Market Comment 09 15 10

The recent stock market advance off the late August lows has started to show signs of stalling right at the top of the trading range that has contained market action for the past several months. The advance has been on declining volume and the major U.S. indexes are short-term overbought, so a correction or a reversal to the downside at this point could be expected.

(Click on chart to enlarge it for easier viewing)

Notice how the short, intermediate, and longer term moving averages are crisscrossing in the chart below. This represents uncertainty on the part of investors in the market.

We need to have the market decisively break above the trading range to remove some of the uncertainties and give longer term investors more confidence in the market. Until then it will remain a traders market.

Blog Blackout Period

Blog Blackout Period

We are in the process of adding and changing client portfolio positions. All GWM clients will be notified of portfolio position changes by email.

The Gerritz InSights blog will be reopened to the general public in a few days.

Christopher Gerritz, a GWM Employee, Presented with Auspicious Award

Billy Mitchell Award Recipient Recognized at the GAC


Author: Stephanie Miller

Published: August 23, 2010

During the 75th Grand Arch Council, Christopher Gerritz, was presented the Phi Kappa Psi Foundation’s William L. “Billy” Mitchell Award, recognizing a Phi Psi undergraduate who has courageously served our country. Brother Gerritz joined the Air Force immediately after high school and was stationed in Germany as a Cryptographic Communication-Electronics Technician for two and a half years. During his tenure at Ramstein Air Base, he was named the 435 Communication's Squadron's Airmen of the Year.


In July 2004, he was deployed as part of Operation Iraqi Freedom to Ali Al Salem Air Base, in Kuwait. After his service and upon being accepted to the Airman Scholarship and Commissioning Program he moved to Corvallis, OR to attend Oregon State University and while there joined Phi Psi’s OR Beta Chapter. Throughout his time at Oregon State he served as Chapter Treasurer and President, Vice President of Public Relations for the Inter-fraternity Council and was honored with several University wide awards.

This summer he will be commissioned into the United States Air Force as a Second Lieutenant and will be attending Pilot Training in Del Rio, Texas.

When asked why he chose to serve our country he responded, “I initially chose to serve for complicated, perhaps selfish reasons - for one, I needed it. The discipline and character I have developed through my military training is what made me who I am today. Additionally, I love my country, the principles it stands for, and the promise for the future as we work to usher in a new era of responsibility and peace for the human race.”

Bond Yields Rising

Below is a chart that illustrates the decline in Treasury bond yields since April. We are now seeing the beginnings of a possible change in trend with yields braking through the top channel line. Bond prices run inversely to bond yields; therefore, higher yield means lower bond prices.

Investments in the low yielding US Treasury market represent a risk aversion trade. When the stock market is in rally mode investors will often times sell treasuries and buy stocks. I believe this is happening now.

Bonds have been the investor preference since April. We should know shortly if investor preference is shifting in favor of stocks longer term.

(Click on chart to enlarge it for easier viewing)

Market Comment 09 06 10

The market got a huge boost last week when the jobs report came in better than expected. Jobs are what the market wants to see. The market advance however was made on extremely light volume.

We will have to see if there is any follow-through next week when Wall Street traders return from their summer vacations.

Relative Strength of Stocks Versus Bonds

Relative Strength of Stocks Versus Bonds

The chart above displays the relative strength of the S&P 500 versus the long bond (30 year US Treasury Bond). When the line is rising, it indicates that stocks are outperforming 30 year treasury bonds, while a falling line indicates that bonds are outperforming stocks.

The relative strength chart above clearly shows that bonds have been outperforming stocks the last few months. The type of bonds we hold in our model portfolios are comprised of a diverse group of holdings, i.e., government agency bonds, corporate bonds, high yield corporate bonds, etc.

When the financial news networks, such as CNBC, refer to bonds they are generally referring to either the 10 or 30 year US treasury bonds. The long maturity bonds will fluctuate based on both interest rate changes and changes in the bullishness or bearishness of the stock market. Money will move out of safe haven treasuries and into the market as stock market rallies take hold and vice versa when stocks fall.

Unlike treasuries, high yield bonds act more like a proxy for the stock market. If the stock market rises high yield bonds tend to rise.

If the stock market rally that began late last week proves to have staying power, I will be adding to our high yield bond positions.

The Gerritz Letter - Corrected Performance Chart

Below is a corrected performance chart for the Sept 1st 2010 issue of The Gerritz Letter. I inadvertently posted the one month rate of return figures rather than the full quarter rates of return. I will update the chart in The Gerritz Letter posted on our website as soon as possible.

The corrected quarterly rates of return should read as follow:

DBLTX =  6.41%

PTTAX = 4.66%

PDVYX = 3.94%

MWHYX = 4.19%

SPY = -3.25% (Spy is our benchmark - We do not current have a position in SPY)

(Click on chart to enlarge it for easier viewing)

I will also send out an email notification and update of the chart correction.

I think you will agree that the quarterly performance of our Low Volatility portfolio is very good, especially when compared to the S&P 500 results.

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