Weekly Risk Report 2/1/2010
For three of the last four weeks we've seen "cumulative breadth" in the market place suffer even as the number of new highs has exceeded the number of new lows. As mentioned before, considering the market place a year ago, there's little wonder that there are very few new 52 week lows being posted. Still, shrinking cumulative breadth usually indicates the buying in the market place has become more narrowly focused. Broad participation like we've had since the end of last March is a very healthy signal. Narrow participation usually precedes or is coincident with market consolidations.
The uncertainty of reappointment of the Federal Reserve Chairman is now behind us. Another quarter of recovery was just reported on Friday morning, January 29th. While unemployment and foreclosure problems persist in some areas of the country, there appears to be a turning of those tides, too.
In general. our cash levels remain appropriate for the market conditions in the relevant portfolios. These cash levels should continue to keep the portfolios' BETA levels lower than their respective benchmarks. Should the consolidation slide toward "correction" we are prepared to add to positions as relative discounts appear.
In our income portfolios, the cash component is not pulling its weight as it relates to the portfolio’ yields. With an improving economic outlook, we should see the FED start to bring the short term interest rate up from its near-zero mark. This will help the yield and the total return. Also of note is with a rise in bond yields, bond funds sometimes fall away from previous highs. If this occurs it will allow us to redeploy our reserves into higher yielding components, lowering average cost per share and raising average yield.
Market risk rose slightly during the week of Jan. 25th. The risk indicator's oscillator is showing a rising trend. Moderate as it is, we're still nearer the "bullish" end of things than the "bearish."
