History Has Steered Folks to Environmental, Social and Governance Investing.
In this Milwaukee Journal Sentinel article from July 15th, Tom Saler explores socially responsible investing (SRI) and breaks down some recent high-profile examples.
Read July article.

 

New Firm Targets Socially Responsible Investors.
In this article from January 9th, Milwaukee Journal Sentinel reporter Kathleen Gallagher explores Greg Wait's launch of a new company that combines socially responsible investing and online investment advice.
Read January article.

 

Investment Trends, with insights by Greg Wait. In the Milwaukee Journal Sentinel's October 17th article, Kathleen Gallagher and Greg Wait discuss the recent rise of environmental, social and governance, or ESG investing. Greg provides insight into how reduced risk and improved returns are causing money managers to include ESG investing in their portfolios. Read October article.

 

Responsible Investing: Creating Financial and Non-Financial Value by Greg Wait. Do investors sacrifice returns in pursuit of their goal of advocating for a better world in which to live?
Learn more.

 

Ten-Year History of Investment Manager Performance by Greg Wait. As part of our process, we have conducted investment manager research and due diligence resulting in manager or fund recommendations to our clients. Here are our findings.

 

The month of September, 2013 marked the 10-year anniversary of Falcons Rock serving our clients and building relationships. We are grateful for all the years of friendship, loyalty, and support, and look forward to our next decade!

 

Investment Trends, with insights by Greg Wait. In the Milwaukee Journal Sentinel's July 20th article, Kathleen Gallagher and Greg Wait discuss the rising U.S. Treasury rates and using duration as a measure of risk. Greg's comments relate to whether we'll be "looking back on this short-term increase in yields as the warning shot for the much-anticipated longer-term rise in interest rates." Read July article.

 

Dec 9, 2012, Journal Sentinel's Kathleen Gallagher interviewed Greg Wait on current Investment Trends. Read the full article: "Low-quality stocks continue to provide strong returns."

 

We've Grown! Meet our new investment consultant: Tony Sebranek.

 

Investment Trends column of Milwaukee Journal-Sentinel shows Top-Down investment strategies are achieving positive results.
Read article on Top-Down Investing

 

Additional articles in the Milwaukee Journal Sentinel featuring Falcons Rock:
One is a fascinating story about a Mequon drug development company, which has a few of our clients as private investors.
Read article about our angel investors

 

Another features us in the Market Trends column: Strategy targets uncertain economy - and how Falcons Rock confronts specter of slow growth.
Read how we help clients get ready

 

There is a great deal of debate in the investment industry regarding active vs. passive (indexing) investment management.  We researched this topic and the results might be surprising to you.  Please see our research paper on this subject...more

 

We have experienced interesting situations with our clients. To update you on our firm’s activities, check out examples of recent work we have done for our clients...more

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What Happened?

 

2012 Quarter 4 Market Review

I wonder how many investors think back to the news they read, or the emotions they felt, at the beginning of any investment period of time. Let's try to remember the news from four years ago. Impact of Presidential Campaigns on US Economy

We had just lived through a financial system collapse, the U.S. Government signed into law a $700 billion rescue package, the stock market delivered the third-worst calendar year pummeling on record, auto makers were begging for federal money to try to remain solvent, and Bernie Madoff was arrested for running a massive Ponzi scheme.

Very few prognosticators were predicting that the U.S. stock market would generate a cumulative return of +72.4%, or the bond market would produce +26.8% over the next four years.

A year ago, the financial press was warning of a collapse of the euro currency, the implosion of Greece and Portugal, and a dysfunctional U.S. government. During the year, many political pundits suggested that there would be an upheaval in Washington following yet another contentious campaign season. Well, the euro currency is still intact, if you bought Greek government bonds in January you earned 80%, the election resulted in a nearly identical political party split in Congress and the re-election of President Obama, and Washington even managed to avoid the "fiscal cliff" with an eleventh-hour (of course) agreement on taxes. Prominent Wall Street "gurus" predicted that U.S. stocks would fall in 2012. Well, the S&P 500 Index finished the year with a return of +16% and the MSCI EAFE Index (developed international stocks) earned +17.9%.

It would be ideal if investors would not pay so much attention to the "fear du jour" and instead focus on fundamental investment principles. Unfortunately, in a world of instant access to any information we choose to absorb, it is difficult for most people to block out the noise. Worse yet, most people access information from sources that adhere only to their personal point of view on issues of interest to them, leading to a further narrowing of investment vision. In his Little Book of Common Sense Investing (2007), John Bogle wrote: "the stock market is a giant distraction from the business of investing." In the long run, the return of any stock is almost entirely dependent on the investment return on capital earned by the business. It is the unpredictable and emotional perceptions of investors that drive short term volatility in the stock market.

So, as we enter the new year of 2013, you will get no market predictions from me… other than the unfortunate likelihood that emotions and speculation, fueled by the media, will likely drive volatility again over the coming twelve months and beyond.

Fourth Quarter 2012 Review

Despite fiscal cliff concerns and a presidential election, the U.S. stock market finished the fourth quarter essentially flat, locking in strong gains for the year. Cyclical stocks, including the financial services and consumer discretionary sectors, were the best performers during the quarter and the calendar year. Defensive stocks, such as utilities, lost value during the quarter and barely eked out a positive return for the year.

Commodities took a hit in the fourth quarter, led by substantial declines in metals and agriculture. While most commodity indexes were down for the calendar year, some long-only managers were able to generate positive returns.

Bond returns were mostly positive during the fourth quarter, with the exception of U.S. treasuries. With a strengthening economy and low default rates, high yield bonds continued their rally with strong gains during the quarter and the calendar year.

Here are the returns for select market indices for Q4 2012 and for the calendar year 2012 (as stated in U.S. dollars):2012 Qtr 4 Returns on Market Indices

Outlook

Fundamentally, the economy seems to be in good position. While Washington is unlikely to promote growth in 2013, the private sector may come to the rescue with pent-up demand, improved balance sheets and a more competitive global trade position in the U.S. Consumer household debt ratios are the lowest in over thirty years, which may allow for expenditures on needs that have been put off for a while. The average age of light vehicles has increased to 10.8 years and an extended period of low home building is spurring an increase in housing starts. Wage increases in China and innovations in the U.S. have combined to make many domestic manufacturers more competitive in the global economy. On the other hand, many economists believe that our easy monetary policy has gone through its cycle of being necessary, then ineffective, and now counterproductive.

Because households now own more in savings than they owe in debt (and about two-thirds of typical household debt is in fixed rate mortgages), a policy of raising interest rates would actually put more money into the household sector than the current policy of keeping them low. Such low interest rates make it less profitable for banks to lend money, further dampening economic growth. As always, the variety of economic forces and policies counter balances each other, making economic predictions very difficult at best.

We very much appreciate you as a client of our firm. On behalf of all of us at Falcons Rock, we wish you a Happy New Year, and blessings for a healthy 2013.

Greg Wait, President of Falcons Rock

Gregory D. Wait, President
Falcons Rock Investment Counsel, LLC

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