JANUARY 2012 COMMENTARY
Entering January, the firm continues to retain its cautious positioning. While we are not outright bearish, we are starting to move further towards such as position. Most concerning to us is the ongoing economic and political backdrop in which policy makers and central bankers continue to actively interfere with and manipulate asset prices. Capital markets work a simple premise of expected gain or expected loss. The risk of loss - whether in an equity investment, a corporate bond, mortgage back security or a sovereign default � is the ultimate arbiter and maintains balance in the system. The current predilection by policy makers towards accepting only gains and attempting to suppress, prevent or bail out losses (whether it be US housing, GM or Chrysler, Fannie/Freddie, European sovereigns, or various banking entities etc..) creates significant distortions in pricing and investor and corporate behavior. The longer these distortions persist, the more violent the subsequent price correction will be.
While we continue to focus on solid bottom up investment opportunities, we continue to hedge against top down macro risks which have buffeted equity and credit markets since this past August and which we believe will continue to persist into the coming year. In such an environment we see opportunity in the following areas.
Equity long opportunities can be found in large cap, global franchise names, many of which have strong product and earnings growth and display high levels of corporate profitability. These firms have managed well throughout the financial crises, in part, because they have clean balance sheets with very little, if any, debt and generate strong levels of cash flow.
The flip side of these top tier firms have been global financial institutions which have weak balance sheets, are restricted in their ability to pay dividends and are being further impaired by regulatory chokeholds. We continue to short many of these firms.
For investors seeking income, there are a plethora of firms with dividend yields greater than 4%, (well in excess of the 2% available from government bonds), and that have solid balance sheets and cash flow generation as well as very stable earnings.
Internationally we remain bearish on Europe and concerned, near term, about the outlook for certain precious metals.
______________________________________________________________________________________________________
DISCLAIMER
This Commentary should not be construed by anyone as the rendering of personalized investment advice (or an offer thereof) for compensation. This Commentary, and any information and research contained therein, does not represent a recommendation of investment advice to buy or sell stocks or any financial instrument nor is it intended as an endorsement of any security or investment. This Commentary is for informational purposes only and represents the writer�s or provider�s own investment opinions, and should not be construed as personalized investment advice. Olympian cannot assess, verify, or guarantee the suitability of any particular investment to any personal situation and the reader of this Commentary bears complete responsibility for its own investment research and should seek the advice of a qualified investment and/or tax professional prior to making any investment decisions. Olympian may only transact business or render personalized advice, and offers of service can only be made, in those states or international jurisdictions where Olympian is registered or where an exemption or exclusion from registration is available. Nothing herein is an offer of any service that is not legal for offer into any particular jurisdiction with Olympian�s current licensure (if any). Olympian, its affiliates, and their officers, directors, principals, agents, and employees make no recommendations or warranties, express or implied, regarding the suitability or other characteristics of the information and materials contained in or represented by this commentary. All such information and materials are provided "as is", without and warranty of any kind. Olympian hereby further disclaims all warranties and conditions with regard to such information and materials, including all implied warranties and conditions of merchantability, fitness for a particular purpose title, non-infringement and availability. Additionally, in no event shall Olympian, its affiliates, or their officers, directors, principals, agents and employees be liable for any claims, losses, liabilities, costs, or damages, including direct, indirect, punitive, incidental, special, consequential damages (including but not limited to, lost profits or trading losses), or damages of any kind whatsoever arising out of or in any way connected with this commentary (including without limitation, the content, information, materials or research included therein) whether based on theories arising in contract, tort, strict liability or otherwise. such limitations apply even if Olympian, its affiliates, or any of their officers, directors, principals, agents or employees have been advised of the possibility of damages.