July 2010 Client Quarterly Letter

This is the quarterly letter that we sent to our clients during July, 2010:

Worldwide, stock markets during the second quarter of 2010 saw the return of market volatility, with wide daily swings and negative returns. Then, the first two weeks of July have seen positive returns, which erased these losses. We thought some perspective may help. Let’s look back, long term.

The year was 1960. The S & P 500 was at 60. The country would soon face the difficulties of Vietnam, the Civil Rights movement and the assassination of President Kennedy. It would also experience the Bay of Pigs crisis and land a man on the moon.

The year was 1970. The S & P 500 was at 92. The country was still in the midst of the Vietnam War. It would face the Watergate crisis, the resignation of President Nixon, the Middle East crisis and the ensuing gas shortages. The prime rate rose to over 15% by 1979.

The year was 1980. The S & P 500 was at 108. The country would face unemployment and high interest rates. Chrysler would face bankruptcy, but recover. The prime rate would reach 20% in April, 1980. The later part of the decade saw the Savings and Loan crisis, which resulted in the closing of 296 financial institutions with total assets of $125 billion.

The year was 1990. The S & P 500 was at 353. By 1994, over 1,500 institutions were closed from the 1980s S&L crisis. The country grappled with health care reform, but it was not approved. Health care costs continued to skyrocket. The internet arrived and high technology stocks would go nowhere but up. The mantra was “this time was different.” But it wasn’t.

The year was 2000. The S & P 500 was at 1,469. The tech bubble was about to burst. 9/11 became emboldened in our memory. Wars began in Afghanistan and Iraq, which still continue. The housing market went up, then came crashing down. Major financial institutions and industrial companies went bankrupt, were taken over by the government or were struggling to survive by the end of the decade.

It is now 2010. The S & P 500 was 1,115 at the beginning of the year.

What can we learn from this information?

• Note the increase, over the long term, in the S & P 500.
o 1960: 60
o 1980: 108
o 2010: 1,115


• If you focus on the day to day problems that face our cities, countries, specific companies or parts of the world, you would focus on the near term and probably be quite pessimistic about future prospects.

• If you focus on the longer term, you become more positive. You realize how resilient the economy, companies and countries can be to resolve issues, innovate and these successes translate into positive stock market returns.

• When we develop your investment plan, we focus on both the short term and the long term. We use very prudent fixed income strategies for the foundation of your portfolio, so you will have a solid base. For the long term, we structure a diversified global portfolio, which should provide for positive results over a longer time period.

o It is our role as your advisor to assist you in reaching a balance, so that your portfolio can give you the comfort and security that the fixed income allocation provides, while providing the longer term perspective to achieve the greater potential returns that stocks can provide.

• We are realistic and very cognizant that many states, municipalities and governments face significant issues. But looking back through history, each time period faced different challenges and problems.

o As we assist you in building and monitoring your investment portfolio, and work with you to provide financial comfort and security, we rely on historical facts and academic information and research, not on the media or market forecasters. We do not have a crystal ball. No one else does either.

o We will work with you, so that you will have the patience and discipline that is required to be a successful long-term investor.


If you are concerned about the economy or the markets, call us. Meet with us. That’s what we are here for.