From our commentary ...
The Good News
Finally, we are on the right side of current trends;
The S&P and NASDAQ had significant losses this week,
while our diversified portfolios gained nicely.
Because of uncertainty in the presidential election,
the end of year rally has been canceled. Because of
uncertainty about fourth quarter earnings and the 2001
economy, the technologies and most other sectors are
settling into a long term bear market.
Fortunately for us, there are defensive sectors that
have been doing quite well in November and should
continue to do well until this uncertainty dies down in
the February to March 2001 time frame.
As the year 2000 draws to a close, here is a rundown of
how our portfolios are likely to end the year.
S&P 500 - Down - 5% to - 15%in 2000
NASDAQ - Down - 30% to - 40%in 2000
Investor's Portfolio - Up 10% to 20 % in 2000.
The Investor's Portfolio in the year 2000 is a perfect
demonstration of the power of sector investing. This
portfolio has been able to focus on technologies when
they were exploding, straddle the sectors when the
market was uncertain, and become purely defensive now
that the Bear Market has settled in. Because of this,
this portfolio will probably outperform 80% to 90% of
all mutual funds and newsletters this year.
Technology Portfolio - Up 1 % in 2000.
While a 1% gain is disappointing, according to CNN the
average technology fund is down - 33.7 % year-to-date.
So, it is clear that while our technology strategy is
not perfect it is much better than average.
Security Portfolio - Up 0 % to 10 % in 2000.
Here too, a 0 % to 10 % gain in 2000 will probably out
perform most mutual funds and newsletters and thus
there is nothing to apologize for, but we owe an
apology to our Security Portfolio investors.
When we folded the Core and Security Portfolios
together we allowed too much of the Core portfolio
model to remain. Because of this, this portfolio was
more of a rollercoster ride and suffered more losses in
the surprising decline of the last three month than it
should have. We have reintroduced security into this
portfolio and so it should be less volatile and may
perform better in the future.
Buy & Hold Portfolio - Down - 5 % to - 15 % % in 2000.
The hardest part about being a buy and hold investor is
holding during down markets. In fact, the buy and hold
investor should be adding money when prices are low.
The good news here is the we have only made two of the
three annual buys so far, so this fund is not as
diversified as it will be and happens to be a
technology heavy portfolio at this time. So the correct
comparison, for 2000, is to a technology fund and this
portfolio is running a solid 20 % better than average
there and technologies will without a doubt rebound in
the coming years.
The Bad News
The technology bear market is here to stay until at
least February or March 2001, but we are now out of
technologies and this is no longer bad news for us.
What may be bad news for us is the fact that worries
about the Presidential election, fourth quarter
earnings, and the hard Vs. soft landing in 2001 will
continue into at least into January 2001.
These concerns may keep the whole market in Bear Market
mode until Spring. But for now there are clearly
defined defensive sectors that are doing well.
Russell Cox
selectinvestor.com |
