Verdant Capital Blog

Markets rebound to some good news

2010-12-01T14:26:00.000-08:00

Global financial markets rebounded as news out of China, Europe and the US restored confidence in the world's economic recovery. In the US, the Dow Jones Industrial Average rose 249.76 points (2.27%) and ended a three-day drop. The rally was sparked by the encouraging economic reports from the payroll number showing private employers adding more jobs in November; manufacturing also showed a 16 month growth, and the Fed's "beige book" indicated that the US recovery is strengthening.

With these encouraging economic numbers, we continue to add more toward equities to our portfolios especially if we get a meaningful stock market pullback. We still feel that the stock market will outperform moving towards the end of the year and continue into the 1st quarter of 2011.

Opportunity to buy on the market’s pull back

2010-11-17T15:36:00.000-08:00

The Dow Jones Industrial Average fell 90.52 points on Friday and again on Monday by 178.47 points to 11023.50, totaling a 3.7% drop for the previous few trading days. The sell off was attributed to the news from China that the government plans to curb the runaway economic growth with a possible institution of interest rate hikes. Added to the downside pressure in the market was the European sovereign debt issue with Ireland and its ability to fund their debt without a restructure of their debt.

The worries about China and European debt issue are concerns for the market but they are not new developments. We feel that the market’s pull back will give us an opportunity to invest into the market at a lower price.

Verdant Capital believes that the equity market is the best place to be, moving toward next year, especially with the Fed’s recent announcement of using quantitative buying of treasuries to keep the interest rate low. As stated from our last commentary, we will allocate more towards equities and be more aggressive in our portfolios. We will buy if any meaningful pull back in the equity market occurs. We continue to like investing in stocks in China/emerging markets, oil, and technology.

Don’t fight the Fed’s and invest more towards stocks

2010-11-04T14:38:00.000-07:00

The Federal Reserve announced that they would purchase an additional $600 billion of long-term Treasury securities by June 2011 in a second round of quantitative easing, which pushed stock market higher. The market rallied to its highest level since September 2008, and investors cheered on the Fed's latest effort to stimulate the struggling economy. The Dow surged nearly 220 points (1.98%), while gold prices set another record high and crude oil rose to a six-month high. Interest rates for the two and five year notes went down to record lows as did the demand for the US Treasury Rose.

With the Feds keeping the interest low for an extended period of time, the stock market will continue to work itself higher in the coming months. Our mantra is “Don’t fight the Fed’s” meaning we will be aggressive in buying stocks if any meaningful pull back does occur. Currently, we like stocks much more than bonds and we continue to be overweighed in China, Oil, and the emerging markets.

Trading range and positive returns for 2010

2010-09-24T16:30:00.000-07:00

The Dow Jones Index leapt 197.84 points, or 1.9%, to 10860.26 and rose 2.4% this week, extending its upward rise to four weeks. For the month, the benchmark is up 8.4%; it’s the best September since 1939 and, as a result, we’ve seen investors race into stocks and commodities. The increased appetite for risky assets is a sign that investors feel that there won’t be a double dip recession.

The market has had an impressive run, but we believe it would take more positive economic numbers in the coming months for the market to move higher. The market is still currently trading on a “technical basis” confirmed by the current low volume environment that is exhibited in this rally. We are currently selling overweighed positions of Gold and QQQQ and then buying them back when the market retreats back to the lower trading range. We are also still accumulating China, oil and emerging markets.

Market Trending …. It will take time for full recovery 08-12-10

2010-08-12T14:16:00.000-07:00

The Dow Jones dropped 265.42 points, or 2.5%, at 10378.83 with all the 30 Dow components declining. The stock market, commodities and riskier currencies fell over worry about the weak US recovery and slowing growth in China. With all three major US indexes turning negative for the year, we continue to believe that the recovery is occurring, but it will take a lot longer time than anticipated.

The market is currently concentrating on the economic numbers that have mostly been negative while corporate earnings have mostly exceeded projections. Most of the inflows for investing now have been in T-notes and bonds which have driven the 10-year Treasury note to a 4 month low of 2.69%. With yields hovering at such a low level we continue to like the stock market for risk adjusted returns. Concentrate on high dividend and yield stocks. This will pay you while you wait for the market to continue to return. For more aggressive investors, we continue to add to emerging markets and commodities.

Stock Market Recovery…. Where do we go from here?

2010-08-02T13:22:00.000-07:00

The stock market started August with a bang on the news of encouraging manufacturing and construction-spending data and better-than-expected bank earnings in Europe. The Dow Jones Industrial Average closed up over 200 points, or about 2.00%, with most sectors in the S&P 500 with positive gains.

The positive momentum from July is carrying over into August but VCM is still very cautious about the fragility of this economic recovery. The unemployment numbers and consumer confidence have to improve drastically before we can declare that the economy and the market are fully back. Though we believe that we won’t get a double dip in recession, we feel that it will take time to recover.

The markets are currently trading on a technical basis and the recent move up in the stock market was partly due to institutional buying from an upward break of a key resistance level in many of the major indexes. We feel that the market will be in a trading range probably till the end of this summer and currently we are in the upper level of this trading range. As the market continues to move in this range, we will be vigilant in studying the earnings and economic indicators in the future.

Stock Market Up’s and Downs

2010-07-16T10:45:00.000-07:00

The markets got more bad news on the economy today from the University of Michigan’s consumer confidence index which dropped to its lowest level since late August. Combined with poor earning from Dow companies, Bank of America and General Electric, the Dow Jones sank 261 points or 2.5 % back to 10,097.

Until Friday, the stock market had weathered the bad news, thanks to some solid earnings reports. Many observers had hoped that the market already had put in its lows for the year, but Friday's sell off erased all of the gains the market had made during the week and left its course again in doubt. The Dow ended the week down 1%.

We have always thought that the recovery will have its ups and downs and this week we are getting those downs. However, we still do not feel that a double dip recession is in the cards. The market will probably be in a trading range until we see more signs of recovery. With interest rates at all time lows, we continue to look toward dividend stocks to add to our portfolios. We believe that the economy is slowly recovering but it always takes longer than we think.

Economy slowing down but no double dip recession

2010-07-01T10:51:00.000-07:00

The stock market fell sharply from concerns about a slow down in the economy and a possible double dip recession. The Dow Jones Industrial Average fell 2.6%, back below 10,000 due to slumping US consumer confidence numbers, the downward revision of the Chinese economic indicator, and worries about the health of Europe's banks and the European recovery. We feel that a double-dip recession is still unlikely but the current drop in confidence number is just the latest sign suggesting that the economy could lose steam in the second half of 2010 and perhaps grow more slowly than in the first.

Lower rates, what does it mean to you?

2010-06-24T10:06:00.000-07:00

Mortgage rates continue to drop with the 30 year fixed rate loan at 4.69 % which is the lowest since 1971 when mortgage companies began keeping records of the rates The yield is partly due to concerns about the European financial problems and its effects on the current global economic recovery.

While yields have fallen to new lows, most Americans have not been able to take advantage of these rates by investing in real estate nor by refinancing their properties and it’s mostly due to their personal balance sheets which have been damaged by the economic financial recession. Lower rates also have made it especially hard for savers in their savings accounts and CDs. This is especially true for those who are living on fixed incomes with their earning currently yielding next to nothing on their money. We believe that low rates are here to stay because of the challenges of the economy.

The Yuan Revalued

2010-06-21T12:58:00.000-07:00

China pledged over this weekend to make its exchange rate more flexible. The decision to drop the two-year-old informal peg to the US dollar follows heavy pressure by the US and other members of the Group of 20; it was cheered by both the US and its other trading partners. Although, China made it clear that it will not move quickly to revalue its currency, rather be more gradual.

I think the reason China’s decided to have its exchange rate more flexible was more political than economics because the meeting of the G20 will be starting next week and China wants to show good faith. Though I think that the Yuan will not change much with this new position, it is a start. We will see in the coming months how fast and how quickly the Yuan will revalue but either way it will be beneficial for the US and world economies.

Stock Market Regains Some Momentum

2010-06-16T09:33:00.000-07:00

Stocks regained their upward movement as the European sovereign’s debt jitters subsided and the technology sector gained from an improved outlook for sales of chips and electronics. The Dow Jones Industrial Average soared 213.88 points (2.1%) to 10404.77, the S&P 500 shot up 2.4%, and the Nasdaq Composite rallied 2.8% as most of the major indexes recaptured a positive or close to positive gains for the year.

The chart formations were also positive, as the blue-chip index ended above its 200-day moving average for the first time since May 19 which is a key level for traders to watch as a potential indicator of future strength.

While the market looks better, we still are cautious and we believe that we are in a trading range. We will be looking to sell stocks if this rally gets close to the high limits of the trading range. We will watch how this rally moves in the next few days to make any moves and we will have better feel for the market’s direction once we get results from 2nd quarter, beginning in early July. We continue to add to oil and China for long term growth and we will stop investing in fixed income until we get a better yield from the bond market.

Dow Jones under 10,000, again

2010-06-07T14:01:00.000-07:00

The concern about the health of the US and European economies sent the Dow Jones Industrial Average tumbling. The Dow Jones declined 323.31 points, (-3.2%), to 9931.97, it’s second close below 10,000 in two weeks and the third biggest decline this year.

The huge drop was sparked by comments late Thursday from officials of Hungary who stated that the country’s debt had become a serious problem and may ultimately need a bailout similar to Greece’s bailout. On the US front, the Labor Department reported the payroll numbers to be 431,000 jobs which was a respectable number but the vast majority of the payroll numbers were temporary workers, hired by the government to conduct the 2010 Census. The private sector employment rose by only 41,000, the smallest monthly increase since January. This sparked renewed fears about the US economic rebound; this, with the financial turmoil in Europe, sent the Dow’s Jones down.

Though we continue to see volatility in the stock market, Verdant Capital believes that the US economy is in the 2nd stage of the recovery and the markets will not fall back into recession. We believe that the markets, in the next 3 to 4 months, will trade in a range and will be extremely volatile. For our aggressive accounts, we are positioned to trade the swings and take advantage of some very good prices in the stock market.

The European Equation and the Market Ahead

2010-05-28T10:01:00.000-07:00

Stocks closed out their worst month in more than a year by sliding again on more unsettling news about Europe; today’s news was that Spain suffered a second downgrade of its credit rating in a month. The problems in Europe have led investors to ignore continuing signs of improvement in the U.S. economy. The fear in the market is that forced cutbacks in government spending in Europe in the coming months will curb the continent's economic growth, and in turn, the U.S. recovery.

Next week will bring a series of economic reports that will test the market, including the Labor Department's May employment report and readings on manufacturing, consumer spending and housing. Investors are likely to start selling again, if there are any signs that the U.S. economy is being affected by news of Europe's problems. If the jobs report is disappointing, the market is also likely to suffer. We will wait till we see signs of stabilization and start buying selectively.

Oil Prices' Reaction to Oil Spill

2010-05-28T09:51:00.000-07:00

The recent oil spill in the Gulf of Mexico has had damaging effects on the environment as well as the economy. With this oil spill, we may have to face a larger effect on oil production other than a temporary production stoppage. The effects of the oil spill may deter legislators from allowing new offshore oil drilling. The current public opinion is against the drilling, but we will have to wait to see how the legislation drama plays out.

Even with the chance that the legislators do not support US offshore drilling, we have seen oil prices drop, mainly due to the European and Greece debt crisis issues. We think it might be a good time to add more to our portfolios and we are doing so for our aggressive accounts.

A view from Below…. 1000 Dow point drop

2010-05-07T12:02:00.000-07:00

Today we saw a bad day in the financial markets made worse by an apparent trading glitch, leaving traders and investors nervous over how a mistake could send the Dow Jones Industrial Average into a 1000-point down. Though, we did recover at the close, only down 374 points or 3.2%. Investor’s confidences have been shaken but more importantly, technical (charting) supports have been violated. This means that we will see increased volatility in the near future and downward pressure for the stock market.

The markets violating technical support levels with the compounding of the uncertainty of the European debt crisis concerns over Greece may be reasons we see a downside with the markets for the short term. Let’s wait to see how low this market corrects and consolidates and review our risk models in our portfolios before we increase our exposure to stocks.

Greece is the Main Attraction in the Sovereign Debt Crisis

2010-05-01T09:51:00.000-07:00

Greece, again, has the focus of sovereign debt issues and it is weighing heavily on the US stock market. As it stands, it looks like Greece will have to go into bankruptcy if the European Union (EU) does not bail them out and the EU may have no other choice but to do so. The EU will defend the currency of the union and will most likely produce a bailout package very shortly. With this uncertainty, we may most likely get a pull back in the stock markets but we are very optimistic long term.

Goldman Sachs, too smart for their own good

2010-04-30T12:10:00.000-07:00

This is a particularly sensitive time for Wall Street, since Washington policy makers are hotly debating a sweeping overhaul of the nation’s financial regulation. The Goldman Sachs lawsuit is well-timed, for Washington, and could be the best ammunition for wide changes in the financial industry and regulations. While financial regulation is good, too much is healthy for the economy and we fear that this is what Washington will use to try to over-regulate the financial industry. If we do see over-regulation, this will certainly slow down the economic recovery and will have a negative impact on the stock market.

Goldman Sachs and Bank Preferred Stocks

2010-04-19T11:02:00.000-07:00

With the financial regulations bill moving toward a congress vote, Goldman Sachs, one of the most respected financial firms on Wall Street was accused of securities fraud in a civil lawsuit filed by the Securities and Exchange Commission.

Shares of Goldman Sachs plunged more than 10 percent in just the first half-hour of trading after the suit was announced Friday morning. They closed down 13 percent, at $160.70, wiping away more than $10 billion of the company’s market value. Investors also sold other bank stocks as well, as rumors swirled about which other firms might become embroiled in the commission’s investigation.

With this bad news of Goldman Sachs and the US Financial stocks we see an opportunity to take advantage of investing in bank preferred stocks. The yields are good (in excess of 7%) and we can buy them now at discounted prices. Remember, the US economy cannot recover without US financial banks leading us out of this recession and, since it is currently vogue to bash banks, it gives us an opportunity to invest in Bank Stock preferred stocks cheap. The current preferred stocks we like are Goldman Sachs, Bank of America, and Morgan Stanley.

Inflation in China and India…..No problem

2010-04-04T09:55:00.000-07:00

The markets are jittery in China and India as the banks are tightening credit. China and India are Asia's most populous economies and, as such, affect the regional and global economies greatly. The latest move came from the reserve bank of India, which hiked a couple of short-term interest rates, as the rates are both below the level of reported inflation. China is about to do the same as the government wants to force lending by state-owned banks in 2009 in order to support the economy. After a record 9.59 trillion Yuan of new bank loans last year, the Chinese are likely to try to bring that number down to 7.5 trillion.

Even with the inherent problems of inflationary problems in China and India, we still think this is the best place to invest, especially when you compare them to the developed economies which are projected to have rising deficits and debt burdens in the next five years, on top of a much higher level of indebtedness, Whereas, emerging economies are likely to have falling levels of deficits and debt burdens with already much lower levels of indebtedness.

High debt levels are likely to restrain growth in the West, and low debt levels are likely to support growth in the emerging world. Economic growth will be higher in emerging markets as the economies grow from smaller bases.

If you're looking to invest in places that offer organic economic growth -- based on a savings-and-investment cycle (not rising leverage ratios like in the West) -- you have to invest in emerging markets, mainly Asia. We still are adding to the China index symbol FXI on any meaningful pullback.

Savers forumulate a plan

2010-03-09T11:14:00.000-08:00

In today’s low interest-rate environment, it is very hard to live on a portfolio that mainly consists of savings accounts and fixed incomes. Most conservative investors are getting little to no return on these accounts and are looking for alternatives. The problem is that there is no short term safe investment that pays them any interest today so they have to increase the duration of their investments. They can invest in a 10 to 30 year US Government bond which currently yields 3% to 4% but considering the future risks of inflation, this is not a lot interest for your return. So what do you do?

It all depends on your investment goals. So review those goals and your risk tolerances. Realize that if you do nothing and keep all your funds in short term safe investments there is a risk too, the risk of not keeping up with inflation. It is still a good idea to diversify into various investment vehicles such as stocks, bonds, real estate, precious metals, etc., that are aligned with your investment goals. Formulate a plan today and make sure that your allocation is right with investment and risk objectives.

The Yuan -- a good investment

2010-03-03T10:58:00.000-08:00

The Chinese economy has been booming for the past 3 years yet the Chinese currency has not appreciated with the boom. Why? The reason is simple; the Chinese government wants to sell their products to the USA as cheap as possible which helps the Chinese export business immensely. So, in 2008 they decided to peg the Chinese currency with the US dollar and it is still peg today.

This strategy has helped the Chinese economy grow faster than most any other country in the world with their annual GDP (Gross Domestic Product) rate close to 10% in the past 5 years. Though, I think this union of the Chinese Yuan and the US dollar will slowly unwind itself in the near future and, at that time, I think the Chinese Yuan could appreciate 20+ percent.

Keep in mind, the last time that the Chinese allowed for its currency to slowly appreciate against other world currencies was in 2005; it moved 20% higher against the U.S. dollar. We are seeing signs of this occurring today with the Chinese government increasing their interest rate recently to fight their internal inflation issues and also selling off billions of dollars in treasury bonds so they have less debt exposure to the United States. I feel that China is ready to resume greater flexibility with the Yuan.

The Chinese Yuan is at a great price and I am slowly accumulating this currency for my aggressive investors and also adding some for moderate investors as well for diversification reasons.

Market Volatility

2010-02-26T12:32:00.001-08:00

This month we have seen an increase in volatility in the stock market. The VIX Index (CBOE Volatility Index) which measures market volatility has increased substantially which usually occurs when we have uncertainty in the markets.

The issues that plague the market currently are the continued rise in unemployment, the recent slow down in real estate sales, and the sovereign debt problems with Greece. Not to mention the newly revised health plan from our president which caused the market to react and become volatile because the stock market hates uncertainty.
Though the market continues to be volatile, my advice to my clients is that for whatever you have got invested in the stock market, stay invested. If you have a longer term horizon, possibly buy on dips. Stay with the notion of higher inflation and the increase in commodity prices and invest in hyper growth areas like China. If the Federal Reserve monetary policy changes drastically we will review our commitment to the stock market.

Market Pullback

2010-02-01T12:08:00.000-08:00

Last week we saw the major stock indexes drop about 5%, wiping out the early January gains of the year. With this drop many pundits believe that the stock market rally that started in March of last year has ended. I don’t believe this to be the case and continue to be positive regarding the stock market for this year. We had such an impressive move in the last 6 months that I think the stock market was ahead of itself and I was looking for a pull back consolidation. With this drop, I believe it will strengthen the market’s advance in the future and is a healthy sign for the stock market.

We continue to like commodities, such as oil and gold with this pullback and will continue to have equal weighing in stocks; and over weight in international and emerging markets.

What Size is Best

2010-01-19T12:31:00.000-08:00

In reviewing market performance data on small, mid, and large market cap companies, I wanted to find information as to which market cap will do the better in an economic recovery. Conventional wisdom suggests that small-cap stocks typically outperform other cap segments in early states of an economic cycle and this seems to be true based on data results of the past 4 recessions; however, after the first 6 months of out-performance by small-caps, mid-cap, large-cap, and small-caps held no historical performance patterns.

This is also true for the recovery of 2009 by taking a look at the newly-released economic data that suggest that the US economy emerged from recession in mid 2009. If we take July 2009 as the first month of economic expansion, (based on current consensus projections by economists) small-caps had a performance of (+31%), mid-caps (+32%) and large-caps (+26%) during the early market recovery phase data. Since then, the stock market has continued to rebound but relative cap performance has somewhat broken from historical trends. Specifically, the dominance of small-caps, though mid-caps have maintained their historical out performance relative to large-caps.

Which market cap will do better in 2010 will be dictated by how the economy fairs. If the recovery is on its way, large-caps may benefit from their multi-national exposure if -foreign economy outgrows the US economy. Small-caps could regain performance leadership if the domestic economy picks up momentum. In an uncertain economic recovery, which I believe is the case now, the hybrid nature of the mid-cap may be the best in continuing to achieve superior risk and adjusted returns.

Out to Sea

2010-01-10T12:30:00.000-08:00

As the New Year rolls in, let’s review what has transpired in the past year and why many investors faired much worse than the actual stock market. The stock market, as measured by the S&P 500 for 2009, was up 23.50%, but for many investors, they showed little to no returns for the year. Why is this case?

I want to use the metaphor of a traveling ship at sea caught in a storm to illustrate this point. As passengers of this ship, we had a choice of jumping off the ship or holding onto the rail. If we resisted the temptation to jump off early, we’d find ourselves on a smaller craft that is not sinking but moving toward our destination. On the other hand, those passengers who panicked and jumped off the boat are now out at sea, swimming after the boat trying to catch up.

This is what happened to a lot of investors when the stock market down-turned. As markets declined, many investors bailed and sold their stocks near the bottom. They bought safe investments like money market funds and treasuries yielding them little to nothing. When the market rebounded, they gained very little, while trying to find a way back to what they had before.

Since March 2009, the stock market has rebounded 65% from the lows and many of the investors that sold or jumped off the ship still didn’t have any real strategies to recover their loses. They were afraid that if they put their investments into the stock markets again the market would collapse so they remained on the sidelines making no money. On the other hand, those investors that resisted the temptation to jump off and stay invested with solid asset allocation portfolio continued to recover and are moving toward their financial goals.

The simple lesson is to formulate a long term investment strategy and if the market does go down (and ultimately they will), don’t make rash and reactive decisions to market fluctuations before you review your long-term investment goals.

Optimism

2009-12-28T10:26:00.000-08:00

Though we have had a significant rise in the stock market this year, we remain optimistic for further gains and feel that on any meaningful market pull back we will be adding to our core position. This is supported by this quarter’s corporate earnings that were much better than anticipated and the improving balance sheets of companies. The economic indicator data shows recovery as well, and the market sentiment is still somewhat negative (contrarian positive for the stock market)

We feel that the dollar will go lower and it will lead commodities, oil and gold higher. We feel China will continue to be a good place to invest and are leading the world out of the global recession. China’s valuation remains very good and the long term investment case for China is very much in place. Also, with the prospects of a lower US dollar, we also continue to buy international stocks.

End of the year tax planning is very important. I feel that taxes is on its up -- May be way up. If you have taxable accounts this is the time to review them and get rid of your losers. Add our core investments of China, Oil, and commodities and add shorter term Municipal bonds for fixed income.

Balanced Portfolio

2009-11-20T07:46:00.000-08:00

I still believe the best strategy in this market is a good, balanced portfolio with stocks, bonds and cash. I like to weigh more toward the stocks because bonds and cash just don’t pay currently but it depends on your investment objective. We have seen a good 2009 and I believe it has legs to go higher through the end of this year, but it will have to consolidate for the next few months before it moves higher.

I think that this approach is “herd mentality” because it is always seems safer to be with the mass. The problem is that you make no money with them and most smart investors get in before the crowd.

Getting There

2009-11-17T12:25:00.000-08:00

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.

VCM Strategy Update

2009-11-09T08:42:00.000-08:00

Verdant Capital Management is taking advantage of the trends that are occurring and we feel that the current low interest rates that will stay low till the economy and most banks do better; the US Dollar will get weaker because of our low interest rate and debt and the massive trade and debt deficit in this country will ultimately cause hyper-inflation.

Based on these trends we like the commodities in agriculture and oil and also commodities in gold and silver to hedge against inflation, but they have moved too far too fast. We will be looking to buy when the prices come down. We like natural gas and oil and think they are good investments for the long term. We like foreign stocks to hedge against the falling dollar and especially like the emerging markets, such as China. We like them because of their strong growth and will add to that position whenever possible

Keep it Simple

2009-10-29T12:27:00.000-07:00

I want to start of by giving one of my main basic tenants of investing which is keep it simple. Simple means if you don’t understand how an investment works and it is so complicated that you need a rocket scientist to understand it, don’t invest in it. I believe most people today try too hard to outsmart and outthink themselves when they are making a decision about their investments. They often overlook the obvious and invest incorrectly, mostly by letting their emotion cloud their judgment. They buy when the stock market is up and sell when the market goes down. My best investments in the past 20 years in this industry have been simple and obvious.

Looking back at this past year, we have seen the stock market go down dramatically and come back to about 50% of the stock market loss in recent months. The drop was influenced by the drop in the real estate market. The recovery was aided by government intervention which kept the economy from going into a major, long recession by lowering interest rates to almost zero. The government also supplied enormous amounts of money to bail out financial institutes that got in trouble with bad loans that fueled the real estate bubble.

Currently, the economy is still weak but is improving. Unemployment is high, and consumers are still trying to recoup from the billions of market capital that they lost in the recent real estate and financial market drop. This means that we will have some time until the economy gets back squarely on its feet and the stock market fully recovers. This is the best time to invest because there are better opportunities. Besides, who wants to invest in a one year certificate of deposit at 1% per year?

New Blog

2009-10-23T15:17:00.000-07:00

I am excited to announce that I will be beginning the “Verdant Capital Management Blog” so I may express my thoughts and strategies for the current financial markets. I want to make my ideas and writings non-technical and easy to understand. They will include current topics, market trends, and specific investment strategies.

I look forward to your feedback and thoughts.

--David