SAC's commentaries and research are sought after by investment professionals and clients alike for their timely insight into the strengths, weaknesses, and future direction of the market.

December 2009

DECEMBER CLIENT INVESTMENT REVIEW: Dawn of a New Decade, Maybe

Despite what the last 10 years have produced, euphoria and optimism abound for the next year and the start of the new decade. This has been helped by the decoupling of the dollar from the euro and the Fed's widely discussed liquidity reduction theme. The Dubai default, a tripwire for the revaluation of sovereign debt and the currency reserve role of the Eurodollar, has temporarily strengthened the dollar. During this final month, the 'rush to risk' or the 'dash to trash' (so evident throughout 2009) continued, as evidenced by the NASDAQ Composite total return of 5.87% for the month and full-year return of 45.36%. Stocks are up despite the relentless shrinkage in dividends by almost one-third - as evidenced in the latest Flow of Funds release from the Federal Reserve. This is further proof of the liquidity pyrotechnics provided by Fed chairman Bernanke to bring about a pause in a much broader deleveraging story that continues. Gold, while down for the month, is up significantly for the year, reflecting the instability inherent in these financial markets, not inflation. Meanwhile, similar conditions exist among the industrial nations, most certainly the G-20 countries that, in turn, are mutually overly dependent on exports to the US, Europe, and Japan - and they will also stumble. Read Full Version >

ASSET ALLOCATION ANALYSIS: Minimizing Portfolio Risk Remains As Critical As Maximizing Returns In The Prospective Decade As It Was In The Last

A hedge is against overly aggressive equity-like exposure. Liquidity and income are crucial in deflation. This past decade has seen a solid 10 years of positive quality fixed income performance and even stronger gold performance versus negative equity returns. Marginalized equity contribution now dates back to 1969, and no efficient frontier exists out to 20 years. Derivatives, leverage, and short-selling employed in alternatives by plan sponsors to stem the challenge to the role of equities has created diversification failure. Read Full Version >

FINANCIAL MARKET REVIEW

To prepare for the new decade of the third millennium, a review is vital. SAC's December 2009 Financial Market Review provides a ten-year comprehensive review of both the taxable and tax-exempt fixed income markets, along with gold and equities. We hope this material will guide you in your portfolio assessment. Read Full Version >