My 2009 Annual Summary to Clients
To My Clients:
Our accounts are up 24.1 % for the year 2009.
Our accounts, together with the stock and bond markets, have performed quite well this past year despite large holdings in each account of low yielding T-bills and Treasury bonds. It is still quite difficult to find reasons not to continue our successful defensive strategies of the past three years in which we’ve been quite fortunate to obtain positive returns in each year.
The credit crisis is far from over, and although there are indications that the recession is coming to an end, it also appears that it will be a far from robust recovery. The best that can be said of the economy is that it has stopped declining. Employment continues to lag and will continue to be a severe drag on any recovery. In spite of the Federal Reserve’s efforts to stimulate monetary growth, it is not happening, as banks remain fearful of lending and continue to leave their reserves on deposit at the Fed. What little stimulus we are seeing seems to be finding its way into the financial markets so far, with little to show in the real economy.
The dollar has been declining for most of this past year with only recent signs of a turnaround. This has contributed to our improving export picture and our improving trade balance, but remains a problem as our imports, notably energy and commodities, will continue to increase in cost. Against this backdrop, there is little reason to back away from our successful precious metals strategy regardless of ones perception of what the future holds for either inflation or deflation. In that regard, the collapse of the money supply stemming from massive loan defaults over the past several years is decidedly deflationary. The thus far unsuccessful massive response by the Fed and the Administration to stimulate the money supply, when and if banks start to lend again, is potentially massively inflationary. In either case, our precious metals strategy should perform well. In this volatile environment, we also anticipate continuing our conservative and defensive approach by remaining invested in safety, in Treasury bills and bonds.
We remain extremely cautious and conservative and will continue this course until the economy stabilizes. We have been very fortunate to have produced positive returns and performance each quarter throughout this economic turmoil. Although these quarterly summaries are very brief, as always, please feel free to call me if you wish to discuss your account or our outlook in detail.
Very Best Regards,
Joseph L. Toronto, CFA
Asset Allocation, Banks, Bonds, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation, Markets, Portfolio Management
