TREES INVESTMENT COUNSEL VIEWPOINT (Q1 2009) 

We usually report on three items, the stock market, the bond market, and the economy.  It doesn't take an expert to say conditions deteriorated in all but fixed income compared to three months ago.

That is probably good news.  Expectations of investors are modest for a change.  The reality of slower economic growth, with inflation threats and higher taxes as well for the next 5 to 10 years, provides little reason for euphoria.  Early indicators show Americans saving again and deleveraging their balance sheets.

The worst stock results since the 1929-1932 collapse and record spreads in yield between US Government and corporate securities go a long way in discounting the more sober future.

Time is the big unknown.  Since last November the markets have fluctuated like a pogo stick on steroids, albeit with a downward bias.  We expect more ups and downs.  We accept conditions as they are.

Our forecasts have not changed.  The market lows may or may not be in, but we think they are probably close to those seen so far.  Our historic preference for good credit quality and reasonable yield for our stocks has been upped an additional notch.

If you think back on prior market debacles, such as the dotcom bust of 2000-2002, every stock does not come back.  The future is not like the past.  But, there will be good growing companies again and it is our job to recognize those with "good value".

On the bond side, returns are adequate on short to intermediate issues although the longer term inflation threat makes long bonds too uncertain.  There is ample evidence the world economic downturn is set to end this year, and the US economy will follow in step.

Jackie Moss is the proud mother of twins, born February 24th.  Scott and Jay are delighted both for her and that they have the easier assignment for a while.

April 17, 2009