Hall Capital “Market Views” Newsletter October 2014

This is the 18th edition of Market Views from HALL CAPITAL. Our aim is to provide concise views of where we see risk and opportunity for investors.

What to Worry About and What Not
- in a dynamic and dangerous world

Weakness in the US stock market recently has been linked to global concerns, such as riots in Hong Kong, ISIS, Ebola, aggression by Russia, the strength of the dollar and overall "uncertainty". Let's put these issues in perspective.

China is an evolving freer country. By design this will be slow. In many ways China is the most stable emerging economy in the world (and most capitalistic!). However, the maturation will not come without bumps in the road.

The progress of terrorist organizations, like ISIS, will be limited, after all the entire civilized world is against them. Their impact on the US investors will be, limited as well - if harrowing at times.

Ebola will be contained soon, or we will have a problem.

Of the political issues, Putin is the main concern, not because of Russia's role in the global economy, but because Russia is a nuclear power. However, soft energy prices are weakening Russia's cash flow and Putin's rational options are limited.

Several US officials have expressed concern that the strong US dollar will make our exports less competitive. It is true a strong currency is a challenge for exporters. However, while our employment rate is rising we WANT a strong dollar. This enables us to buy the rest of the world on the cheap. Foreign demand for US goods and securities are behind the dollar's strength. This is a good thing.

As to "uncertainty", in my 30 plus years as a professional investor I have yet to see a time without uncertainty. Compared to many times, such as 2008, I would argue that uncertainty today is below the norm. Many of the above global concerns are side shows compared to the two main issues: growth in the US economy and Fed Policy -- neither of which are that uncertain well into next year. Even with very slow growth in Europe and Japan, the US big ship is unlikely to reverse course quickly. Our economy is more likely to steam ahead. And the Fed is likely to stay close to their well articulated script over the next few quarters with no surprises. Granted, when interest rates start to rise in earnest, we will enter more uncertainty.

Focus List
- doing its job

As mentioned last quarter, the somewhat defensive characteristics of this list seemed appropriate going into the expected less than robust market for Q3. Indeed, the summer quarter was ho hum for the S&P 500 which was up just 1%. The Focus List moved ahead 4% in the period with all stocks except Exxon showing a positive return.

For individual stocks as well as selection strategies, past performance is not necessarily indicative of the future.

Hall Capital Focus List

Follow Up – from our letter one year ago

"We are currently in a government shutdown which is NOT a big deal"
- Do you even remember that we shut the government down?

" ... 2013 over all will likely end up a good year for equities, if not for bonds."
- 2013 equities, though higher already by the time this letter was issued, finished Q4 strong and turned in 32% return for the year. Bonds suffered a negative -2% return.

NOTE: Now in addition to ALL our quarterly letters, on our website is a tab with just the Follow Ups.

About HALL CAPITAL

HALL CAPITAL, LLC is a registered investment advisor and was formed by Principals from Arcturus Capital in 2010.
For more information, contact Donald Hall 626 578 5700 x101 dhall@hallcapitalmanagement.com