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Optivest Updates

Investment Summary-

The second quarter of 2009 continued to see the global economic “Great Recession” slow its decline and saw confidence grow that the GDP will turn back up in the second half of the year. Prices of stocks, bonds and commodities all rebounded sharply in April and May before
stalling in June. A tension exists between balancing the early signs of recovery with prospects of a “jobless recovery” and economically unhelpful government policies presently being proposed. Our near-term outlook is neutral with little expectation of further price appreciation. Our overall strategy continues to be focusing on low/medium risk income producing investments along with a smaller allocation to inflation/weak dollar hedges.

Investment Summary-

The first quarter of 2009 started with the continuation of the scary economic declines from the fourth quarter and ended with the hope that the worst was behind us. We now believe that the combination of worldwide economic/financial stability crises and the US stimulus/economic spending budgets/deficits are finally fully discounted in today’s current financial asset values. However, reaching the bottom still means that we have a long way to go until the damage is repaired and markets go back up to historic valuation norms.

The current financial crisis reminds me of a movie from the 50’s, “The Day the Earth Stood Still”.  With a frozen and fearful credit market, lending for virtually everything has stopped.  A true panic has caused runs on money market funds and banks (WAMU saw $16.5 billion withdrawn from its bank in the week before it was seized by the FDIC).  These are supposed to be the “safe” places to put your money.  Goldman Sachs, the most revered of all investment banks, recently had to borrow money from Warren Buffet at 10% interest.  If Goldman Sachs has to pay 10%, everyone else down the food chain has to pay more. This also means that the yield on corporate and muni bonds have sky rocketed, driving their prices down. The value of our well diversified Optivest portfolios, including Commercial Property, Trust Deeds and Hedge Funds really shines in times like these.

Investment Summary-

Thank goodness for broad diversification in our investment portfolios. While the portion of our accounts that are in unhedged stocks and bonds have been subject to the worst bear market since the Great Depression, our diversification into real estate, trust deeds and hedged stock and bond funds have held most accounts to losses in the low single digits. Stable, cash flowing assets never looked so good…

Investment Summary-

Despite a weak economy and stock market, Optivest investors experienced a surprisingly good second quarter.  All of our hedge fund investments were up, our Sector Logic stock portfolios were up 8% and our real estate investments performed as expected.  The only disappointment has been our Schwab Bond investments which remain at discounted levels; however, they continue to pay uninterrupted cash flow.

US Economy
What a wild ride the first three months of the year has been! The sub prime mortgage problem, compounded by highly leveraged investment vehicles (CDOs), caused a bona fide banking panic culminating in the mid March government sponsored bail out of Bear Stearns, steep drops in the stock markets and the floating of $200 billion of Federal Funds to help weak financial institutions meet minimum capital requirements.