of new activity that is the bearish signal because after all the market is healing, right?
Market Themes
Stocks bear market rally
· Dollar now approaching strong
(technical) resistance
· Commodities out of favor - for now
· Financials ready to test the low?
· Inflation is here
Daniel Strachman, who publishes Hedgeanswers.com, caught our attention with this insight into the hedge fund business - keep in mind that these vehicles have become a very significant market participant, so what goes on in that industry as important in the same way that following the banking business is:
Everyday it seems another hedge fund is going out of business or in trouble. The volatility of 2008 is taking its toll on many funds both large and small. It is very strange. New funds cannot seem to get off the ground and some well-known established funds are closing their doors. It is the numbers - stupid.
It is bad out there. Do not be fooled by recent rallies. Things are are tough and do not seem to be getting any better. There is some light at the end of this tunnel. The bright side is that this volatility is truly getting rid of a lot of the dead weight in the industry. It is forcing fund managers to show their investors and potential investors just how good or bad they are during tough times. It is fascinating to be observing the hedge fund business right now.
Finally, in R.W. Roge & Company's "Market Review and Outlook" for August 7, 2008, Steven M. Roge points out what he describes as "Some Encouraging Signs."
No one can guess when the markets will hit bottom, but there are some potentially encouraging signs that a turnaround may be on the horizon. Here are a few things to consider:
Smaller stocks are historically the first to rally in a recessionary recovery, possibly providing us with the first signs of a recovery.
The bond yield curve has returned to normal after being inverted much of last year, a change that has been a harbinger of economic growth in the past.
Many observers are saying the fundamentals underlying the oil market do not support current price levels.
And, finally, the markets appear to be testing earlier lows and potentially laying the foundation for a recovery.
Naturally, there are a variety of angles from which market participants view the world and make decisions. Here is the key point: managing a portfolio (or evaluating one who does) is NOT simply about making predictions and bets. It is an ongoing process of gathering information, finding a balance between risk and reward, and constructing a portfolio that in the opinion of the manager, gives the investor the best chance of succeeding over the course of a particular time horizon.
As you would expect, different portfolios and different investors have different time horizons. That's the importance of the advisor - to assess what portfolio management teams and investors represent, and find the right match between them.
The preceding article is not a complete analysis and should not be considered investment advice. Emerald Asset Advisors, LLC is a registered investment advisor. If you would like to receive more information about Emerald, please contact us for a copy of our disclosure document, Form ADV Part 2 and Schedule F.
