Weekly Risk Report 04/13/2009
Progress has been made in many of our portfolios in the last week. We are starting to rebuild our Cash Reserves slowly through sale of various components. The long period of seeing only small buys has now been replaced with a more even posture of buying and selling.
Even with the recent improvement in market psychology our risk indicators continue to show very low levels. Still in the lowest 5% of our database since 1982 we see little sign of overheating in general. The smaller cap stocks, however, are starting to see a larger amount of speculative activity. Even with this, the larger and smaller cap markets continue to move nearly lockstep.
It is interesting to note that the long period of nearly no Initial Public Offerings has started to thaw. A few new company listings have appeared in the last couple of weeks. Our Zeal measurement isn’t sensitive enough to see such a small statistical change, but the news is interesting. Usually a company likes to take itself Public when P/E ratios are more generous than right now. If at one point in time the market is willing to pay $20 for a dollar’s worth of earnings why would a company be willing to “go public” when the general market is only paying around $12 for that same earned dollar? This helps explain the lack of IPOs in recent months. The improvement in P/E in recent weeks is helping to get the IPO activity started again. This is a very early sign of a “return to life” in the market place.
