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Meriden Retirement Board
Tuesday – November 13, 2007
Overview
Markets are struggling to recover from a dramatic sell-off this past month, after rising oil prices, a plunging US dollar, the softening housing market, and an explosion of financial confessions pulled down stock prices across the board. Corrections are often healthy signals in a rising stock market and invitations for new investment, but the US economic expansion of the past seven years is now the fourth longest in history and some analysts believe a bear market signal could be near. The Dow Industrials have fallen 1,000 points in a month. Dow Theorists, tracking market valuations, believe 12,845 would be a technical confirmation of a major market reversal. However, if the Dow holds above that level, an end of the year rally would be likely for the equity markets.
This week witnessed a recovery for the battered US dollar, but even that move has a potential downside. US companies selling their products overseas have benefited from the weak dollar, so reversals in currency could trigger difficult revenue comparisons for those firms next year. Two other challenges lie just ahead. Markets may be tested over the coming weeks by end of the year hedge fund redemptions, and by further write-downs of financial assets under new accounting rules. FASB Rule 157 takes effect this week, requiring companies to better identify their asset valuation methodology prior to their Sarbanes-Oxley declarations.
Meriden Retirement Funds
The performance recovery of September (+6.07%) extended into October (+3.20%), but losses in early November (-2.54%) are taking their toll. In the opening ten days of the month, most stock portfolios have declined 4% to 6% – with positive performance reported only from gold, fixed income, and the Board’s managed futures accounts. Fiscal year to date, Navellier (large cap growth) and Orrell (gold) remain double-digit performers, supporting the composite gain of 3.25%. Roxbury (mid-cap growth) and Armstrong Shaw (large cap value) have the weakest portfolios through November 12 th . Composite assets total $251.9 million with 62% in equities, 20% in bonds, 7% in cash, and 11% in alternatives (REITs/managed futures).
Manager Updates
The Investment Sub-Committee should meet prior to next month’s Board meeting to assess year-end asset assignments, including consideration of international growth managers. Portfolio manager visits will be scheduled for February through May.
DJIA: 12,987.55
November 12, 2007
This report is provided for the convenience of the client. While information contained herein has been received from sources believed reliable, price and performance data may be incomplete. Clients should rely solely upon official statements and trade confirmations.
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