sl12 year in review and state of cabot
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23rd AnnualInvestment Conference & Luncheon
Dennis Wassung, Jr., CFA®
Portfolio Manager
Cabot Money Management, Inc.216 Essex Street
Salem, Massachusetts 01970800-888-6468 eCabot.com
Cabot’s Year in Review
2012 By Asset Class
2012 thru 9/21/12
NASDAQ
S&P 50
0
REITS
SMALL C
APS
MID
CAPS
FOREIGN D
EVELOPED
GOLD
EMERGIN
G MARKETS
COMM
ODITIE
S
BONDS0%
5%
10%
15%
20%
25%
2012 By Country: Top & Bottom 5
2012 thru 9/21/12
EGYPT
TURKEY
THAILAND
GERMANY
INDIA
UNITED STATES
ARGENTINA
ISRAEL
CHILE
SPAIN
CHINA (SHANGHAI)
-10% 0% 10% 20% 30% 40% 50% 60%
2012 By Sector
2012 thru 9/21/12
TELECOM S
VC.
INFORM
ATION T
ECH
FINANCIA
LS
CONSUMER D
ISCR
HEALTH CARE
MATERIA
LS
CONSUMER S
TAPLES
INDUSTRIA
LS
ENERGY
UTILIT
IES
0%
5%
10%
15%
20%
25%
30%
2011 U.S. Equity Market Performance
2011 Full Year12/31
/2010
1/13/2
011
1/26/2
011
2/8/20
11
2/21/2
011
3/6/20
11
3/19/2
011
4/1/20
11
4/14/2
011
4/27/2
011
5/10/2
011
5/23/2
011
6/5/20
11
6/18/2
011
7/1/20
11
7/14/2
011
7/27/2
011
8/9/20
11
8/22/2
011
9/4/20
11
9/17/2
011
9/30/2
011
10/13
/2011
10/26
/2011
11/8/
2011
11/21
/2011
12/4/
2011
12/17
/2011
12/30
/2011
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
S&P 500
2011 & 2012 U.S. Equity Market
12/31/10 to 9/21/1212
/31/20
10
1/20/2
011
2/9/20
11
3/1/20
11
3/21/2
011
4/10/2
011
4/30/2
011
5/20/2
011
6/9/20
11
6/29/2
011
7/19/2
011
8/8/20
11
8/28/2
011
9/17/2
011
10/7/
2011
10/27
/2011
11/16
/2011
12/6/
2011
12/26
/2011
1/15/2
012
2/4/20
12
2/24/2
012
3/15/2
012
4/4/20
12
4/24/2
012
5/14/2
012
6/3/20
12
6/23/2
012
7/13/2
012
8/2/20
12
8/22/2
012
9/11/2
012
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
S&P 500
2012 U.S. Equity Market
2012 thru 9/21/1212/3
0/20
11
1/9/
2012
1/19
/201
2
1/29
/201
2
2/8/
2012
2/18
/201
2
2/28
/201
2
3/9/
2012
3/19
/201
2
3/29
/201
2
4/8/
2012
4/18
/201
2
4/28
/201
2
5/8/
2012
5/18
/201
2
5/28
/201
2
6/7/
2012
6/17
/201
2
6/27
/201
2
7/7/
2012
7/17
/201
2
7/27
/201
2
8/6/
2012
8/16
/201
2
8/26
/201
2
9/5/
2012
9/15
/201
20%
2%
4%
6%
8%
10%
12%
14%
16%
18%
S&P 500
2012 U.S. Equity Market
2012 thru 9/21/12
12/30
/2011
1/8/20
12
1/17/2
012
1/26/2
012
2/4/20
12
2/13/2
012
2/22/2
012
3/2/20
12
3/11/2
012
3/20/2
012
3/29/2
012
4/7/20
12
4/16/2
012
4/25/2
012
5/4/20
12
5/13/2
012
5/22/2
012
5/31/2
012
6/9/20
12
6/18/2
012
6/27/2
012
7/6/20
12
7/15/2
012
7/24/2
012
8/2/20
12
8/11/2
012
8/20/2
012
8/29/2
012
9/7/20
12
9/16/2
012
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
S&P 500
What’s On The Horizon?
?
Stocks vs. Bonds (2011 & 2012)
12/31/10 to 9/21/1212
/31/
2010
1/18
/201
1
2/5/
2011
2/23
/201
1
3/13
/201
1
3/31
/201
1
4/18
/201
1
5/6/
2011
5/24
/201
1
6/11
/201
1
6/29
/201
1
7/17
/201
1
8/4/
2011
8/22
/201
1
9/9/
2011
9/27
/201
1
10/1
5/20
11
11/2
/201
1
11/2
0/20
11
12/8
/201
1
12/2
6/20
11
1/13
/201
2
1/31
/201
2
2/18
/201
2
3/7/
2012
3/25
/201
2
4/12
/201
2
4/30
/201
2
5/18
/201
2
6/5/
2012
6/23
/201
2
7/11
/201
2
7/29
/201
2
8/16
/201
2
9/3/
2012
9/21
/201
2-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Stocks Bonds
Stocks vs. Bonds in 2012
2012 through 9/21/12
12/3
0/20
11
1/7/
2012
1/15
/201
2
1/23
/201
2
1/31
/201
2
2/8/
2012
2/16
/201
2
2/24
/201
2
3/3/
2012
3/11
/201
2
3/19
/201
2
3/27
/201
2
4/4/
2012
4/12
/201
2
4/20
/201
2
4/28
/201
2
5/6/
2012
5/14
/201
2
5/22
/201
2
5/30
/201
2
6/7/
2012
6/15
/201
2
6/23
/201
2
7/1/
2012
7/9/
2012
7/17
/201
2
7/25
/201
2
8/2/
2012
8/10
/201
2
8/18
/201
2
8/26
/201
2
9/3/
2012
9/11
/201
2
9/19
/201
2-5%
0%
5%
10%
15%
20%
Stocks Bonds
Equity Markets Have Long-Term Value:Dividend Yield Is Higher Than 10-Year Treasury Yield
1998-Current
7/3/
1998
12/3
/199
8
5/3/
1999
10/3
/199
9
3/3/
2000
8/3/
2000
1/3/
2001
6/3/
2001
11/3
/200
1
4/3/
2002
9/3/
2002
2/3/
2003
7/3/
2003
12/3
/200
3
5/3/
2004
10/3
/200
4
3/3/
2005
8/3/
2005
1/3/
2006
6/3/
2006
11/3
/200
6
4/3/
2007
9/3/
2007
2/3/
2008
7/3/
2008
12/3
/200
8
5/3/
2009
10/3
/200
9
3/3/
2010
8/3/
2010
1/3/
2011
6/3/
2011
11/3
/201
1
4/3/
2012
9/3/
2012
0%
1%
2%
3%
4%
5%
6%
7%
8%
S&P 500 Dividend Yield 10-Year Treasury Yield
Equity Markets Have Long-Term Value:Stocks Are Still “Cheap”
1976-Current
Dec-
10
Dec-
15
Dec-
20
Dec-
25
Dec-
30
Dec-
35
Dec-
40
Dec-
45
Dec-
50
Dec-
55
Dec-
60
Dec-
65
Dec-
70
Dec-
75
Dec-
80
Dec-
85
Dec-
90
Dec-
95
Dec-
00
Dec-
05
Dec-
10
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Rolling 10-Year Annualized Total Return of the Dow Jones Industrial Average (1910 - Present)
Equity Markets Have Long-Term Value:10-Year Rolling Returns Still Favor Stocks
One of the Classic“Stock Market Rules”
The Stock Market climbs a “Wall of Worry”
William Larkin, Jr.Portfolio Manager
Cabot Money Management, Inc.216 Essex Street
Salem, Massachusetts 01970800-888-6468 eCabot.com
Cabot’s Year in Review - Bonds
Federal Reserve Policies Dominate The Markets
0%
QE3
JOBS
Removes Safe Investment Options From The Bond Market
Targets Interest Rates Across All Maturities
The Employment Mandate Forces The Economic Recovery
Credit Dries Up
Valuations Fall
Production Slows
Confidence is Lost
Market Fear Spreads
Panic
Excessive Pessimism
Cash Hoarding
Principal Preservation
Excessive OptimismHistoric Investment Opportunities
Economy StabilizesInitial Hiring Starts
Confidence Recovers
Pricing Improves
Market Confidence Spreads
Investors Begin Re-allocation to Risk
Recovery Becomes More Mainstream
Reaching for Yield
Consumer Demand Returns
Productions Increases
Panic Subsides
A
B
C
X
US Treasury Securities
Mortgage Securities
Bond Mkt Corporate Bonds
High Yield Bonds
Emerging Market Debt
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
1.67%2.89% 3.40%
5.93%
9.06%
16.34%
2012 Performance (Year-To-Date Returns)
Gov’t Backed Moderate Risk High Risk
Reaching For Yield
A Professional New Approach Is Required
Buy & Hold No Longer Works
Indexing Is Dangerous
Risk Management is
Required
Opportunities Require Flexible
Non-Core Strategies
State of Cabot
Robert T. Lutts President & CIO
Cabot Money Management, Inc.216 Essex Street
Salem, Massachusetts 01970800-888-6468 eCabot.com
State of Cabot
Cabot Technology Platform Expanding – Best Practices Thinking Phones
Salesforce.com – Integration with Schwab - Custodians
Hosted Networks – Cloud Computing
Installing Power Backup Generator
Staff Education – High Investment – Expanding Conferences, Seminars, World Travel
Continue to Seek To Upgrade our Skills and Abilities
Cabot Investment Offerings New Equity Dividend-Oriented Portfolio – Stock Dividend – 3.5% yield
Cabot’s knowledge and Use of New ETFs Expanding
Fixed Income – Use of New Fixed Income products expanding
Wealth Management Team – Best Practices Seminars and further education
Advanced Degrees – Taxes, Estate Planning and Insurance work
Staff Conferences, Seminars, World Travel
State of Cabot
23rd AnnualInvestment Conference & Luncheon
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