January 25, 2010Fourth Quarter 2009 ReviewInvestmentsOutlook

PDF DocumentDownload PDF of Market Commentary

Our fundamental bearish view is largely unchanged although our expectation of severity has moderated. We expect investors will continue to waver in their views on a recovery based on economic and earnings results, leading to a volatile and range bound market.

We continue to believe that market values have diverged from economic fundamentals and contemplate an economic view that is overly optimistic. We are gradually reducing net exposure as we believe markets are due to reflect the challenging fundamentals. In our view, short-term market behavior is becoming increasingly fraught with risk.
 


 

October 13, 2009Third Quarter 2009 ReviewInvestmentsOutlook

PDF DocumentDownload PDF of Market Commentary

We believe the market is likely to continue to benefit near-term from investor psychology, liquidity, and recovery expectations. Our fundamental view is largely unchanged, although we believe the near-term probability of a severe correction has receded. We expect investors will continue to embrace risk to compensate for investment performance that has lagged the market this year, continuing to drive the market in a broadly upward trajectory through year-end.

But markets have climbed a wall of worry to a point where they have diverged from economic fundamentals, and contemplate an economic view that is overly optimistic, in our view. While we believe markets will continue to act in such a manner near-term due to investor psychology, at some point investors will cause the markets to reflect fundamentals rather than hope for a quick economic recovery.
 


 

July 21, 2009Second Quarter 2009 ReviewInvestmentsOutlook

PDF DocumentDownload PDF of Market Commentary

Our concern about the indebtedness of the United States and consumers, as well as inflation, continues to grow. We continue to believe the financial sector remains challenged as banks endeavor to earn enough money to remain solvent by filling their capital shortfalls before the loan defaults are fully reflected in their financial statements. Without the liquidity in the system that credit (including securitization) provides, we believe consumers, and consequently the economy, will continue to limp along.

We continue to anticipate a prolonged period of financial and economic weakness. Consequently, we remain vigilant as we believe that difficult and volatile markets can cause securities prices to decline far below companies' intrinsic values — more so than in "normal" markets. However, we are patient investors who believe that difficult periods such as this create superior investment opportunities, and we seek to capitalize on the inevitable market dislocations that surface during such times.
 


 

April 13, 2009First Quarter 2009 ReviewInvestmentsOutlook

PDF DocumentDownload PDF of Market Commentary

We remain cautious in this highly volatile environment. Our view leads us to a lower gross exposure than we would have in more stable markets. As the range of potential outcomes has widened, the cost of being wrong has increased significantly. Once we derive more certainty in the investing environment, we would expect to be more fully invested, and to act quickly as conviction warrants.

Significant market dislocations exist, creating many mispriced securities. Based on our views, we believe there will be much opportunity for an extended period of time as crises and change have historically resulted in uncommon value. We intend to draw on our experience to capitalize on these opportunities in the form of both long and short investments.