“While many economists and Wall Street strategists are predicting a “soft landing” for the economy, we are less optimistic. We have long believed that the housing boom was being driven to a much larger extent by aggressive lending practices than underlying fundamentals, and as a result, we believe that we are entering a housing slump that will be deeper and longer than most “experts” are predicting. Given that outlook and the integral part that housing activity plays in our economy, we believe that the risk of an eventual economic recession is fairly high.”
– ACM Quarterly Commentary October 20, 2006
“The stock market is overdue for a correction. We suspect that this correction will materialize later this year as stocks discount lower corporate profits and an increasing risk of economic recession, precipitated in large part by a continue slide in housing activity.”
– ACM Quarterly Commentary, January 15, 2007
“We continue to believe that the slowing residential housing market could likely push the economy into recession, and that eventually the stock market will discount this risk. Our focus, going forward, will soon shift towards reducing the risk in our portfolios given the looming correction in stock prices…The performance of the capital markets over the past four years has left many investors complacent about the possibility of losses. It is precisely when other are complacent that our contrarian approach leads us to be more aware of the risk to our portfolios.”
– ACM Quarterly Commentary, April 17, 2007
“…with investor sentiment reaching bullish extremes, we decisively reduced our equity allocation in late June of this year. Less than a month later, stock prices collapsed over liquidity concerns related to the mortgage markets and worsening data from the housing industry…We have used the recent rally to further reduce the equity exposure in our portfolios (relative to each portfolio’s target allocation). Despite the market rebound and some recent encouraging economic data, we continue to believe that an economic recession is inevitable given the weakness in the housing market.”
– ACM Quarter Commentary, October 17, 2007
“Looking forward to this year, we believe that the stock market has not fully discounted the slowing economy. If we are not already in a recession, then we will likely be in one soon. Assuming this is the case stock could fall further…”
ACM Quarterly Commentary, January 16, 2008
“While some may still debate the odds of a possible recession, we believe that is began last December or January. Furthermore, we believe that this recession could be deeper and last longer than many might expect. The housing downturn is far from over…As such we anticipate another down move in the markets before things improve. We can envision an eventual market bottom that will be accompanied by very negative investor sentiment in the face of scary headlines about regional bank failures as well as comparisons to the stagflation of the late 1970’s and even to the Great Depression.”
– ACM Quarterly Commentary April 17, 2008
“We were not enticed by this recent stock market rally. We continue to believe that stock prices could fall further as they discount an economy that to us, at least, is clearly in recession….Looking forward, we expect to maintain a defensive posture in our portfolios until this market decline has run its course.”
– ACM Quarterly Commentary, July 15, 2008
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THE FINANCIAL CRISIS OF 2007-2009 IS CONSIDERED TO HAVE BEEN THE WORST ECONOMIC CRISIS SINCE THE GREAT DEPRESSION OF THE 1930’s. THE S&P 500 DECLINED NEARLY 43% FROM ITS OCTOBER 2007 HIGHS TO ITS MARCH 2009 LOWS. THE CRISIS WAS TRIGGERED BY A COLLAPSE IN THE SUBPRIME HOUSING MARKET WHICH PUSHED MAJOR U.S. FINANCIAL INSTITUTIONS AND THOSE AROUND THE WORLD TO THE BRINK OF COLLAPSE. GOVERNMENTS AND CENTRAL BANKS WERE FORCED TO BAIL OUT MANY OF THESE COMPANIES AND HAD TO RESPOND WITH UNPRECEDENTED MONETARY AND FISCAL STIMULUS. THE RECECESSION WAS LATER DETERMINED TO HAVE BEGUN IN DECEMBER OF 2007.
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