Our 2nd Quarter Client Letter

Writing this letter is much more pleasant than some of our previous ones. If you just look at the indices, you would think that it has been an uneventful year so far, with the S&P 500 up 3% and the Dow up Jones down 2%. Of course the minor changes in the averages masks an incredibly volatile (and at times frightening) six months. We saw 2009 start with such promise after the painful declines of 2008. A new president was inaugurated with many bold ideas for change, but then the markets started spiraling downward. The bottom was on March 9th and the fear and anxiety levels were at levels that many have never before seen (and hopefully will never again see). The markets then began moving up and by June 12th we had reached our high for the year. The S&P 500 had moved a stunning 38% in 3 months.

Given the unease we saw in late February and early March, we have come a long, long way. But we still have a ways to go. The journey did not end for you on June 30th, and we are very cognizant of that fact. So, while we are pleased to see improvement in the markets and investor psychology, we know that there will continue to be many bumps along the way. We are still waiting to see if the stimulus leads to improvement in the economy, if some kind of health care reform is enacted, what type of financial and environmental regulations may be passed, what will happen to our taxes…There are many questions and few clear answers.

So what does this mean for you? It means that we will continue to focus on finding the best investments for your portfolio-whether they be reasonably valued equities, high quality fixed income instruments or mutual funds that are run by talented managers. We continue to feel this approach provides some level of consistency in very turbulent times. It should also allow us to avoid disasters, while also taking advantage of opportunities in the market. Because we have generally been maintaining high cash levels in our portfolios, it gives us liquidity to take advantage of opportunities that will present themselves in the market. Over the next month, many companies will be announcing earnings and unless managements are overly optimistic, we should find a bargain or two.

In regards to mutual funds, we have been making an effort to be more pro-active by setting up conference calls with the firm’s managing the funds. We use these calls in an effort to provide a high level of due diligence in these uncertain times. We have shared our thoughts on the Blog, which you can find in the Newsroom section of our website.

As always, we like to remind ourselves how lucky we are to have you as a client. We appreciate your trust and look forward to rewarding your confidence. Please let us know if there is anything that we can do to help you out during the summer. We also would be pleased to assist a friend or family member who may be in need of some financial advice or a fresh perspective on their investments. Feel free to pass on our names.