Q2 2006 -- Mid-Quarter Review
By any measure, this past May was a tough one for investors. Investments of all types were pushed lower by a combination of rising interest rates, inflation worries, geo-political concerns, and fears of a pending economic slowdown. This downturn was frustrating as many market measures were nearing levels not seen in a number of years, if ever. Accounts managed by Arrival Capital were not spared the turndown in values, though almost all remain up on the year or right around breakeven. Positions in the metals, materials, and energy area, which helped accounts earn market beating reuturns thoguh the beginning of May, were among the hardest hit areas in the past few weeks. Since stocks in most other industries were also pushed lower, account values declined.

What comes next? First of all, we remember our goals and approach. We are invesotrs not traders, searching for good, underlying value in stocks and other investments that can rise over time, create wealth, and generate income. A market decline often creates more oporunities than rapid market advances, so we continue to look to deploy client capital in a prudent matter. A changing market also warrants a re-examination of all account positions. This has been done, with particular emphasis on what amount of metal and energy stocks to hold going forward. We continue to believe that these positions, in the context of a properly diversified account, remain good values with low price to earnings ratios. Looking out over the longer term, we believe that the rapid industrialization of China, Brazil, India and other parts of the world will conitnue to drive d emand for hard assets, energy, and the expertise to put those elements to good use.

Times like the past few weeks can be trying ones for investors. but we remain confident that better times lie ahead, especially for those who build their wealth on a foundation of solid value, prudent judgment, and an optimistic yet realitic view of the future.
- posted by Jay @ 1:38 PM