Happy New Year!  Hopefully, happier investing wise than last year.  2015 is being called one of the toughest years for investing.  2016 is starting off as if to compete for that title.  Here are the year to date numbers not counting today’s numbers which are negative as I write.

DOW -5.22%

S&P -5.15%

NASDAQ -7.38%

Russell 2000 -8.03%

TLT (Long Government Treasury) +2.65

The Oak Springs portfolios hold 70 to 75% cash positions.  We have deployed more cash to the long treasury position.

The U.S. economy is the tallest midget in the room when it comes to comparing ourselves with the rest of the world.  As you know the FED increased its rate by .25% in December and has signaled 4 more increases this year, the next scheduled in March.  It is hard to believe the March hike will occur.  FED minutes from the December vote indicate a real fear among the FED members that deflation and not inflation is the real problem.  The threat of deflation has only grown since the December meeting.  In the past week the Chinese have devalued their currency by 1% against the dollar.  While the U.S. is tightening thru rate increases the rest of the world’s economies are ramping up their quantitative easing.  Parts of Europe have negative rates in place on deposits.  Some European home mortgages are actually making payments to the borrowers.  So, while the rest of the world is in a race to the bottom with their currency values, the U.S. has raised rates and forced up the strength of the dollar.  That is a nightmare for U.S. companies that export.  In fact, our trade deficit has gone through the roof.  Small U.S. companies have been in a slide for over a year.  The Russell 2000 (small company index) is down 8.03% for the year to date.  For the past year it is down 11.47%.  The small companies are considered the canary in the coal mine signaling real problems in the economy.  While employment is at 5% many of the underlying jobs being created are low paying and part time.  The overall labor participation rate remains very low at 62%.  Wow.  This sounds like doom and gloom.  Sorry.  But this is the reason why we have remained in the large cash position.  As soon as we see indication that the equity market is truly turning positive we will begin investing.