Investing for the Long Uncertainty Ahead Don’t be fooled by last week’s rally. The outlook for when and how investors can start to rebuild their retirement savings is grim

By David Bogoslaw

March 16, 2009

Economists are characterizing the current financial crisis as everything from the Great Recession to possibly something on the scale of the Great Depression of the 1930s. Just how long will the pain and uncertainty last? Nobody knows. With the jobless rate expected to keep climbing, consumer spending, a key prop of the U.S. economy, may not rebound anytime soon. Meanwhile, Washington has yet to articulate a viable solution to the banking morass. That makes the odds for a recovery within the year or even the next two look worse with each passing day.

The implications for when and how investors can start to rebuild their retirement savings are equally grim. Let’s be honest. Investors probably don’t want to listen to anyone telling them to stay the course and stick with the classic asset allocation at this point, after a nearly 60% plunge in the major stock indexes from their October 2007 peaks.

Don’t be fooled by last week’s stock-market rally. Yes, it was the first time stocks ended higher on four consecutive days since November 2008, but ask yourself: What on the economic horizon has substantially changed since then? Unfortunately, very little.

Criticizing Obama The use of taxpayer dollars under the Troubled Asset Relief Program (TARP) to recapitalize banks and other financial behemoths isn’t working. There has yet to be a consensus in Washington or progress toward removing toxic assets from these institutions’ balance sheets to promote lending, and there’s a growing sense that the Treasury Dept. isn’t any closer to a solution today […]

Recently I wrote that as the market was testing its November lows that we could expect a big battle and the outcome was important from a technical point of view. In fact, the market did break through its November lows, and has had five down days in a row. Technically this was important, but proving once again that the market does not know these technical indicators, the market bounced off its lows today rallying 150 points on the Dow. Volume was a modest 1.79 Billion shares. The market had traded higher most of the day paring its gains at the end. Gainers outnumbered losers 4:1. The catalyst was a stimulus package announced by China. It remains to be seen how important today is for the markets, but it is a good sign.

Posted by David Gaffen

* Sure, stocks put together a rally, but it wasn’t much. Equities could not maintain the day’s highs, which it threatened on three occasions during the session, and the action was middling, as if investors didn’t have the confidence to rebuild positions after Tuesday’s selloff. The reasons? Those assets that can’t be valued, the securities that can’t be sold, and all the other “things that we can’t do right now.” One could say this has a broken-record quality to it, but by now, all of the records have been broken, and the market is moving on to the cassettes and the eight-tracks. “What they need to focus on is housing – that’s the key to solving this problem,” says William Rutherford, president of Rutherford Investment Management in Portland, Ore. “They [bankers] don’t know where the bottom is, so they’re being defensive.right now, there’s no plan, so it leaves us bewildered, befuddled.” Word that the economic stimulus package looked on track to circumnavigate the halls of Congress helped boost sentiment in the latter part of the session, in both stocks and bonds, but the market remains decidedly range-bound. Action in gold and Treasurys supports the view that investors remain concerned about the economy. The 10-year note rallied, dropping its yield to 2.76%, even though demand at the new auction suffered a bit because of its size, and gold gained $30.10 per troy ounce to close at $943.80, highest close since July 22, 2008.

Ok, maybe it isn’t such a good idea to listen to these guys either.

* Early in the ” Wall Street Eight” hearings on Capitol Hill, Rep. Spencer Bachus, R-Ala., the top Republican on the House Financial Services Committee, told […]

Secretary of the Treasury Timothy Geithner took to the podium today to announce the long awaited and oft delayed Obama bank rescue plan. He laid an egg. The market dropped nearly 5% with the Dow Industrials down 385 points.

Not only did Geithner seem out of his element and in over his head, the “plan itself lacked detail”. Well, it did have a few details, there is going to be more regulation, always a popular item with business, and the government is going to “stress test” banks. Since no one knows what “stress testing banks” will mean, banks sold off sharply.

At some point the administration must recognize that the problem is housing. Until they fix the housing problem, bank balance sheets will continue to erode, along with business and consumer confidence; banks will refuse to lend and the downward spiral will continue. Geithner did not address housing until well into his comments, and then only tangentially. It appears that the administration does not have a plan after all.

With three months to prepare for this juncture, the Obama administration is off to a poor start. They need to do much better, and they need to do so soon. The occasional rant against Wall Street is not a plan.

So to borrow a phrase, “It’s housing stupid”!

Rutherford Investment Management LLC is pleased to announce that we have been notified by Morningstar that Rutherford has again been rated five stars, the highest rating Morningstar gives. The rating came in the Large Cap Growth category and is for the last five years. At the same time we were notified that we were rated in the sixth percentile of large cap growth managers in the nation in the Morningstar database.

“We are obviously pleased to have received the highest rating that Morningstar can give for the trailing five year period. This means that we have now been rated five stars in both the Large Cap and Mid Cap categories” said Bill Rutherford, President of Rutherford Investment Management. “We are especially proud that this rating has come in the midst of the worst market since the Great Depression”, Rutherford continued.

For further information call us toll-free at 1-888-755-6546.

Today the Federal Reserve released the attached statement at the conclusion of their regularly scheduled meeting.

Basically policy is unchanged and the Fed stands ready to take such action as indicated to support the economy and housing market.

The Obama administration is still quiet on their solution for the financial sector, but is said to be working on a plan. In addition to financial sector solution they are working on a nearly $1 trillion stimulus plan.

In coming days, as the administration plan becomes more visible, I will be writing more.

In spite of a spate of bad news, equity markets seem to be stabilizing. Much of the bad news was anticipated and the markets are beginning to look forward to improving conditions. More on that later.

If you have any questions, do not hesitate to call. 503.452.1210

Best Bill

Fed-Statement-01-28-2009

By Mary Ellen Lloyd of DOW JONES NEWSWIRES
(c) 2009 Dow Jones & Company, Inc.

It’s still too early to buy home-improvement retailing stocks, even though shares of the biggest players have built up some nice gains since hitting five-year lows in October.

The U.S. housing market troubles and recession are likely to pressure sales and earnings growth at Home Depot Inc. (HD) and Lowe’s Cos. (LOW) at least through 2009 and probably through 2010, say some money managers and industry analysts. They argue home-improvement sales have lost wallet share as Americans cope with concerns about falling home values, shrinking retirement accounts and job security. Home equity withdrawals have fallen to an all-time low, and other credit for big renovation projects is harder to secure.

“Even though the valuations on those stocks probably look really, really attractive, we can’t see any earnings growth” anytime soon, said Thomas Nyheim, a large-cap growth manager at Christiana Bank & Trust Co. “It’s probably too early.”

“I don’t think the stocks are outperformers in either the short term or the long term,” said Jon Fisher, a portfolio manager at Fifth Third Asset Management.

Nevertheless, as they did in late 2007 and early 2008, shares of Home Depot and Lowe’s from late October (in which both hit 52-week lows) to earlier this month moved higher as investors anticipated the companies’ eventual return to growth once housing woes hit bottom. Sanford C. Bernstein and Goldman Sachs boosted 12-month price targets on Lowe’s in recent days, and Morgan Stanley joined the firms in boosting targets on Home Depot, too.

Bulls cite the companies’ solid balance sheets, their ongoing efforts to trim expenses and take market share from weaker players, and their leadership positions in one of the few retailing […]

http://www.businessweek.com/investor/content/jan2009/pi20090113_601276.htm

Results and outlooks from JPMorgan, Caterpillar, IBM, Johnson & Johnson, and Exxon Mobil will set the tone for corporate profits in the coming months

By Ben Steverman

A torrent of earnings news begins hitting investors this week, giving them key information about what was perhaps the toughest quarter for U.S. companies in a generation.

According to Thomson Reuters (TRI ), analysts expect earnings for companies in the S&P 500-stock index to fall 15.1% in the fourth quarter of 2008 from the previous year.

But there are plenty of questions about those forecasts, especially during such a rocky economic environment. Investors won’t really know how U.S. businesses are holding up until earnings results arrive in the next few weeks. They will want to scrutinize detailed quarterly results and hear executives talk about their 2009 forecasts.

Alcoa (AA ) officially kicked off earnings season Jan. 12 with its results, and they weren’t pretty. Here are five companies to watch in the coming weeks:

1. JPMorgan Chase (JPM )

JPMorgan surprised investors Jan. 13 by saying its fourth-quarter results would be released six days early, on Jan. 15. It’s hard to interpret that move, but the bank’s stock moved up by 6.7% on Jan. 13.

JPMorgan’s report could be an important clue to the future of the sector that started the economic crisis. Standard & Poor’s Chief Investment Strategist Sam Stovall calls financial stocks the earnings season’s “biggest wild card.”

Few investors expect good news from financial companies like JPMorgan. “The only question with financials is how badly they do,” says William Rutherford, president of Rutherford Investment Management.

“Problems with financials are continuing to plague the whole earnings front,” says James King, president and chief investment officer […]

We wanted to share this news with you!

Morningstar again notified us that we have earned a 4-Star Rating for our 5-year performance results for the period ending June 30, 2008.  Our category returns are in the top 11% of all managers tracked by Morningstar.  This is the 7th straight quarter we have received a Morningstar Rating of 4-stars or better.

We are currently accepting new clients, so please get in touch if you or anyone you know needs top-level, results-oriented investment management expertise.

Best regards,

The Serious Investor’s Personal Investment Manager

William D. Rutherford
Rutherford Investment Management, LLC
10300 SW Greenburg Rd, Ste 115
Portland, Oregon 97223
Cell 503 701 8547,  Office 503 452 1210,  fax 503 452 0120

www.rutherfordinvestment.com