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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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Markets At A Crossroad

February 22, 2016

In a September 8, 2015 blog, I indicated my strong belief that a major worldwide bear market had begun. At the recent February 11 lows, the S&P 500 was about 15% below its May and July 2015 highs. Most foreign markets had suffered more significant declines. The dangerous conditions outlined in that earlier blog remain major intermediate and long-term concerns.

One of the weakest beginnings to a new year ever turned short-term investor sentiment very negative. At extremes, sentiment measures can be excellent contrary indicators. In a bear market, sentiment can remain pessimistic far longer than during bull market corrections, but significant pessimism often marks at least a short-term market bottom. Notwithstanding numerous ongoing negative conditions, we must now remain alert to see whether stock prices need to rise appreciably to relieve excess negative sentiment. A telling point is likely to be whether stock prices can remain above their February 11 lows (about 1810 on the S&P 500 and 15,500 on the Dow Jones Industrials). Remaining above those levels could rekindle more bullish feelings for a while, even leading to a test of former highs. On the other hand, a break below the February 11 lows could unleash torrents of selling as investors come to believe that central bank rescue efforts have become ineffective. Either way, the year ahead is likely to be extremely volatile with the potential for a market, economic, political or military event decimating longer-term investor confidence and leading to a persistent, destructive market decline.


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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