Week 31 Performance.....Time to take a deep breath

How many people like amusement parks?  If so this has definitely been the summer for you when it comes to the equity markets.  In addition to the record breaking heat and drought conditions which looms as a headwind to the economy, the markets seem to go on a hot streak themselves only to run out of water and come to a complete halt.


I was listening and reading to some analysis this week where looking over the past few decades that most of the market's return have been on those days where the FED has announced their monetary decisions.  This week as expected the Fed made no moves.  However don't look for them to stand pat even though we had a better than expected jobs report on Friday.


At the end of August the Fed will convene at it's annual meeting in Jackson Hole, WY site of many major Fed decisions such as QE 2 and operations twist.  While the argument will rage on as to whether any new stimulus would actually help the economy, (at DWCM we believe that it won't) the doves at the Fed seem to be having a itchy trigger finger just waiting to shoot.


Even though Bernanke told congress a month ago that there is only so much that the Fed can do to spurn growth and that they are the ones that need to take action.  So what happens in Washington?  Congress decides to take a 5 week vacation.  So if Congress won't take action then Bernanke will find some way to do the job himself.


No one expects any type of resolution before the election, so you have overpaid politicians basically in an extended lame duck session.  If this type of action were take in the private sector, people would be fired and out of work.  In Washington though, it is totally acceptable.


In the meantime, we will march towards the fiscal cliff continuing to erode consumer confidence and stall economic activity.  Markets will oscillate back and forth on news from Europe and how they cannot come up with solutions to their fiscal issues.  And we will watch for news out of China regarding their slowing economy.


Bottom line, expect more of the same from the markets.  Asset classes will continue to move in the same direction one way or another.  So when you have a good jobs report like Friday expect the markets to be up.  When enough people get worried about Europe or China on any given day, expect the markets to be down.


As we have stated previously, at DWCM the best way we see to protect investors and capital in this type of environment is to be somewhat conservative.  You can't be all in, but you can't be all out either.  We are standing by our strategy of being long agricultural companies, companies that have strong balance sheets and pay solid dividends, and mixing in a little risk with technology names that are still growing despite the headwinds.


Despite the volatile nature of the markets, the DWCM fund has been up 7 out of the last 10 weeks during the summer months.  We have been able to manage through the ups and downs by sticking with our core strategy and making changes to our risk profile when we saw fit.  One of our goals with the DWCM fund is not just to outperform our benchmarks, but to also perform in a consistent manor while trying to achieve our goals.


This was yet another week where we had little to no market activity.  Our only trade this week was to add to our Caribou Coffee CBOU when it hit our technical buying point.  This is a name that has some risk as it depends upon consumers who have income.  However it has a strong balance sheet, solid fundamentals, and the ability to grow.

The Week Ahead

Things become allot quieter this week as the bulk of companies have gotten through their earnings reports and the level of economic data dies down.  With that being said, look for any type of news out of Europe to drive our markets.  As we have stressed before this is where it is handy to have your watchlist of companies ready in case prices hit your buy or sell limit.

• Mon -  Ben Bernanke Speaks
• Tue -  Ben Bernanke Speaks,  Consumer Credit,  ICSC-Goldman Store Sales
• Wed -  Productivity and Costs
• Thu -  Jobless Claims
• Fri -  Import and Export Prices,  Treasury Budget

Have a great week!

DreamWorks Capital Management
FREE LECTURE:  Our next finance lecture will be on Tuesday September 18th at the The Community House.   The topic will be Balancing Your Changing Investment Needs: Emergency Fund, Investments, Retirement, Education, and Philanthropy.  We will cover significant points regarding creating, developing, and executing on your wealth management plan.  We hope to have another interactive group, so be sure to sign up by emailing me directly at pfenner@dwcmllc.com or by contacting The Community House at 248-644-5832.  There is no charge and light refreshments will be served.