Client Communications

This mini bull market we have been riding for the past three months has continued to surprise many with its longevity. For a couple of months now market experts have been warning about a second wave of financial problems and economic weakening. Just maybe they are being too bearish.

Having a plan and adhering to it can make getting through these times a lot less stressful. Are We Headed in the Right Direction?

Since the low point of March 6th, the S&P 500 Index has had a nice gain of over 20%. The action of the rise, defined by volume and advances verses declines, has indeed been very strong and positive. More than a couple of the daily moves have been unprecedented.

Our research shows that this may very well be one of the best opportunities in the past 40 years to own quality companies.

The Advisor - Spring 2009

The current market spiral we are experiencing is being driven by a loss of confidence in our financial markets and our country’s leadership. Job losses lead to decreased consumer spending while tight credit markets and reduced consumer spending lead to reduced capital expenditures and layoffs by businesses. These are basically feeding off of each other at this time. Shares of quality companies are being sold in an attempt to try to sidestep further declines in value.

Recently, we discussed the bottoming process that takes place during major market declines. The current market decline, and the events of this past week, continues to follow the historical blueprint as we are now testing the lows reached on November 20th, 2008. Finding support at these price levels, for a second time, is an important step for the stock markets to move forward. The media, in all its wisdom, is more so compelled to report to us how the stock markets have retraced their values back to 1997 levels.

This seems to be the question of the day and one we will attempt to answer. With the major news focusing on the economic numbers and congressional actions of stimulus packages and bailouts, we will update you on some technical information.

President Bush signed into law The Worker, Retiree, and Employer Recovery Act of 2008 on December 23rd, 2008. The new law grants a temporary waiver of Required Minimum Distributions from retirement accounts for the 2009 year only. Clearly, this provides relief for those who need to take the minimum distributions and will give the equities in the investment accounts an opportunity to recover. Furthermore, if you were taking monthly withdrawals from your retirement accounts simply to satisfy your Required Minimum Distribution, it may be prudent to suspend those for this year to avoid unwanted income taxes. At this time, it is expected that Required Minimum Distributions will continue in 2010.

“So, although this decline is different in many ways from other declines, it is also the same in the way it is moving through the cycle. We feel that each week that goes by more indicators are flipping to the argument that this oversold condition may begin to correct to the upside. And keep in mind that in the first 40 days of a new bull market, stocks typically regain a third of what they lost during the bear market.”

The Advisor - Fall 2008

The stock markets continue to attempt to digest the daily barrage of new information stemming from the credit crisis, current economic reports, testimonies on Capitol Hill by economic experts, and the current political backdrop. As if that wasn’t enough, recent conversations with money managers we use indicate the untimely liquidation of large hedge funds has significantly added to the volatile trading we are seeing in the stock markets.