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Commentary
January 15. 2008
On January 15, 2008 Parish and Company adopted a "conservative" focus, generally recommending that equities not exceed 30 percent of assets. In 2007 the focus had been "balanced" in which total equities, both domestic and international, ranged between 40-60 percent. Quality and income remain a key focus, in particular dividend income given that 50 percent of dividend income is now tax-free due to tax law changes. High networth individuals and trusts in particular can benefit greatly by focusing more on investments that generate dividend income.
The shift to conservative is due to uncertainty injected into the financial system by hedge and private equity funds and their creation of derivative financial products. These derivative products are having a significant impact on the banking system and overall credit markets. Clearly, they need to come under SEC regulation and only then will necessary transparency be established.These are indeed times of both extraordinary opportunity and risk in the investment world as investors experienced the best stock market in decades followed by three difficult years and then solid performance again in 2003-2007. It is important to note that Parish and Company has performed well in both strong and weak markets and that no investment management client losses occurred during the bear market of 2000-2002
Today many investors are still heavily weighted in low quality equities, funds and long term bonds unprepared for a rising interest rate environment. Too often these same investments are recommended based upon the brokerage firms' goals rather than the clients specific needs and expectations.
Many senior citizens in particular are living longer more exciting lives yet are also frustrated by low long-term interest rates. As a result, they are taking significant risks by being overexposed to low quality equities and bonds. Compounding this risk is the uncertainty generated by higher energy costs.
This makes now an excellent time to have Parish & Company review your portfolio and determine if it is balanced, consists of high quality investments and is squarely focused upon income generation.
On January 15, 2008 Parish & Company's largest fund position across all clients is the Vanguard Utility fund, an exchange traded fund, and the largest individual equity holdings are Weyerhaeuser and Northwest Natural Gas. Prior to January Charles Schwab was also a significant holding yet the majority of shares have since been sold and gains locked in. In late 2007 all holdings in China, which had produced significant gains over years, were also sold. Although China may hold great promise, my sense is that its necessary regulatory systems are simply not keeping pace with the nation's growth.
The largest fixed income holding is Canadian Treasury notes with maturities ranging between 6 and 12 months. These represent between 15-35 percent of the average client's total assets. Canada does indeed provide high quality fixed income diversification as a resource based economy consistently running surpluses while we run large deficits here in the U.S. These Canadian Treasuries have indeed produced good annual returns.
Today most top quality investment choices can be accessed via a discount broker and this is ideal for investors and their advisers like myself. By using a quality nationally recognized discount broker, for example TD Ameritrade, investors are able to gain custodial security and low cost access to individual stocks, additional fixed income alternatives and top quality funds in various fund families, including Vanguard and Barclays, when appropriate.
Parish & Company is also now recognized internationally regarding the review of corporate financial matters, in particular mergers, inventory, taxation and compensation practices. This includes detailed studies of Microsoft, AOL/Time Warner, Cisco Systems, Portland General Electric, Berkshire Hathaway, Weyerhaeuser and Citigroup, all of which have been widely used by major media outlets.
This research is known for its consistently high quality and enables me to develop a global network of leading asset managers, financial analysts, regulators, business journalists and university professors. This is, I believe, a key advantage in working with Parish & Company.
Historical Commentary 2000 - July 31, 2003 (How losses were avoided)
In late 1999 and early 2000 I began to focus on the "quality" of corporate earnings, as corroborated by news stories in my press archive. This resulted in removing technology stocks and funds over weighted in technology stocks from client portfolios, including the Vanguard Index 500 mutual fund. In 1999 five technology companies accounted for 75 percent of the gain in the S&P 500. At the time I lost 6 clients who were happy yet concerned about my "sudden old economy orientation." Today five of the six are once again clients.
Similarly, in late 2000 I recommended selling all stocks and stock funds due to the accelerating breakdown in the integrity of corporate earnings as my focus shifted from balance to wealth preservation. Clients were therefore fully protected from losses during a very difficult period. There will always be creativity in reporting financial results, that is expected, but again this previous situation was one of historical significance. My focus remained on wealth preservation until the integrity and reliability of financial reports improved, the key date here was June 2003. At this time my orientation shifted back to one of "balance" as I began to again selectively add equities.
I take great pride in serving my clients and enjoy my work. Thank you for visiting my web site and please do let me know if my services would be of interest. Best regards.
Bill Parish
Parish & Company
10260 SW Greenburg Rd., Suite 400
Portland, OR
97223
Tel: 503-643-6999
email: bill@billparish.com