Quick Links
 
 
August 2010 Investment Journal 

The month of August is in the books and here's our "view from the front lines".
 
Economic data was weaker for the month, with the Employment Report the early focus. Prior gains were revised down, and the current jobless number was higher than expected. Huge numbers of labor force participants continue to drop off the rolls altogether, as they have stopped looking for work. Fed regional banks reported slower growth, and purchasing managers indices demonstrated less investment activity.
 
Undoubtedly these reports influenced Fed policy makers, who announced that they were downgrading their view of the U.S. economy. They would therefore be using proceeds of maturing securities to purchase longer term Treasury bonds, rather than taking money out of the system. This has been called "QE Lite", or quantitative easing lite, as the Fed committed to maintaining, but not expanding, the overall monetary base. Late in the month, the Fed's gathering in Jackson Hole WY confirmed that the Fed is ready to become more activist in its market policies (we think outright interest rate targeting--buying bonds to force them to a pre-determined level--is a real possibility.)
 
The bond market responded very favorably to this news, with the ten year Treasury Note yield moving from 2.90% to 2.47% during the month. Equity markets slipped 4.8%, as analysts revised their earnings forecasts down. Gold rose due to heightened sense of risk aversion, closing up $67 to end at $1,236 an ounce.
 
Going into the fourth quarter, we expect volatility to rise. Seasonally, stocks tend to weaken. Bonds have had a huge run and the question is how much lower they can go. Most market observers are skeptical that bonds offer any value, but in a long de-leveraging/deflationary period which we believe we are in, rates likely can stay lower for longer than many think. Japan, for example, has experienced a decade long period of low interest rates, yet their currency is hitting new highs. This counter-intuitive outcome is causing a lot of investors to re-think the whole interest rate/currency intersection.  
  
Thank you for your support, and, as always, we welcome your questions and comments.
 
 
2010 Stratford Advisors, Inc. All Rights Reserved. 
 
This publication is intended solely for information purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or sell or trade in any securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from Stratford Advisors, Inc., or any of its officers, directors, employees, affiliates or other agents that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. All investments are subject to risk which should be considered prior to making any investment decisions. The firm may hold for its clients, Principals or employees, positions in any securities mentioned herein, and may buy or sell such securities at any time without prior notice.

© 2018 • Stratford Advisors • Investment & Invested in your Future