Economic Forecasting Track Record

• In 1993, LHO sold its client's bonds and moved into under two-year maturities. In our Client Memorandum we warned that the Fed would start to increase interest rates in the first half of 1994, which it did.


• In November 1994, when the thirty year Treasury bond was at a yield of 8.15%, LHO bought zero-coupon bonds.


• In the fall of 1998, a breakdown of confidence in global securities markets followed the default on sovereign debt by Russia and the collapse of a huge U.S. hedge fund. The senior members of LHO predicted no recession, but rather an accelerating U. S. growth rate.


• Throughout 1999, LHO predicted that the Federal Reserve would continue tightening into 2000 until economic growth slowed.


• Correctly anticipating that the Fed would raise rates, leading to an economic slowdown, LHO reduced our exposures in equities and moved out of growth and into value in February and March of 2000.


• Most market participants were expecting a recession in 2001. We thought that was incorrect and increased our allocation to equities and growth stocks in March and April of 2001.