Bristlecone's Form ADV
A little more than two months ago, ideological debate over government spending reached a crescendo in Washington. A stalemate over increasing the U.S. debt ceiling left Congress and the President wrangling with the possibility of default on government obligations. Though the two parties disagreed on much, there seemed to be nearly unanimous agreement that default was to be avoided at all costs. Should the U.S. find its creditworthiness questioned—the argument went—then borrowing costs would skyrocket, creating a de-facto tax increase on all Americans. Treasury Secretary Timothy Geithner even went as far as to warn that a U.S. default would cause “catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008-2009.” Read the rest of this entry »
Monthly Digest – October 2011
October 19th, 2011Large Cap Value Commentary – September 2011
October 7th, 2011The best thing about September is that it is finally over. The S&P 500 index declined by 7.2%, and the Large Cap Value model portfolio dropped even further during the same period. Investors appeared to have a split personality throughout the month, alternatively showing signs of extreme pessimism and optimism, with the market registering frequent daily swings of 3% or more.
At the time of this writing, there does not appear to be any resolution yet of the situation in Europe. It seems that politicians across the pond are making the economic situation worse by prescribing a medicine, austerity, which keeps pushing the sickest patient, Greece, further into recession and fiscal deficits. Read the rest of this entry »
Monthly Digest – September 2011
September 23rd, 2011Eureka!
Though not adopted until 1963 as the official motto of our home state of California, “Eureka” was first officially associated with the Golden State upon adoption of the state seal in 1849, which includes the word above an idyllic image of the goddess Minerva surrounded by a bear, grapes, and a miner, set against a backdrop of the Sacramento river and snow-capped Sierra Nevada mountains.
Eureka—translated from the Greek as “I have found it!”—was widely associated with the discovery of gold in the state in 1848. It could as well be the motto for today’s gold-obsessed market. Read the rest of this entry »
Large Cap Value Commentary – August 2011
September 13th, 2011In August, the Large Cap Value model portfolio declined but outperformed the S&P 500 index’s 5.4% drop (net of dividends). Investors are becoming increasingly pessimistic about growth prospects in the US and the ability of European governments to solve the sovereign debt crisis within the euro zone. Long gone is the optimism prevalent last spring. We can’t help but think that the current negative mood greatly exaggerates the deterioration in economic and business fundamentals, but we also understand that pessimism can become a self-fulfilling prophecy especially if companies start cutting back on investments and hiring. Read the rest of this entry »
S&P Downgrade, Market Volatility
August 8th, 2011Late Friday, after the market closed, Standard & Poor’s downgraded the United States debt rating from AAA to AA+ with a “negative outlook,” meaning a future downgrade is possible. This news comes on the heels of recent, mostly negative, economic news and this combination has led to what is now a sharp selloff in the stock market. Volatile markets like we’ve experienced, especially the last three trading days, cause enormous stress even to long-term investors. We thought it would be helpful to provide some context to help you assess the news in light of your personal long-term investment goals. Read the rest of this entry »
Quarterly Commentary – Second Quarter 2011
July 15th, 2011While the broad stock market produced flattish returns during the second quarter, there was at least a whiff of fear in the air (a June gloom, as we might call it in Los Angeles) as the market dropped 7% or so from the highs hit in April and May, before rebounding somewhat to end the quarter roughly flat.
Monthly Digest – July 2011
July 15th, 2011With a looming August 2nd deadline for raising the U.S. debt ceiling, congressional leaders and the White House are in the midst of a tense political standoff over the nation’s fiscal direction.
Congressional Republicans are insisting on significant reductions in federal spending as part of any deal to raise the debt authorization limit, while President Obama and his Democratic allies are equally insistent that new sources of revenue (primarily through the closing of existing tax loopholes) are needed in order to bridge the budget deficit. At stake is the potential for the U.S. to technically default on its debt, an unprecedented event which would have unknown but potentially far-reaching repercussions on world financial markets. It’s a standoff which at least one famous investor has criticized as an unnecessary game of “Russian Roulette.”
Monthly Digest – May 2011
May 15th, 2011Our digest this month raises two policy debates, one of broad economic significance and one related to particular investment themes we’ve explored. The first, the 800-pound gorilla, is the ongoing debate over how to reduce the federal deficit. The other–the plight of the for-profit, post-secondary education industry–directly impacts several investment choices we’ve made in Bristlecone’s Large Cap Value portfolio. Though they can be foreboding to read, we suggest you at least take a moment to look through some of the charts and graphics.
Quarterly Commentary – Third Quarter 2011
October 28th, 2011The whiff of fear alluded to in our last commentary gained force in the third quarter, with looming worries about domestic recession and European sovereign debt woes growing. The result was a strong downdraft in equity markets, with the S&P 500 down about 14% in the quarter and most other equity categories down further. On October 3, the S&P 500 dipped below 1100, the lowest level of the year, putting the peak to trough (so far, at least) decline since April right at 20%. That is slightly worse than the downturn experienced last summer.
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