Letter to Our Clients - July 2011
It appears there is strong likelihood that the United States government will default on its debt.
By the time you receive this letter/email, the government may have actually worked it out. If so, then doing nothing would have been our best decision.
If the debt limit is not raised, no one can predict what will happen to the financial markets. It is doubtful that it will be as bad as 2008-2009. Even that we cannot say with certainty. Eventually the debt limit will be raised and business will return to normal, although, it may be a new normal.
The strategies being discussed to get through a short term crisis include going all to cash, going all to short term bonds, investing in foreign currency, buying gold, and many other strategies beyond these.
The risk is that we might zig as the market zags. If we sell out of the stock market completely, we are back at the classic problem of knowing when to buy back in.
The stock market ultimately tends to reward the companies that provide goods and services profitably. It is my belief that we take on more risk when we try to be clever and outsmart the market.
This is an uncertain world and this may feel like these times are more uncertain than in the past. We have talked many times about the importance of developing an investment strategy and staying with it. I firmly believe that this is what we should be doing now.
Please call if there is anything you would like to discuss. We are going through an e-mail conversion, so if you e-mail to us and do not get a reply, please be sure to follow up with a phone call.
Thanks, and best wishes,