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MOLDENHAUER & CO., INC.
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NEWS August 28, 2007 Well, I'm a little late with this edition of "the News" - I've been trying to post something at least bi-monthly but here goes anyway. The situation we face as equity investors today is more complicated than ever. We must be aware of an ever-increasing gamut of financial "games" the sophisticated "big boys" play in their sand boxes on Wall Street as they strive to milk the last dollar or two out of trading around the edges of what's legal (sometimes marginally so). Never mind the morality of the game; for none of those rules apply. It's "Caveat Emptor" in this game and you'd better be a very educated "Emptor" if you mix it up with those guys. By applying some old-fashioned rules of our own, however, and watching the "big boys" carefully we can avoid the traps they set for themselves and stand aside to safely observe the avalanche of hurt pile up on them. When their "house of cards" has fallen, completely disheveled, around them, we will pick up a few bargains and ride along as the markets dig themselves out of whatever hole has been created. Meanwhile, we still have a very small position in most portfolios that increases in value when the stock market declines, while the lion's share of our money is invested in U.S. Treasury instruments.
August 9, 2007 Watching billions of dollars in asset value disappear from the equity markets (as I did today watching the action in the U.S. stock market) is not pleasant for anyone in my business - even when it means value is being added to the accounts of my clients. Since my message on this page in early July reporting of my concern about possible turmoil in the financial markets, I have become even more concerned but for slightly different, much more complicated, reasons. Now, I don't pretend to completely understand what all the turmoil in the credit markets is all about, but my old-fashioned ideas and training about deals that "appear to good to be true" seems to be coming home to roost in the financial markets. Unrealistic, speculative, and greedy deals in the credit markets over the past few years seem to be unraveling before our very eyes - causing unexpected results; even in seemingly unrelated areas. The very foundation of our modern financial system revolves around an orderly credit market - one in which both borrowers and lenders make reasonable deals beneficial to both and one in which there is a well-founded reason to believe that the "deal" will not default. I suspect, however, that some players have been violating these basic rules. The extreme volatility in the equity markets over the past few weeks seems to be telling us that the "big boys" don't yet know what to make of the unraveling "credit crunch" and uncertainty almost always causes declines in the equity markets. So, for the time being we'll remain extremely cautious and keep our powder dry, so to speak, while we wait for more information and let the equity markets settle down.
July 26, 2007 I'm sitting here at my desk today watching millions, maybe billions of dollars evaporate from the value of the U.S. stock market. For those investors who own stocks it has not been a very pleasant day. When this kind of thing happens, people react to the trauma in differing ways, so I want to reassure the clients of Moldenhauer & Company, Inc. that the recent declines in the U.S. equities markets - about 3% so far this week - have actually been beneficial to the value of their accounts. This is because, not only have we positioned our portfolios to be devoid of equity investments (with minor exceptions), but we have recently taken a small position in a mutual fund that rises in value when the value of the S&P 500 market index declines. Internally, this mutual fund (Rydex Ursa) is very complicated but it absolutely does provide investment results that inversely correlate with the performance of the S&P 500 market index. In other words, the value of Rydex Ursa will increase by about the same magnitude that the value of the S&P 500 declines over any given relatively short period of time. Just thought you'd like to know...... especially after reading my comments of a couple of weeks ago (shown below).
July 11, 2007 After a very satisfying 3-month period ending June 30, we've begun to see some weakness in both the stock and bond markets caused, allegedly, by rising interest rates, oil prices, and troubles in the mortgage industry - among other less publicized things. Our clients' portfolios have recently been re-positioned to protect from what we believe will be volatile and sluggish times in the investment markets, at least in the near term. We believe that the underlying U.S. economy is generally healthy and will return the investment markets to a more pleasant trend later this year, but the time seems to be ripe now for some consolidation of the gains made earlier this year and for "investors" (whomever they are) to take a breather - so to speak. We'll be watching for reasons to confirm the above opinion over the next couple of weeks, or for further news to change the way we perceive the economic front. Meantime, caution seems to be the predominant mood at the moment.
June 7, 2007 Hope you like the new format of this "News" page. It does make it easier for me to update and you're getting newer information that way. This week has seen some pretty dramatic "action" in the U.S. stock markets and equity markets around the world. Several factors apparently have conspired to make "investors" (whoever they are) less bullish in the last few days. Suffice it to say that the recent declines should be no surprise to conservative observers, although the magnitude of the fluctuations seems to be a bit overdone. I'm proud to say that Moldenhauer & Company began to be concerned about this situation before its development and reduced clients' equity holdings in anticipation of a "correction" or shift in the direction of the trend - however you want to describe it. Our portfolios, therefore, have suffered minimally from the stock market's downturn and we've recently added a mutual fund position related to the bond market which, so far, has protected portfolio values even more. This mutual fund increases in value as interest rates rise - conversely to the decrease in the value of bonds (and conventional bond market mutual funds) when interest rates rise. For the time being, we don't foresee an extreme decline in equities but will become even more defensive of that market if conditions warrant over the coming days and weeks.
May 24, 2007 Today we saw the first significant stock market decline in quite a while. This was accompanied by a spike in interest rates (which means the value of bonds declined commensurately). Rather than try to explain the reasons for today's action - you get plenty of that commentary in the new media from more or less qualified pundits - suffice it to say that some sort of a "breathing spell" or "correction" in the trend is normal, expected, and necessary in a healthy investment environment. Mostly, the things we watch to tell us the general direction of stock and bond prices are still bullish, but we see - as did, apparently, some other investors - reasons to be wary of the future in the longer term. For the time being, we remain cautiously optimistic but will not hesitate to reduce portfolio exposure to equities if and when the conditions warrant.
May 1, 2007 Last week, and early this week, more economic news released show a "mixed bag" of good and bad tidings for the U.S. economy in general, leading us to believe that the economy is currently having little effect on the direction of the stock and bond markets. Equally, consumer-related data suggests reveals little to help us determine how much fuel individual spending my be adding to the economy in the near future. Corporate profits and the outlook of corporate executives for their sales and profit are coming in strong and we believe this information will add to the upward bias in the stock market we've seen late this spring. Overall, then, we're moderately optimistic on the stock market but we think the trend could be fragile, which requires that we be ready to revise our outlook on relatively short notice. We remain vigilant.
April 26, 2007 We're changing the look of our "News" page to make it easier to update. Hopefully this will result in my being able to make the page more current and, therefore, more useful to our clients. Please check back from time to time and let me know of any suggestions/comments you have. Lots of economic news lately has revealed that things are actually pretty good in the U.S. and elsewhere - as far as business activity goes, at least. Interest rates remain steady and the current profit reporting season has give us mostly good news. We have taken this opportunity, therefore, to increase equity-related holdings in most of our clients' portfolios in order to take advantage of what we believe is a rising trend in the U.S. stock market While we don't believe this trend will be long-lived, we'll take advantage of it for the time being. Thanks for listening; and thanks for your business! Buster
February 27, 2007 Clients of Moldenhauer & Company, Inc.; You may have read or heard in the mews media of today's dramatic decline in stock prices. I want to reassure you that the portfolio we manage for you DID NOT experience the magnitude of decline that you may have heard or read about. For a few weeks now, we have become more and more concerned that equities worldwide were approaching unsustainably lofty valuations and we have been reducing equity exposure in portfolios under our management to a more defensive allocation for just this reason. This is not to say that your account(s) did not suffer to some degree, but your loss is minimal by comparison to today's carnage in the financial markets. Please don't hesitate to give me a call if you'd like a more detailed explanation of our efforts to conserve the value of your portfolio and its current status. Thank you for your continued confidence in our service. As always, we welcome your questions and comments. Contact us here. Thanks, Buster 770-487-3615 800-878-3615
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© 2006 Moldenhauer & Company, Inc.