Weekly Risk Report 09/18/2009
After a very interesting year, I thought this chart would be of interest. It shows the various components of our income portfolios, their current prices and where those price ranges have been over the last 12 months.
Please note the current price and then the 52 week High. In many cases we see that the current price is now very near the high for the previous 12 months. It is of comfort to know that many of these components have generated sales and the positions are fully funded with reserves of cash at present. While the interest earned on cash is nominal these days, most of the sales generated very handsome gains from the lows at which shares were purchased earlier. Only the REIT funds are still considerably off their previous high water marks.
Only the Speculation component remains in its bearish territory. Divergence is very bullish, IPO activity is nearly nonexistant. Of note in the Relative Valuation component is that the Price/Earnings ratio of Value Line’s 1700 stocks is now about where it was in 2007 before the market started to unravel. The big difference is that back then short term interest rates were around 5% where they are less than 0.2% today. Where interest rate go from here will determine if there’s any upside room for the markets. Earnings may start to rebuild slowly and this would allow some further upside movement. However, if short term rates start to rise quickly, that could put a cap on further gains in the market for a while.
