Look at how the time goes past.

Old man look at my life,
I'm a lot like you were.
Old man look at my life,

I'm a lot like you were.

I've been first and last
Look at how the time goes past.
But I'm all alone at last.

Rolling home to you.

"Old Man" by Neil Young

Time always seems to fly, but the speed of events in the last decade hardly gives us time to breathe. 

Ten years ago, as the world peered toward the uncertainty of Y2K and the fears of the impending technology crash, I was celebrating our second successful year at Rockhaven Asset Management, which saw our growth fund appreciate 50%. Little did we know at that time that the tech crash we needed to fear was not based in technology, but instead was a very real crash in equity values.  The markets peaked in the spring of 2000, and then took a sickening plunge with the NASDAQ  falling 74% by Sept. of 2002. 

I'll never forget that beautiful September morning in 2001, I was flying to Birmingham AL to meet with our partners at AmSouth Bank, only to be forced to land in Columbia, SC just in time to watch the collapse of the first World Trade Center tower. 

In 2002 AmSouth and I agreed to sell Rockhaven to Strong Capital Management. This was a great period for Rockhaven, our funds had performed very well during the collapse of the tech bubble, and we were happy to be working with one of the premier investment managers of our time, Dick Strong. In 2003 the markets rallied strongly, but as 2004 rolled along we got to see first hand how political ambitions can turn into abuse of power, with the witch hunts of then Attorney General Elliot Spitzer. Strong was forced to sell to Wells Fargo, Spitzer became Governor of New York, and then resigned in disgrace. 

In 2004 the old Rockhaven team agreed to take over the management of National City's large-cap growth and large-cap core equity assets. We participated in the growth of Allegiant Asset Management, only to witness the stunning disappearance of our parent, National City. As 2009 started we found ourselves employed by PNC Bank and reevaluating our future paths in this industry.

An amazing decade, the decade of the Naughts. Y2K proved to be an empty threat; but the tech/media/telecom crash, the 9/11 terrorist attacks, two wars, corporate and political scandals, a real estate bubble, the disappearance of nearly all investment banks and over 100 regular banks, countless Ponzi schemes, and one of the nastiest recessions of all time, were all to real.

As we enter the next decade (the Tweens?) we can take solace in the fact that we not only survived, but we actually learned numerous valuable lessons. We know to expect the unexpected, no matter how bizarre. That corporate greed and political ambition can never be satiated. That buy-and-hold is dead, and only a thoughtful disciplined active allocation approach can work in volatile markets.

As we enter the "Tweens" lets remember what Mark Twain so famously said, "The art of prophecy is very difficult, especially with respect to the future." 

Focus on what we do know, not what we think we know. We know the U.S. government has to work itself out from under a staggering fiscal deficit, while fighting two wars, and preparing for a chronic entitlements challenge. We know that while China is growing rapidly, that they still have many domestic challenges that could derail them from overtaking the U.S. in economic superiority.  We know that we will probably have to deal with a nuclear Iran. We know that long-term weather trends have been occurring since the earth started cooling, and that they will continue to occur long after humans are extinct.

I do not believe that our future is bleak. I am more often than not surprised at just how strong and adaptable we humans can be. Our goal as investors is to be aware and ready for whatever comes our way, in other words...adaptable. Will interest rates stay low due to a struggling economy? Will interest rates ratchet higher due to ever rising deficits? No one knows! But we must be prepared for either eventuality.

We are clearly seeing signs that the inflation hawks are winning the battle of late, with both Int'l Bonds and Int'l REITs moving to neutral territory recently. U.S. fixed income is also very close to moving from bullish to neutral territory.

Our current Asset Allocation Model:

U.S. Equity - Maximum Bullish

Int'l Equity - Maximum Bullish

U.S. REITs - Maximum Bullish

Int'l REITs - Neutral

Gold - Maximum Bullish

Commodities - Maximum Bullish

U.S. Fixed Income - Maximum Bullish

Int'l Fixed Income - Neutral

Cash - Near Minimum

Enjoy your New Year and your New Decade, 

Chris Wiles