As Houston recovers from Hurricane Ike and the financial storm on Wall Street intensifies, I would like to provide an update regarding Kanaly's market thoughts.
First, Kanaly's investment professionals are fully engaged, with the ability to monitor markets and manage client portfolios. Second, client portfolios remain defensively positioned as we anticipated further dislocation among financial service organizations. We do not own shares in negative headline grabbing firms including Fannie Mae, Freddie Mac, Lehman, AIG, Washington Mutual, or Merrill Lynch. We do have some exposure to Buffet's Berkshire Hathaway, a firm likely to benefit from this turmoil. Furthermore, we do not see significant direct impacts on the portfolios from the bankruptcy of Lehman.
Events over the weekend certainly seem to be without precedent, however, we see some positive developments. Oil prices have come down substantially, relieving pressure on the economy. Bank of America has agreed to buy Merrill Lynch, suggesting that there is value in Wall Street firms and averting another large scale failure. Lehman was allowed to fail, rather than kept on life support by the government. The long-term emerging market demand theme remains intact despite a severe correction, and equity markets are displaying some signs of a bottom, though it is too soon to make that call.
Our portfolios are invested in financially strong companies that we expect will be meaningfully higher one year from now. We believe the best course of action is avoid panic and preserve cash for the inevitable opportunties that are coming. We will continue to watch for three key indicators of an improved market environment: lower credit spreads, improvement in the housing market, and classic signs of bottoming action in the equity market.
For more information or to ask questions, e-mail us at kanaly@kanalytrust.com or visit us at www.kanaly.com.
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