We continue to hold to the thesis that we reside in a cyclical bull market in the context of a secular bear market.  The cycle seems to be concentrated in discretionary items like automobiles and ipads.  An aging fleet of cars needs to be replaced.  The average age of a car in the US is 11 years old.  Short term demand for such items can provide some strength, but the overall economic backdrop is not ideal.

 

Global risks are still present.  Sovereign debt issues still exist in Europe.  On Friday March 30 an increased firewall was announced, a combined 700bln Euros by the EFSF(European Financial Stability Facility) and ESM(European Stability Mechanism).  This sparked a small liquidity rally, which fizzled by mid week.  The effort provides additional liquidity for rescues, but falls short of the 1tln Euro firewall recommended by the IMF.  The macro view remains, there are problems.

In our stock portfolio Barclays was our biggest exposure to the risks presented by continued debt issues in the Eurozone.  We purchased this stock at 11.20 back in October based on compelling valuation during a period of extreme pessimism.  The stock showed weakness this week which could portend more severe headwinds.  We made the decision to book a short term 25+% gain.

The short term nature of this trade is not our preferred philosophy for investing.  But doing the right thing for clients, given the circumstances of the world today, will always trump a preference for long term, sustained gains.

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For information on Alhambra Investment Partners’ money management services and global portfolio approach to capital preservation, Douglas R. Terry, CFA is reachable at dterry@4kb.d43.myftpupload.com