We have made only minor changes in the portfolio during November, reducing our hedge by approximately 4% and our cash moved up by about 5%. Most of our technical and fundamental indicators are very cautious regarding the equity and fixed income markets. We believe the markets have been driven primarily by very aggressive Federal Reserve policy, and the markets will normalize when the Fed eases off the bond buying, or when the markets anticipates that it will occur. We continue to believe the value in the market is in large cap, Blue Chip type of securities, as the more speculative sectors and companies have well outdistanced their fundamentals.

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We thought it would be helpful to discuss how to best use our strategy, in an asset allocation, in preparing your clients portfolios for next year. We believe coming out of a recession, having more in equities and less in fixed income is appropriate, and having more in long only managers versus tactical or loss averse. As the cycle ages, and five years has pretty much been about the duration of a cyclical bull market, you want to be using more tactical, and having more fixed income in a portfolio. This is when you want to protect a portfolio, and preserve the gains made during subsequent years. One of the problems with this cycle, is the fixed income market potentially has as much risk as the equity market, as the yields are so low, fixed income is not a prudent investment.

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