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The
Trust Administration and
Investment Committee of
Coral Gables Trust (the
“TIC”) in its most
recent meeting on May 13,
2010, in light of current
global events, has moved to
reduce our current 10%
overweight in our equity
allocation in our Balanced
investment model to 50%. The
10% reduction from equities
will be added to our
diversified fixed income
allocation, primarily to
shorter duration
instruments. This will take
the Balanced model back to a
50-50 weighting. This should
not be interpreted as shift
in our overall views as
expressed in our previous
quarterly letters.
The TIC
remains of the opinion that
the economic recovery that
is underway is legitimate,
sustainable and will
continue to further develop
and take the economy from
recovery to expansion. We do
not believe that the events
unfolding in Europe will
fatally damage the macro
fundamentals and are of the
opinion that the probability
of a double-dip recession,
while not zero, is simply
low.
The
position behind this is
based on a number of factors
including, but not limited
to, the following:
-
Improving economic data
such as GDP growth,
declining unemployment
claims, increasing
retail sales and
consumer spending, and
growth in manufacturing.
-
Corporate profitability
is improving on top line
growth, not simply on
cost cutting.
-
Low
interest rates and lower
oil and energy prices
are net stimulative to
the economy and will
help offset any pressure
on exports from a
stronger US Dollar and
weaker Euro.
-
The
US financial system is
much healthier today
than it was 18 months
ago; higher
capital and much less
leverage.
-
The
US equity markets, on a
valuation basis are
currently below
historical trend levels.
The
events unfolding in Europe
are indeed meaningful and
have caused markets to
become more nervous and that
has manifested in the form
of increased market
volatility. We are positive
on the steps recently taken
by the European Central Bank
and the IMF with respect to
the framework and content of
the rescue package; we are
more cautious with respect
to the ability of the
impaired countries within
the Eurozone to manage their
fiscal and budgetary
affairs. As we have
mentioned before, this is a
fluid situation with events
unfolding daily. The TIC is
analyzing and interpreting
the events as they develop
and will continue to
communicate its views in
both a clear and timely
manner. For now,
our actions represent our
commitment to protect our
clients’ wealth.
On
behalf of the Trust
Administration and
Investment Committee of
Coral Gables Trust,
Sincerely,
Joseph
Nader
Chief Investment Officer
Coral
Gables Trust
255 Alhambra Circle, Suite
333
Coral Gables, FL 33134
Direct: 786.497.1214
Fax: 786.497.1217
jnader@cgtrust.com
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