July 1, 2010

After a somewhat disappointing first half of the year, we are looking ahead through the November elections and towards the end of the year.
First, a brief recap; during the first quarter, our defensive position caused portfolios to slightly under-perform the S&P 500, as market rose nearly 10%. However, since then, our cautious approach and diversified strategy has paid off. The area that surprised us most was the fixed income market, where Yields on the 10 Year Treasury Bond went below 3%, and appeared to be poised to stay in a relatively tight range through the summer. Over the course of the first 6 months of the year, investors received news of a European Debt contagion, a slow-down of economic growth in Asia, in particular China, the risks of the US experiencing a double dip recession, etc… certainly enough bad news for investors to want to run for the hills. In our view, this would be a mistake. As we look ahead, not just for the remainder of 2010, but well beyond, we see interesting investment opportunities. As money managers, we believe that some of the best growth opportunities for business’ will come from outside of the United States, particularly in south-east Asia and in Latin America. This, however, does not mean that investors have to look for “foreign” companies or should overweigh their international exposure. Rather, we believe that by selecting multi-national companies that understand how to grow their business internationally, and when appropriate, pay a dividend, investors would benefit from international growth without the need to take on full international market risk. Additionally, we see select opportunities in corporate and municipal bonds. Despite much talk about the debt levels and a budget crisis that most States are experiencing, at this time, we do not believe there is significant default risk in Municipal Bonds issued by States such as NY, CT, NJ or MA (that is not to say that other States are in greater danger of default). Moreover, we continue to see a divergence in inflation – specifically between “core” inflation, which we expect to remain low, as a result of excluding food and energy prices, and top-line inflation, which includes food and energy. Specifically, we believe that soft commodities, such as Sugar, Corn, Wheat, and Cattle prices may appreciate as world demand for food continues to grow and seasonal weather patterns impact crops and harvesting. We also continue to see investment opportunities in base metals, such as Copper, Aluminum and Zinc, as well as certain precious metals such as Silver and Palladium. (We are less bullish on Gold, as the price has risen to levels that we believe are overbought). Generally, we anticipate that overall inflation will remain low over the next year or so. Investors should be aware that commodities tend to be very volatile, and investments into this sector need to be monitored and actively managed. One way investors can gain some exposure to these asset classes, is by investing in a well diversified mutual fund that incorporates Stocks, Bonds and Commodities in a single, no-load mutual fund. As most of you know, the members of the Gary Goldberg Financial Services Investment Committee manage the GMG Defensive Beta Fund (ticker MPDAX) in the manner described above.
Given the current over-sold conditions, we believe equities may experience a brief summer rally. Thereafter, we anticipate a range bound market, with a upward bias, through the end of the year. As a result, we continue to believe that being defensive is the most suitable choice for investors seeking capital appreciation or future income. Therefore, we continue to focus our portfolios in a manner that favors preservation of capital over growth.
Lastly, we hope that you have had the opportunity to see us on CNBC and Fox Business News, where we now regularly give market commentary, or have read about our thoughts in Business Week, The New York Times or The Wall Street Journal. If you would like reprints of articles or video out-takes, please visit our website – www.ggfs.com

We appreciate your continued confidence and trust in us.

Sincerely,

The Gary Goldberg Financial Services Investment Committee.