Best wishes to all on September 11th

As we remember those we lost that day, and the challenges our country faces as a result, it gives me great pride to be an American and witness what the resolve and industriousness of our great nation can accomplish.  The toll on our country, and more specifically, the financial services industry was extreme. I am pleased to see the resiliency and commitment which has led to our recovery.

As you may remember, on the day the market was to re-open, US West accidently cut our internet service off and we basically had to run the Denver office off of one laptop with a dial up (yep… a dial up) connection for a week.  As horrific as the events of the day were, it was powerful to see the industry and the country come together and bounce back so quickly.

As many of you know, I don’t spend a lot of time on technical analysis. Technical analysis is the study of price movement patterns in an effort to identify trends on which to base buy and sell decisions.  However, I’ve been watching one technical indicator since I started in the business way back in 1992.  Dorsey-Wright’s NYSE Bullish Percent chart is a very broad-based indicator which I refer to as the “Mood of the Market” indicator. Essentially, the NYSE BP chart looks at all of the approximately 3,000 stocks on the NYSE, and measures the percentage of these which are on technical buy signals vs. sell signals and is indicated in the chart below:



The numbers on the side of the chart represent the percentage of stocks on buy or sell signals.  A column of O’s indicates the number of stocks on sell signals is increasing, and a column of X’s indicates the number of stocks on buy signals is increasing.  Thus, a column like the most recent column of O’s would indicate to me that the “Mood of the Market” is very negative, with 76% of stocks being on sell signals.  This is very broad based, essentially throwing the baby out with the bath water as the investing public stampedes out of stocks.

On Wednesday, the market action reversed, moving up to a column of X’s, meaning that the decline in buy signals has reversed, and the Mood of the Market, while still terrible, just made a turn towards improvement.  Without going into too much technical detail, reversals like these have proven to be good times to buy U.S. stocks.

That’s not to say the market can’t retest lows (in fact, it is fairly common and should be expected).  I do take this as an indication it is a relatively good time to increase equity allocations for our capital appreciation targeted portfolios.

In addition, I just had the opportunity to see a Wharton finance professor, Jeremy Siegel, speak again, which always rejuvenates my enthusiasm for investing in general. Seeing him again caused me to re-read his book, “Stocks for the Long Run”, now in its 5th edition.  The basic premise of the book is if you have an appropriate time horizon, stocks are clearly the best bet for generating returns.  This is illustrated pretty plainly in the chart below:

Total Real Return


When you combine this knowledge with the opportunity presented in the “Mood of the Market” chart, I believe we have a fairly compelling set of indicators leading us toward increasing our equity allocations.  When you combine this with the fact bond yields continue to remain at all-time lows and stocks yield roughly the same (The 10 yr. treasury currently yields 2.17%, the S&P 500 currently yields 2.14%), stocks are a compelling alternative to bonds today.

Of course, individual portfolio design is based on factors that go well beyond market opportunity.  To find out if your strategy allocation still reflects your objectives, contact your Cascade advisor today, or e-mail us at

We appreciate your continued confidence and look forward to being of service for many years to come.  Please take a moment today to reflect on the events of this day in 2001, and pay tribute to the brave men and women who protect us every day.



Total Real Return Index Chart: