Here is the Sage Investment Strategies weekly update on March 28, 2009:

Results through 3/27/2009

Market Highlights
S&P 500 Index up 6.2%
The S&P 500 Index (symbol: ^GSPC) chalked up gains of 6.2%, 1.6% and 10.7% over the last 3 weeks, closing at 815.94. Representing the weighted value of 500 large publicly held U.S. companies and a bellwether for the U.S. economy, the index is off 38.0% from a year ago and down 48.2% from it’s October 11, 2007 peak of 1,576.09. Since the peak most investors (except for our subscribers) have been on a tumultuous roller coaster ride punctuated by sharp ups and downs. Over the past 52 weeks the market has tumbled as much as 56.4% peak-to-trough. While some market observers feel the bottom is behind us, others claim this is simply a bear market rally or what some cal a “dead cat bounce.” History will show who was right. 

Market volatility remains high
The CBOE Volatility Index (symbol: ^VIX), a popular measure of the fear of anticipated stock market volatility, ranged between 40.17-45.89 last week compared with a range of 38.79-47.63 the prior week. While the VIX continues to be high by historical standards, during October 2008 the index spiked to an all-time high of 89. In comparison, the VIX ranged mostly in the teens and twenties for most of 2008 prior to September and had never been higher than 46 prior to 2008. The current readings indicate persistent elevated fear in the markets. 

Bonds off 0.8%
Bonds (as represented by symbol AGG) closed down 0.8% for the week and up 2.3% from a year ago. AGG is an ETF that tracks the total United States investment grade bond market as defined by the Barclays Capital U.S. Aggregate Index of more than 9,000 government and corporate bonds. 

Crude oil steady at $52
Crude oil futures prices finished the week nearly unchanged with the nearby contract closing at $52.38, up from $52.07 per barrel the prior week. Oil is off 64.4% from its July 2008 peak of $147 per barrel. Nationally, gasoline averaged $1.94 per gallon retail for the week of March 9, rising $0.05 from a week ago but down $1.297 per gallon from a year ago.

Gold down $33
Gold futures prices ended down 3.5% from prior week with the nearby contract closing at $922.40 per ounce, down from $955.60 the prior week. 

Economic Highlights
Continuing unemployment claims up again 
Initial unemployment claims rose from a revised weekly figure of 644,000 to 652,000 for the week ending March 21, while the 4-week average fell slightly to 649,000 from the previous week’s 650,000 revised average. Advance data shows continuing claims for unemployment benefits rose to 5.560 million from 5.438 million. 

Consumers’ expenses up, income & savings down
The Bureau of Economic Analysis reported a 0.2% month-over-month decline in personal income, a 0.1% decline in disposable personal income (DPI) and a 0.2% increase in personal consumption expenditures (PCE). In contrast, personal income rose 0.2%, DPI rose 1.6% and PCE rose 1.0% in January based on revised estimates. Personal saving as a percentage of disposable personal income declined from 4.4% in January to 4.2% in February.

New home sales up monthly - way off yearly
The U.S. Census Bureau and the Department of Housing and Urban Development reported that sales of new single-family houses rose 4.7% in February to a seasonally adjusted annual rate of 337,000 from the revised January rate of 322,000. However, sales are off 41.1% from year ago levels. The median sales price of new homes sold in February 2009 was $200,900 while the average selling price was $251,000. More than 12 months of inventory remains on the market.

Existing home sales improving
The National Association of Realtors reported that the seasonally adjusted rate of existing home sales grew by 5.1% over last month but shrank by 4.6% from last year. The West led gains with sales climbing 2.6% over last month and up 30.4% year-over-year. Inventory of unsold homes remained at 9.7 months of supply.

Fed warns of grave inflation danger
Federal Reserve Bank of Richmond President Jeffrey Lacker said the huge increase in the money supply could cause “quite sizable inflation pressures” unless the Fed acts in a timely manner to “withdraw the stimulus” when economic growth resumes. 

Durable goods orders up
Snapping a 4-month losing streak, durable goods orders excluding transportation rose 3.9% against a forecasted decline of 2.0%. The durable goods report is a bellwether indicator of U.S. manufacturing. Durable goods orders are for big ticket “hard goods” with a shelf life of at least 3 years including autos, computers, machinery, aircraft and communications equipment. 

Sage Investment Strategies Portfolio Update
SIS portfolios stable year-to-date despite market volatility
Despite extraordinary market volatility and devastating losses for most stock market investors since October 2007, the Sage Investment Strategies portfolios have shown remarkable stability. Since our SISTM minimized stock market exposure for most of the past year, the performance of our portfolios (see chart above) has been relatively smooth compared to the stock market’s gut-wrenching volatility. The combination of low volatility and solid long term results enable our subscribers to sleep well at night. 

Our SISTM has performed an outstanding job of keeping our subscribers’ money safe from devastating losses compared with the two benchmarks against which we compare our performance: (1) a hypothetical investor’s portfolio consisting of 60% stocks and 40% bonds and (2) the S&P 500 Index, representing the U.S. stock market. 

The performance of our portfolios ranges from -0.2% to +1.0% year-to-date (YTD) and from -1.8% to +4.7% year-over-year (YOY). In contrast, the performance of the 60/40 Benchmark is -4.0% YTD and -22.4% YOY while the S&P 500 index shows -6.5% YTD and -38.0% YOY. But YTD and YOY performance doesn’t tell the whole story. One must also examine the maximum drawdown (peak-to-trough losses) over the past year.  Maximum drawdown for the Sage Investment Strategies portfolios ranges between a manageable -4.6% and -6.2% compared to a massive -35.3% for the 60/40 Benchmark and an eye-popping -56.4% for the S&P 500 Index.

Depending on which SIS portfolio strategy you follow, you enjoy an advantage over an average investor as represented by the 60/40 benchmark, somewhere between 3.8-5.0 percentage points YTD and 20.6-27.1 percentage points YOY. Compared with the stock market as represented by the S&P 500 Index, you have an even greater advantage of between 6.3-7.6 percentage points YTD and 36.2-42.7 percentage points YOY. 

Comparing various measures of risk and return in the table above, the SIS portfolios continue to outperform the benchmarks over the past year. For those not familiar with all the terminology, let’s review what it means:

52-Week Return represents the percent gain or loss compared to one year ago.

Standard deviation (52-Wk Std Dev) measures the volatility of individual weekly returns from the average return. As standard deviation increases, so does risk. Conservative investors prefer portfolios with lower standard deviation values while more aggressive investors are willing to invest in portfolios with higher standard deviation if there is a good chance of achieving higher returns.

Maximum drawdown (52-Wk Max DD) represents the largest percent decline in the portfolio’s value over the last year from the highest peak to the lowest point following the peak.

Sharpe Ratio (52-Wk Sharpe) measures how well the return of a portfolio or benchmark compensates the investor for the risk taken. Positive numbers are better than negative numbers and higher positive numbers signify better risk-adjusted returns.  

It’s important to review all the above measures when assessing and selecting a particular investment strategy for yourself. Doing so may keep you from taking on more risk than necessary. 

Here’s how each of the Sage Investment Strategies portfolios have fared…

Log in to read the rest of the newsletter. Not subscribed yet? Try our 30-Day Free Trial.

Have a great week ahead!
Paul

 

Results through 3/20/2009

Market Highlights

S&P 500 Index up 1.6%
After surging 10.7% the prior week, the S&P 500 Index (symbol: ^GSPC) managed a 1.6% gain last week, closing at 768.54. Representing the weighted value of 500 large publicly held U.S. companies and a bellwether for the U.S. economy, the index is off 38.8% from a year ago and 51.2% from it’s October 11, 2007 peak of 1,576.09. While some market observers feel the bottom is behind us, others claim this is simply a bear market rally or a “dead cat bounce.”

Market volatility lessens
The CBOE Volatility Index (symbol: ^VIX), a popular measure of the fear of anticipated stock market volatility, ranged between 38.79-47.63 last week compared with a range of 40.03-51.34 the prior week. While the VIX continues to be high by historical standards, during October 2008 the index spiked to an all-time high of 89. In comparison, the VIX ranged mostly in the teens and twenties for most of 2008 prior to September and had never been higher than 46 prior to 2008. The current readings indicate persistent elevated fear in the markets. 

Bonds up 0.7%
Bonds (as represented by symbol AGG) closed up 0.7% for the week and up 2.6% from a year ago. AGG is an ETF that tracks the total United States investment grade bond market as defined by the Barclays Capital U.S. Aggregate Index of more than 9,000 government and corporate bonds. 

Crude oil jumps to $52
Crude oil futures prices rose with the nearby contract closing at $52.07, up from $46.25 per barrel the prior week. Oil is off 64.6% from its July 2008 peak of $147 per barrel. 

Gold up $26
Gold futures prices ended the week up 2.8% from prior week with the nearby contract closing at $955.60 per ounce, up from $929.40 the prior week.

Economic Highlights

Continuing unemployment claims up again 
Initial unemployment claims fell from a revised 658,000 to 646,000 for the week ending March 14, while continuing claims for unemployment benefits surged to 5.473 million. While the official unemployment rate is 8.1% nationwide, 14 metro areas are above 15% unemployment including El Centro, CA with a depression-era rate of 24.2%.

Leading Indicators fall 0.4%
The Conference Board reported a 0.4% month-over-month decline and a 4.1% decline in the past 6 months in the forward-looking indicator. The coincident index, which measures current conditions, fell 0.4% from the prior month while the lagging index, which provides a rear-view mirror look at conditions, also fell 0.4% from prior month.

IMF says global growth to  fall
The International Monetary Fund forecasts a global contraction of 0.5%-1.0% in 2009 but an expansion of 1.5%-2.5% in 2010. The IMF forecasts a 2009 contraction of 5.8% in Japan, 2.6% in the U.S. and 3.2% in Europe. The IMF and the U.S Federal Reserve both say deflation is a serious danger. 

Consumer Price Index rises unexpectedly
The Bureau of Labor Statistics reported the seasonally adjusted core CPI rose 0.2% in February from the prior month while annual core inflation rose 1.8%. Economists dismiss the rise as a temporary blip. 

Federal Reserve to buy $300 billion in U.S. Treasuries
The coordinated move by the Fed is designed to temporarily hold down long term interest rates, stimulate mortgage refinancing and reflate the economy. It might even allow the Chinese to dump some of the $1 trillion in U.S debt they hold without upsetting the bond market.  

Consumer sentiment ticks up slightly
The ABC News Consumer Confidence Index rose slightly from -48 to -47 in the week ending March 15.

February housing starts jump
The U.S. Census Bureau and the Department of Housing and Urban Development reported that February housing starts jumped 22.2% over January (a bad weather month), while year-over-year housing starts are down 47.3%. Building permits were up 3.0% from January but down 44.2% from a year ago. Housing completions rose 2.3% over January but fell 37.3% from prior year.

Household net worth  off $13 trillion
RGE Monitor reports household net worth sank by $13 trillion from Q2 2007 through Q4 2008 and projects the erosion will continue in 2009 given the outlook for both equities and the housing market. RGE says this will significantly impact consumer spending and contribute to a sluggish recovery.

Sage Investment Strategies Portfolio Update

SIS portfolios stable year-to-date despite market volatility
Despite extraordinary market volatility and devastating losses for most stock market investors since October 2007, the Sage Investment Strategies portfolios have shown remarkable stability. Since our SISTM minimized stock market exposure for most of the past year, the performance of our portfolios (see chart above) has been relatively smooth compared to the stock market’s gut-wrenching volatility. The combination of low volatility and solid long term results enable our subscribers to sleep well at night. 

Our SISTM has performed an outstanding job of keeping our subscribers’ money safe from devastating losses compared with the two benchmarks against which we compare our performance: (1) a hypothetical investor’s portfolio consisting of 60% stocks and 40% bonds and (2) the S&P 500 Index, representing the U.S. stock market. 

The performance of our portfolios ranges from -0.1% to +1.6% year-to-date (YTD) and from -1.1% to +5.7% year-over-year (YOY). In contrast, the performance of the 60/40 Benchmark is -6.6% YTD and -25.1% YOY while the S&P 500 index shows -11.9% YTD and -42.2% YOY. 

Depending on which SIS portfolio strategy you follow, you enjoy an advantage over an average investor, as represented by the 60/40 benchmark, somewhere between 6.6-8.2 percentage points YTD and 24.0-30.8 percentage points YOY. Compared with the stock market, as represented by the S&P 500 Index, you have an even greater advantage of between 11.9-13.5 percentage points YTD and 41.1-47.9 percentage points YOY. 

Comparing various measures of risk and return in the table above, the SIS portfolios continue to outperform the benchmarks over the past year. For those not familiar with all the terminology, let’s review what it means:

52-Week Return represents the percent gain or loss compared to one year ago.

Standard deviation (52-Wk Std Dev) measures the volatility of individual weekly returns from the average return. As standard deviation increases, so does risk. Conservative investors prefer portfolios with lower standard deviation values while more aggressive investors are willing to invest in portfolios with higher standard deviation if there is a good chance of achieving higher returns.

Maximum drawdown (52-Wk Max DD) represents the largest percent decline in the portfolio’s value over the last year from the highest peak to the lowest point following the peak.

Sharpe Ratio (52-Wk Sharpe) measures how well the return of a portfolio or benchmark compensates the investor for the risk taken. Positive numbers are better than negative numbers and higher positive numbers signify better risk-adjusted returns.

It’s important to review all the above measures when assessing and selecting a particular investment strategy for yourself. Doing so may keep you from taking on more risk than necessary.

Here’s how each of the Sage Investment Strategies portfolios have fared… 


Log in to read the rest of the newsletter. Not subscribed yet? Try our 30-Day Free Trial.

Have a great week ahead!
Paul

Here is the Sage Investment Strategies weekly update on March 14, 2009:

Results through 3/13/2009

Market Highlights

S&P 500 Index surges 10.7%
After losing 21.3% over 4 straight weeks of losses, the S&P 500 Index (symbol: ^GSPC) surged 10.7% last week, closing at 756.55. Representing the weighted value of 500 large publicly held U.S. companies and a bellwether for the U.S. economy, the index has plummeted 41.3% from a year ago and 52.0% from it’s October 11, 2007 peak of 1,576.09. Some market pundits declared the powerful surge is a sign that the market has seen the bottom. However, history shows that surges of this magnitude are more likely in a bear (downward) market than in a bull (upward) market.

Market volatility continues
The CBOE Volatility Index (symbol: ^VIX), a popular measure of the fear of anticipated stock market volatility, ranged between 40.03-51.34 last week compared with a range of 45.02-53.25 the prior week. While the VIX continues to be high by historical standards, during October 2008 the index spiked to an all-time high of 89. In comparison, the VIX ranged mostly in the teens and twenties for most of 2008 prior to September and had never been higher than 46 prior to 2008. The current readings indicate persistent elevated fear in the markets. 

Bonds flat
Bonds (as represented by symbol AGG) closed flat for the week, up 2.8% from a year ago. AGG is an ETF that tracks the total United States investment grade bond market as defined by the Barclays Capital U.S. Aggregate Index of more than 9,000 government and corporate bonds. 

Crude oil up slightly
Crude oil futures prices rose with the nearby contract closing at $46.25, up from $45.52 per barrel the prior week. Oil is off 68.5% from its July 2008 peak of $147 per barrel. 

Gold down slightly
Gold futures prices ended the week down 1.3% from prior week with the nearby contract closing at $929.40 per ounce, down from $942.10 the prior week. 

Economic Highlights

Consumer sentiment stuck in a rut
The preliminary report from Reuters and the University of Michigan showed that consumer sentiment rose slightly from 56.3 in February to 56.6 in March while the ABC News Consumer Confidence Index rose slightly from -49 to -48 in the week ending March 8.

Unemployment worsens 
Initial unemployment claims rose to 654,000 for the week ending March 7, while continuing claims for unemployment benefits rose to 5.317 million. More than 1 in 10 workers are jobless in California, Michigan, Rhode Island and South Carolina. The official unemployment rate is 8.1%.

Even billionaires are hurting
Forbes Magazine reported that the world’s wealthiest man, Bill Gates, lost 31% of his wealth over the past year. The magazine reported that members of Forbe’s billionaire list lost some $2 trillion in net worth with the average billionaire losing about a third of their wealth since last year’s report. Warren Buffet, who lost 40% from a year ago, says “everything will be all right.” Separately, the Asian Development Bank estimated the global impact of the current economic crisis at $50 trillion, with Asia alone bearing nearly $10 trillion of total losses.

Budget deficit soars to record high
Just 5 months into the government’s fiscal year, the U.S. Treasury Department reported a record $764.5 billion deficit compared with a $264.5 billion deficit for the same period the prior fiscal year. Receipts are down 11.4% from last year while spending rose 32.0%.

Banks need billions more
Treasury Secretary Geithner pledged to protect the nation’s top 20 banks even if it means more capital infusions from taxpayers, despite irresponsible lending practices and huge bonuses banking executives awarded themselves. Fed Chairman Ben Bernanke committed to protect banks deemed “too big” to fail but said that operating rules may need to change.

AIG needs billions more to avoid “catastrophic collapse”
Despite three massive infusions totaling $265 billion of taxpayer funding since September, the world’s largest insurance company confidentially reported that it desperately needs billions more. Without another capital infusion the company says it will fail, potentially triggering a global economic catastrophe. 

Retail sales still weak
Two key retail indicators showed continued weakness in week ending March 7. The ICSC-Goldman Sachs survey of 75 retail chains in the U.S. reported that sales fell 0.9% year-over-year. Meanwhile, the Johnson Redbook retail survey reported sales fell 1.4% year-over-year. 

Sage Investment Strategies Portfolio Update

SIS portfolios stable year-to-date despite market volatility
Despite extraordinary market volatility and devastating losses for most stock market investors since October 2007, the Sage Investment Strategies portfolios have shown remarkable stability. Since our SISTM minimized stock market exposure for most of the past year, the performance of our portfolios (see chart above) has been relatively smooth compared to the stock market’s gut-wrenching volatility. The combination of low volatility and solid long term results enable our subscribers to sleep well at night. 

Our SISTM has performed an outstanding job of keeping our subscribers’ money safe from devastating losses compared with the two benchmarks against which we compare our performance: (1) a hypothetical investor’s portfolio consisting of 60% stocks and 40% bonds and (2) the S&P 500 Index, representing the U.S. stock market. 

The performance of our portfolios ranges from -0.4% to +2.2% year-to-date (YTD) and from -3.3% to +4.7% year-over-year (YOY). In contrast, the 60/40 Benchmark is -7.8% YTD and -24.6% YOY while the S&P 500 index is -13.3% YTD and -41.3% YOY. 

Depending on which SIS portfolio strategy you follow, you enjoy an advantage over an average investor, as represented by the 60/40 benchmark, somewhere between 7.5-10.1 percentage points YTD and 21.3-29.3 percentage points YOY. Compared with the stock market, as represented by the S&P 500 Index, you have an even greater advantage of between 12.9-15.5 percentage points YTD and 37.9-46.0 percentage points YOY. 

Comparing various measures of risk and return in the table above, the SIS portfolios continue to outperform most benchmarks over the past year. For those not familiar with all the terminology, let’s review what it means:

52-Week Return represents the percent gain or loss compared to one year ago.

Standard deviation (52-Wk Std Dev) measures the volatility of individual weekly returns from the average return. As standard deviation increases, so does risk. Conservative investors prefer portfolios with lower standard deviation values while more aggressive investors are willing to invest in portfolios with higher standard deviation if there is a good chance of achieving higher returns.

Maximum drawdown (52-Wk Max DD) represents the largest percent decline in the portfolio’s value over the last year from the highest peak to the lowest point following the peak.

Sharpe Ratio (52-Wk Sharpe) measures how well the return of a portfolio or benchmark compensates the investor for the risk taken. Positive numbers are better than negative numbers and higher positive numbers signify better risk-adjusted returns.

It’s important to review all the above measures when assessing and selecting a particular investment strategy for yourself. Doing so may keep you from taking on more risk than necessary.

Here’s how each of the Sage Investment Strategies portfolios have fared…

Log in to read the rest of the newsletter. Not subscribed yet? Try our 30-Day Free Trial.

Have a great week ahead!
Paul