Financial Professionals


First In, Last Out


I am back from an enjoyable few days in the wonderful state of California. The dynamics of California are so intriguing with its troublesome economy, teetering on the brink of oblivion, vilified in the media on a regular basis for its missteps. However, after visiting the state, it is very difficult to believe the Land of the Golden Bear will forever hibernate in economic malaise.

The same can be said for the United States on the global stage. It was the clear villain for the 2008 global meltdown, vilified by fellow G-20 members for its economic policies. But, just like California, I find it impossible to believe that those who visit our great country leave the nation believing Old Glory won't shine again. There is something fundamentally sound in our principles that allows democracy and capitalism to prevail.

Thinking back to the 2008 crisis, one of my early comments was that the "U.S. economy and capital markets just needed time." Time to heal. Time to repair. I believe that when investing in the capital markets your first instinct is usually the best. Allow me to be self-deprecating and remind myself of my own words, my first instinct - "Time to heal, time to repair."

Have we fully healed? No. Are we on the right path? I truly believe YES.

The efforts of the FOMC, Treasury, and global central bankers have been about using public balance sheets to help consumer and corporate balance sheets heal. Providing time. We, as a society, are very impatient; we measure progress in minutes. Maybe it's time to measure progress more properly in months.

At the end of the day, the prices of assets within the capital markets are the arbiter. We tend to forget how far we have healed since the Winter of our Discontent in March 2009. To that point, let's review where the markets priced assets on Tuesday September 2, 2008 versus today. Some assets have recovered; others will take more time. Obviously, at the heart of the crisis financials, housing, and employment will need more time.

Call it "First In, Last Out" - but recover they will.

S&P 500 Index                                             9-2-08 1277.58         11-12-10 1199.21

SPDR Technology ETF                                 9-2-08 22.62             11-12-10 24.34

SPDR Financial ETF                                     9-2-08 21.72             11-12-10 14.94

Moody's Bond Indices Corporate BAA         9-2-08 7.07%             11-12-10 5.97%

Moody's Bond Indices Corporate AAA         9-2-08 5.54%             11-12-10 4.92%

Spot Copper                                                 9-2-08 332.25             11-12-10 388.85

Spot Crude Oil                                             9-2-08 109.71             11-12-10 84.88

Spot Gold                                                     9-2-08 806.60             11-12-10 1365.50

Spot Dollar Index                                         9-2-08 78.061             11-12-10 78.082

10 Year Treasury Yield                             9-2-08 3.7326%             11-12-10 2.7871%

30 Year Treasury Yield                                9-2-08 4.3554%          11-12-10 4.2844%

ISM Manufacturing                                 9-2-08 49.2                     11-12-10 56.9

U.S. Unemployment Rate                         10-1-08 6.03%                 11-12-10 9.6%

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.