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Thomas J. Feeney's Measure of Value offers periodic commentary on leading financial issues of the day. Additionally, we present occasional articles explaining the philosophical underpinnings of the investment approach that our firms have employed successfully since 1986. Our thinking frequently differs from the common wisdom of the investment industry. The investment approaches we employ always recognize this as a probability business, not a certainty business. In evaluating any investment action, we always weigh the potential damage should the market prove us wrong.

While we have great respect for investment history, we recognize that each era introduces unprecedented specifics. In all that we do, we attempt to identify value, in both a relative and absolute sense. History has demonstrated that long run investment performance leaders need not be the leaders in bull markets as long as they avoid giving up significant portions of their assets during bear markets.

We firmly believe that one need not be fully invested at all times. In fact, we far prefer to assume relatively large levels of risk when assets are historically cheap and to be heavily risk-averse when assets are historically expensive. This approach has proven successful for our clients over more than a quarter century.


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Since July of last year, the Dow Jones Industrial Average has experienced 16 price moves ranging from 600 to 2000 points, eight up and eight down. Twelve of those moves have taken place in the last five months, each lasting an average of just two weeks. This is highly abnormal market action, clearly demonstrating a lack of investor conviction. In fact, volatility has become even more intense since mid-April. The Dow has experienced six moves ranging from 350 to 450 points in just 17 market days, each move completed on average in less than three market days. Some rallies and declines have lasted as little as a day or two.

 

In recent months, volatile market moves have typically come in response to domestic or international news, especially related to our Federal Reserve or other central banks. Now, apparently, markets have decided to move many hundreds of Dow points in a day or two without the stimulus of news stories. This, too, shall pass, but not without leaving a trail of serious investors longing for regulators to crack down on high frequency traders and others gaming the system for ill-gotten short-term trading profits. Reform on Wall Street is desperately needed.

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Tom Feeney is Chief Investment Officer for Mission Management & Trust Co., a full service trust company regulated by the Arizona Department of Financial Institutions. If you would like to explore the management of an investment portfolio of $1 million or more, you are invited to email your interest to Tom@missiontrust.com or call (520) 577-5559 to speak with one of the Portfolio Coordinators.

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