3rd Quarter 2010
September brings positive quarter
Client Newsletter
Quarter Ending September 30, 2010
For the recent quarter ending September 30, 2010, the market had a decidedly positive move. U.S. general stocks were up 11.1%, exactly matching their trailing twelve month gain. International stocks were stronger with a 16% gain vs. 11.1% for the trailing twelve months. Taxable bonds gained 4% vs. 10.4% for the trailing twelve months, and municipal bonds gained 33% vs. 5.5% for the trailing twelve months.
2nd Quarter 2010
Rutherford Investment Management, LLC
Newsletter: 2nd Quarter 2010
A volatile quarter
A quarter in which volatility ruled saw the Dow Jones Industrial Averages slide 10%. The crash of 2:45 PM (Flash Crash) detailed earlier in my notes to you, concern over Sovereign debt in Europe, especially Greece, and evidence of a slowing economy led to concerns about a double dip recession. (Please see my Daily Journal of Commerce column recently forwarded to you.) All of these concerns led investors to seek safety and pushed bond yields into record low territory. Mortgage loans plumbed all time lows.
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More On The Crash Of 2:45 PM
Both the SEC and congress have now undertaken a review of the events of 2:45 PM May 6, 2010.
I can’t prejudge their decisions, but I am sure that they must take drastic action or this event will certainly happen again.
Why will it happen again? About 70% of trading on and off the NYSE is program trading done by computers using algorithmic codes. Wall Street has lobbied congress and the SEC to allow this so called flash trading and “Dark Pools”. I first wrote about this phenomenon in August of 2009 and suggested it gives Wall Street firms an unfair advantage over other investors. No wonder Goldman Sachs can brag that they made money trading every day last quarter. They know the cards in the deck and what everyone else is holding before they trade. In any casino, this would be known as an unfair advantage. The exchanges are supposed to be better than a casino.
This advantage was sold to Regulators on the basis that it provided liquidity to the market. However, it also sucks liquidity out of the system as last Thursday’s crash illustrates.
All the program trading and computers use the same logic.
Therefore, when they want to sell, they all […]
The Crash Of 2:45 PM
On investing and the markets
On Thursday May 6, 2010, at 2:45 PM, the Dow Jones Averages crashed. In the space of a few moments the Dow fell 650 points. There was no explanation at the time and apparently not one yet. Six minutes later the market recovered. We have had many market crashes before, but none of this velocity and none of this duration.
The crash came with the backdrop of a credit crisis in Greece. The markets were already nervous. And then the market began to fall without resistance, in huge numbers. In later analysis, traders on the floor said that a huge $12 billion sell order in Proctor and Gamble, one of the most stable names in the market, hit the market and overwhelmed it. Then other sell orders poured in and there were no bids. Sell orders came from every direction. The market was in freefall, and there seemed no explanation. Procter fell by over 40%, by itself at one point, accounting for 150 points of the Dow fall. For a full two minutes not a single share of P&G traded on the stock exchange.
At that moment CNBC flashed a chart of Proctor on the screen, showing it […]
1st Quarter 2010
Rutherford Investment Management, LLC
Newsletter: 1st Quarter 2010
Near Term Market Outlook
Since March 9th of last year, the market has seen a steady, if uneven rise. This rise has largely been fueled by the policies of the Federal Reserve.
The Fed provided massive bailouts of the banking sector, enormous liquidity to the credit markets and interest rates near zero percent. the result has been a return of confidence to the economy and a willingness to take a risk.
4th Quarter 2009
Rutherford Investment Management, LLC
Newsletter: 4th Quarter 2009
The Lost Decade
The decade of the 2000’s began with the sharpest drop in the US economy since the Great Depression, and ended on an even worse note, eclipsing the drop in the beginning of the decade, and ushering in the Great Recession.