Weekly Risk Report 5/04/2010
The first four months of 2010 have gone well for investors. Even as share prices have been rising market risk has remained relatively calm over the same period. This week we have three of our four risk components rising from the previous week. Overall risk is only moderately changed with slight upward bias showing as a risk trend.
The SignalPoint portfolios continue to have their reserves of cash rising in sync with their rising values. Tight control of the total amount available for risk moderation through liquidity is our current activity. While interest on cash reserves remains exceedingly low, we anticipate a slow return to more normal interest rates.
Even Warren Buffett has now stated that government spending needs to be constrained. He mentioned govt debt being approx 10% of Gross Domestic Product and is unsustainable at that level. He related it to the WW II debt and said that we worked our way out of debt at that time through good planning and fiscal responsibility. He suggests that is now what we need again.
As the economy transitions from the emergency measures taken over the last two years to a less Keynesian norm we will see changes in taxation, interest rates and inflation. It would be difficult to predict how all these changes will influence the stock and bond markets. Especially difficult since the changes are not yet pinned down or in place. We at Signalpoint work hard on the aspects of investing that we can control and make adequate allowance for what is outside of our realm.
