Arbor Asset Allocation Model Portfolio (AAAMP) Blog

1. The velocity of money circulating in the economy is very low. The growth we are experiencing right now is from massive government spending and expansion of the money supply. The Federal Reserve has kept short-term rates near zero and provided extremely loose monetary conditions. They have little left to help the economy if it stalls. What if the economy continues to struggle and government deficits mount from already excessive levels?

2. The U.S. Consumer is tapped out. The main driver of the economy the past several decades is facing shrinking credit due to high debt, sagging wages and high unemployment, higher taxes, and greater uncertainty; all at the same time. The U.S. Dept. of Labor Bureau estimates the unemployment rate at over 17% when people who have given up looking for work are included. Homeowner’s equity of 38% (as a percentage of real estate value) is the lowest in 58 years.

3. Commercial Real Estate is in trouble. Almost 800 billion in commercial real estate debt is expected to mature between 2010 and 2014. Experts estimate that 2/3 of these loans are for more than the property is worth now. Already weak banks have this additional problem to deal with for years to come. This means reduced credit expansion for several years.

4. The powerful rally from March 2009 to date is showing signs of exhaustion. Economic growth and higher earnings are already priced into the market. Insiders are selling stock to the public. Who knows better about the value of their company than insiders?

5. Too many investors are focused on making back losses rather than assembling a well diversified asset allocated portfolio. This has been evidenced by the public buying the more risky investments and the blue chip dividend stocks lagging in 2009.

The challenging market we faced the past decade requires expert stock picking and portfolio asset allocation.  The Arbor Investment Planner can provide both.  Additional information and our long term record at: www.ArborInvestmentPlanner.com.