28 October 2009

Selling Risk and Buying Safety. Again.

Who will argue that NWL and APOL weren't safe stocks before today? Who'd of thought that AIG and CIT would be big winners today? On the other hand, a few exceptions don't invalidate the rule. When investors are anxious, they carefully evaluate the economic trends, company fundamentals, fund mandate, etc and then they run like hell for the door. They've been running especially hard since the beginning of October. Our reference portfolio of risky stocks (high beta,low VMO) is down by about 13% since the beginning of the month while the safe stocks are down "just" 4%. The spread widened considerably over the last three days. Over the long run, high quality stocks outperform low quality stocks. I can't say the same thing for high vs low beta as the results are choppier. We'll put some long term charts up tomorrow for your perusal.

Otherwise buckle up, batten down, cowboy up and put your big girl pants on.

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