The Alethea Group of Oppenheimer & Co. Inc.

The Alethea Group
of Oppenheimer & Co. Inc.
Committed to making your life simple
by delivering a professional investment
management and financial experience.
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always making your interests our major priority.
M. Trent Miller, CFP ®
Managing Director - Investments
OMEGA Portfolio Management
(972) 450-3876
Stephen D. Robinson, CIMA ®
Managing Director - Investments
OMEGA Portfolio Management
(972) 450-3883
Tony Hsu, CFP ® *
Executive Director - Investments
OMEGA Portfolio Management
(949) 219-1072
The Alethea Group
of Oppenheimer & Co. Inc.
Galleria Tower Two
13455 Noel Road, Suite 1200
Dallas, TX 74240
(877) 242-2999 Toll Free
*Located in the Newport Beach office.
620 Newport Center Drive
Suite 1000
Newport Beach, CA 92660
(888) 876-1150 Toll Free
We want to welcome you to this inaugural issue of the Investment Newsletter of
the Alethea Group of Oppenheimer & Co. Inc. We hope to issue our newsletter
on a monthly basis, along with any “Newsbreaks” that may emerge. This
month, we will focus on three areas. First, the economy: we think the going
remains tough. Second, we will touch on a variety of investment themes from
the fl ight to quality to defl ation and what types of managers we think might
do well. Finally, we discuss overall asset allocation, including the importance
of fl exibility, quality and conservatism in structuring a portfolio.
Has the “Great Recession” been a normal recession that could lead to a
V-shaped recovery? We think the answer is “no.” We expect tough going for
the next several quarters on most economic fronts and potentially more pain
to follow. But for now, we believe that we are in the middle of a statistical
recovery. The following trends illustrate our claims.
Consumers are spending less, saving more and trying to pay down debt. Retail
sales for Christmas were up, but marginally from the very low numbers of
last year. We expect retailer profi tability to be muted at best. Unemployment
numbers have started to normalize, and we will see job growth soon.
However, unemployment will stay relatively high for quite some time. We
have mixed signals, with auto sales looking surprisingly strong; China GDP
growth increasing dramatically, but very weak pending home sales. The Fed is
starting to slow down some of the massive stimulus. They have stopped buying
Treasuries and will stop buying mortgage-backed securities in the coming
months. Then, we will have a better handle on the shape of the economy. We
are keeping a very close watch on these indicators and will keep you posted
concerning any material changes.
After last year’s plunge into the “Great Recession” and the stock market’s
subsequent rise of more than 60%, we know we are dealing with an extremely
volatile market. Therefore, we suggest you keep the following principles
in mind:
• Because markets can move violently, investors should stay informed, liquid
and nimble to take advantage of asset dislocations.
• Try to employ very little leverage.
THE ECONOMY
GENERAL INVESTMENT THEMES
1
Source: Urban Land Institute (Summary from conference as of November 23, 2009)

GENERAL INVESTMENT THEMES (cont’d)
• In what we think is a stock pickers’ market, try to choose the best
active managers as opposed to index funds.
• This is also a time for a fl ight to quality. Sell high-yield bonds and
lower-quality stocks and move to more conservative assets such as
high-grade bonds and blue chip equities. Use domestic large-cap
companies and top-notch global allocation money managers for
diversifi cation. We are selecting Exchange Traded Funds (ETF) that we
think have the least risk but the best chance of outperformance on
the basis of relative strength.
• We believe that we are going to eventually see rising short-term
rates, while longer-term rates will not go up as much, causing a
fl attening of the yield curve. We are very cautious about buying bond
funds. Instead, we recommend buying medium-term, high-quality
tax-exempt bonds.
• Barring unforeseen changes in political and economic conditions,
we expect long/short managers who can avail themselves of market
swings and merger/arbitrage managers who will benefi t from more
deals on the market to perform better than most in 2010 and 2011.
ASSET ALLOCATION
In these volatile times in the market, we advocate an active, nimble investment style as well as a careful determination of how much (if any) income
is needed for each individual portfolio we manage. We recommend a conservative income stream, including bonds with strong credit ratings.
We perform extensive due diligence so we can identify some of what we consider among the world’s best money managers, mutual funds, ETFs,
individual stocks and hedge fund managers 2 in the categories listed below.
We currently emphasize:
Risk Reducers (cash, money markets, medium-term tax-free bonds, short-term government agencies): 50%
Income Generators (government bonds, corporate bonds): 5%
Inflation Protectors (hard assets, commodities): 10%
Market Exposure (consumer staples, telecom, healthcare, select country ETFs): 20%
Return Enhancers (global macro, long/short, merger arbitrage): 15%
Please contact us if you have questions about your portfolio or about the
investment types and themes we’re recommending.
2
Alternative investments such as Hedge Funds and Fund of Funds are made available only to qualifi ed investors and involve various degrees of risk.
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The OMEGA Group is a program through Oppenheimer & Co. Inc. It offers a unique managed money program in which experienced Financial Advisors act as portfolio managers for their clients.