Searching for Safety (Part 3)

How can investors figure out what’s safe and what’s not?

The process of investing in safe assets, seeing them appreciate, and moving out of these (formerly safe) assets can seem like a kind of dance—a two-step—where investors pile into a safe asset, watch it appreciate and start to come down, then pile into the next new thing, only to see the process continue: lather, rinse, repeat.

It started with the internet boom. Investors had no illusions that these were safe stocks, but when the entire market pulled back 50%, people started looking for safety. They thought they found it with real-estate. There seemed to be structural reasons why real-estate shouldn’t depreciate; after all, when prices fall, owners just take their homes off the market, limiting supply and raising prices. Or so the story went.

But the “safe” real estate market appreciated too far, too fast, and its pullback caused a credit crunch that’s still with us. Investors piled into safe Treasuries, which have appreciated and are now vulnerable. Searching for income, investors have moved on to dividend stocks. But dividends aren’t coupons. They aren’t contractual, and can be cut when needed.

A safe asset is one at a fair price. Or cheaper.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-06-05T09:44:46+00:00 June 5th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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