Year End Re-balancing

After another solid quarter of corporate profits we are heading into the home stretch for 2010. We take this time to review any positions that may be paying a large dividend or capital gains that we would like to avoid. This year there are none that we feel are large enough to sell and escape the tax burden. We are also rebalancing the portfolios to position them into the areas that we think will provide the most attractive returns in the coming quarters.

So far we have trimmed our bond positions back to our target levels, as the rally in most sectors of the bond market is beginning to level off. We then added a tactical allocation to South Korea, taking advantage of the recent decline during the military and political unrest in the region. This emerging market, in particular, is extremely undervalued and we feel we are well positioned to benefit from a global economic recovery. For the second time in two quarters we have trimmed our positions in the developed foreign markets, such as Europe and Japan, where growth is again expected to be more modest. We are also contemplating taking chips off the table with our Brazil Small Cap exposure after a huge 28.8% return in the third quarter.

In the coming weeks, we will finish bringing the portfolios into our current target allocations, which will also include adding back some core U.S. domestic exposure, as well as a few more tactical cyclical sectors that should do well in the next stage of the recovery.

Give us a call if you have any questions or concerns. 2010 has been good to us/you as we have minimized volatility and produced almost market returns!

Have a great day!
Bob