As Oak Wealth Advisors approaches its first 100 days of operations, it seems appropriate to reflect on what has transpired during the period and what lies ahead.  First, and foremost, I am very grateful that all my former clients have chosen to follow me to Oak Wealth Advisors.  In addition, a handful of new families have already come through our doors seeking my advice.

In the past 100 days, we have witnessed the historic election of Barrack Obama and the heroic landing of an airliner in a New York river. We have also seen the Governors of New York and Illinois shamed and impeached out of office and watched the media expose the transgressions of two sports icons which will forever tarnish their golden legacies. On the financial front, we have experienced a meteoric collapse of the global financial markets and an unprecedented injection of fiscal and monetary stimulus from the U.S. government. These are interesting times in which we are living.

Against the backdrop of these events, we can review what Oak Wealth Advisors has been doing with portfolios. First, I have NOT been rebalancing to push equity allocations back to their target levels. Why? The negative momentum that has been driving stocks lower has caused rebalancing to exacerbate the damage to portfolios. By intentionally underweighting stocks relative to bonds, our clients have lost less than they would have by following an automated rebalancing program. In addition, many of the country’s brightest investment minds including David Swenson who runs the $20+ billion endowment at Yale and Bill Gross who manages hundreds of billions of bonds at PIMCO are recommending overweighting high quality bonds relative to stocks. Their thinking is based on the expectation for a protracted period of economic sluggishness which will preclude stocks from delivering their historical rates of return while high quality bonds are yielding in the high single digits. Given that bonds have a preferential standing in the capital structure to stocks, bonds provide a relatively safer way to stay invested during these turbulent times.

While we have been overweighting bonds relative to stocks, we are also trying to decrease the risks within the equity exposure in client portfolios. We have intentionally been overweighting large company domestic stocks and underweighting international stocks. Historically, the expected risk and return of domestic stocks and international stocks have been similar. Given that the U.S. entered the global recession first and has taken the broadest steps to combat the problems, economists believe the U.S. should also be the first to recover. Another factor favoring the domestic overweighting has been the global flight to quality which has seen investors across the globe buying U.S. Treasury securities. As low as the Treasury rates are, they are still seen as the global gold standard for safety. The demand for U.S. Treasury securities has caused the dollar to strengthen against foreign currencies. While the strengthening of the dollar may sound good from a political standpoint, it decreases the returns for U.S. investors in foreign companies.

Across the board we have been making trades to eliminate mutual funds and exchange traded funds that have not benefited portfolios. In almost every case the trades have generated income tax benefits and lowered the going-forward cost of the portfolios. By continuing to implement tax-efficient, low-cost investments, we can increase the likelihood of clients having successful investment experiences.

While the media loves financial predictions, rarely are the prognostications of any value. So rather than provide predictions, I will give you a couple of strategies that I will be implementing over the remainder of 2009 in client portfolios.

First, I will be looking to increase diversification where it is prudent to do so. As the Nobel Prize winning researchers have demonstrated, the only “free lunch” in the investment world is diversification.

Second, in retirement accounts, I will be looking to build positions in Treasury Inflation Protected Securities (TIPS) which are issued by the U.S. Government and earn an inflation premium in addition to their stated rate of interest. While inflation is not a near-term fear, at some point the economic recovery will begin and the unprecedented stimulus will add to the inflation pressures. These factors will lead to an increased level of inflation. Since inflation is the biggest challenge for maintaining lifestyles in retirement, TIPS will be part of the bond portfolio by year-end for clients who are approaching retirement or who are currently retired.

Third, I will be mindful of the wisdom of our country’s greatest living investor, Warren Buffett, “be fearful when others are greedy and greedy only when others are fearful.” He also is famous for stating “The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.” Essentially, he espouses taking a long-term view and a willingness to make smart investments when the widely held view is not to be making investments.

In closing, we are at a point when money market, savings, and checking accounts are holding record levels of cash. In fact, there was more money held in cash and cash equivalents at the end of 2008 than the cumulative market value of all the companies in the S&P 500! At some point, much of this cash will be redeployed in the market. Clients of Oak Wealth Advisors will remain fully invested so that we are not left wondering why no one sent us the announcement that yesterday was the day we were supposed to reinvest in the market.

This update is intended for the use of Oak Wealth Advisors LLC clients. This update should not be viewed as personalized investment or financial planning advice from Oak Wealth Advisors LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult Oak Wealth Advisors LLC. Past performance does not guarantee future results and all investments should be scrutinized before being implemented in a portfolio.