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Welcome to the GIM Home / News Page
GIM, Inc. is an investment management firm dedicated exclusively to meeting the fixed income, stable value, and money market management needs of institutional investors. Founded in 1999, we manage more than $455 million in assets for corporations, governments, unions, and other institutions.GIM is a certified MBE and 100% owned by its President and CEO Bruce T. Goode. We bring more than thirty years of financial market experience to bear on our clients' behalf and we manage assets with an unswerving commitment to the highest standards. We insist on quality, integrity and diversity in our portfolios, our process and our practices. We are acutely aware of the efforts our clients took to raise the capital they have entrusted to us, and our first and foremost objective is to protect the value of that capital. With a clear understanding of our clients' unique objectives, our objective is to assemble and nurture portfolios that help them reach their goals with the least possible risk. We helped pioneer the use of pooled stable value funds in qualified retirement plans and we are developing exciting new applications for them today. We would welcome the opportunity to explore ways in which Goode Investment Management can help your organization.
With the exception of treasuries, May was a good month with gains across the board on all spread sectors. Equities shared in the positive spirit with a 330+ point rally in the Dow Jones Industrial Average. Commodity prices surged as well with Gold and oil moving higher for the month. Some of this strength however was due to dollar weakness rather overall global recovery demand. None the less, it was a good month as investors were rewarded for moving out of treasuries and adding risk to their portfolios. The broad Barclays Aggregate Index returned a positive 73 basis points for the month while the Intermediate Government Credit Index returned a positive 74 basis points. The trend this year has been a reversal of 2008. That is, treasuries performing less well while spread sectors have performed quite well. As these two broad sectors somewhat offset each other the Year-to-date return for the Aggregate is only 1.32% while the Intermediate Gov/Credit return is a positive 1.15%. Fixed income returns still surpass negative equity returns YTD through May31st. The treasury curve steepened 33 basis points this month as ten year yields rose 34 bpts versus a 1 bpt rise in the two year sector. The backup in treasury yields across the maturity spectrum contributed to the negative performance of this sector which was most pronounced on the long end. Thirty year mortgage rates rose modestly, which is an unfortunate consequence of rising treasury yields. However, with modest spread compression the overall MBS sector performed well this month. Throughout this time period there have been positive signs in housing with increases in Pending and Existing Home Sales but if mortgage rates continue to rise, this will have the potential to damage those "green shoots" going forward. While it may be a unanimous opinion that treasury yields will rise in the future do to economic recovery, a tightening Fed and a huge increase in new treasury issuance, the rise of over 125 basis point in ten year yields (a rise of 80 bpts in five year yields) from year end 2008 has been fairly dramatic at this point given a Fed on hold and a still anemic economy. Spreads narrowed this month with the Asset Backed sector benefiting the most. While MBS spreads tightened by 17 bpts, the ABS saw a 190 bpts move on its Index versus treasuries. The TALF program has benefited ABS in this regard as new deals were priced and sold into the market. In addition, this activity helped with secondary liquidity and valuations of existing ABS securities. Intermediate Credit spreads moved tighter by 84 bpts and CMBS narrowed by 82 bpts. Clearly the ABS sector won the excess return category for the month once again and the YTD number for ABS excess return is a staggering 15.91%. CMBS excess return for the year came in second at 11.87% which represents a dramatic reversal of last year's performance. Intermediate Credit and MBS round out the positive scenario excess return story for the year coming in at 7.81% and 2.82% respectively. The Index Plus Strategy portfolios returned a positive 2.32% for the month versus the Intermediate Gov/Credit Index return of .74%. Continued strong performance in the ABS and CMBS sectors, where IPS portfolios are overweight, were the major contributors to the out-performance of IPS along with an underweight to the Government/Treasury sector. Our expectation continues to be that spread sector overweighting will benefit performance for the coming months although there may be periods of time when spreads pause, adjust or widen due to short term headline risk. On balance however, the macro view is to stay the course.
Despite a negative month for the treasury sector, both the Barclays Aggregate and the Barclays Intermediate Government Credit Indices turned in positive total returns for the second time this year. The Aggregate returned a positive 48 basis points for April bringing the YTD total to positive .59 and the Intermediate Gov/Credit returned a positive 45 basis points bringing its YTD to positive 40 basis points. The treasury curve was a drag on returns this past month with rates rising across the board. While the two year treasury rose only 10 bpts from a .80 yield to a .90 yield, the ten year treasury rose 46 bpts from a 2.66 yield to a 3.12 yield. The resulting curve steepened 35 bpts for the month. Unfortunately for the Federal Reserve Bank, the long bond (30 year) rose even further, moving 50 bpts from a 3.53 to a 4.03 yield for the month. This move took place despite the Fed's efforts to buy long treasuries to reduce supply in the long end and therefore keep long mortgage rates low. The other side of the equation was all positive for the spread sectors, both credit and securitized. Intermediate Credit tightened in spread by 97 bpts and Asset Backs, residential MBS and CMBS tightened by 110, 25 and 178 basis points respectively. Clearly the ABS and CMBS sectors have benefited from some of the early success of the TALF plan. When looking at the best sector for the year, the ABS sector has returned a 8.98 year-to-date followed by the CMBS sector at 5.79 and Intermediate Credit at 2.61. In contrast, Intermediate treasuries have returned a negative -1.39 year-to-date and Long treasuries have returned a negative -10.13 for the year. Clearly, this is part of the unwind of last Fall's strong move in treasuries at the expense of the spread sectors. With liquidity beginning to show signs of slight improvement in the market, some of the focus has moved back to the economic front and the length of the recession and the shape of the recovery. Unemployment rose to 8.5% from 8.1% last month. Most forecasters are looking at something north of 10% before we are done. The losses in non-farm payrolls at -663 are still very large accompanied by ongoing losses in the manufacturing sector of -161 as well. In a sense, the word "Inflation" has been removed from the markets current vocabulary unless we are talking about one to two years in the future. Headline PPI month-over-month came in at -1.2 and CPI at -.01. Personal Consumption Expenditures (PCE core) came in at a comfortable.2 month -over- month and the year- over- year number was 1.8. The big picture stills shows weakness across the broad economy. Retail Sales came in at -1.1 and if look at Sales-less autos, it was still a negative -.9. Industrial Production fell by -1.5 and Durable Goods orders were -.8. As expected, the Federal Reserve left their target funds rate unchanged at 0-.25 and maintained a "Risk to Growth" posture at the April 29th meeting. The IPS portfolios returned a positive 1.84 total return for the month versus the Barclays Intermediate Index return of .45. The largest contributor to performance came from our exposure to the CMBS sector, which as was mentioned above, has benefited from expansion of the TALF program and the formation of the Public-Private Investment Funds (PPIF). While we believe that spreads will not move in a straight line (tighten), we expect that there is still a return advantage to be gained by remaining overweight in the Securitized sectors for the IPS portfolios.
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