Getting There

The recent market gain has been impressive especially with the news that the current unemployment rate was above 10%. The market, though, may be ahead of it self and is seemingly being fueled by the current low interest rate Fed policy which is contributing to the weakness in the US dollar. In the next few weeks I believe we will have a pull back and then a mini rally toward the end of the year. With this pull back, we are adding to our stock portfolio and focusing on oil, foreign stocks, and emerging markets. We especially like China and India for the global recovery.

In the fixed income market, we like tax-free bonds because we believe that income taxes will be increasing. The yields on these bonds have been higher than normal even in this low interest environment. This is due to the problems with the states fiscal budget and current troubled economy, especially California. We feel that when the recovery does occur we will get a nice premium for our risk and continue good income stream.

This year seemed to fly by and I’m happy to report that the forecast of recession and the world coming to end did not happen. The stock market, we feel, is on the 1st stage of recovery but we have a long way to go. We have seen the stock market recoup much of its losses but I don’t think that this recovery is going to be V shaped. It will take time and we still have many issues ahead. The real estate market will have to be stabilized and the US fiscal deficit will have to be addressed. Without these factors it is unlikely to see much further upside in the market.