Hello my friends. I hope that you are having a wonderful June and start of summer!  This letter is the first of a new monthly communication we are beginning.  In an effort to keep you better informed, we are going to send our update of what is happening that has (or will have) a potential impact on your investment portfolio and financial circumstances.  I believe this information will help give you a stronger comfort level with the management that we are providing for your assets.  Below you will find some very interesting facts.

What Do 4/05/1999, 3/23/2000 and 6/24/2008 Have In Common?
•    The S&P 500 Index first closed above 1314 on 4/05/1999, and that is where it closed yesterday (06/24/2008)!
•    Add in dividends and you add a year: the S&P with dividends is worth the same today as it was on 3/23/2000.
•    Either way, eight or nine years of no growth.  It doesn’t have to be that way.  ‘Buy and Hope’ (hold) just doesn’t pay off.  You need to have the flexibility to change your asset mix along with changing market and economic trends which is exactly the service that we provide for you.
 Recession: Still Looming?
 
The official definition of a recession is two consecutive quarters of negative growth.  That has not happened, officially. During both the 4th quarter of 2007 and 1st quarter of 2008, the U.S. economy definitely slowed, but did not turn negative.  To many this signaled that we may have escaped the worst and have better times to come.
 
But maybe we shouldn’t be celebrating missing the bullet too soon.  Consider the following:
•    The Consumer Confidence Index tumbled almost 8 points in June to 50.4. This is its most pessimistic assessment since 1992 and one of its lowest readings ever!  The only other times it was lower was 1974-75 and 1980 (ugly stock market years, not coincidentally).
•    Not only is the Consumer Confidence Index at a low but it has fallen 10 of the past 11 months, and is the deepest/sharpest 12 month deterioration on record!
•    Consumer home buying plans dropped to only 2.2% which is the fewest since October 1982. For some perspective, mortgage rates in 1982 were a stiff 15% for those qualifying.  So it isn’t high interest rates that are discouraging today’s buyers.
•    Another fun statistic is a record low of only 35.8% of families expect to take a vacation in the next six months: not good news for lodging, gaming, resorts, airlines and restaurants.
If the normal IRS tax refund checks and the economic stimulus package don’t lift consumer confidence, it may be we are just now starting with a recession.
 
Unfortunately, the market keeps getting hit with bombshells. As of today we are testing the March lows on the S&P 500 index, down almost 13% year to date.  Obviously the worst hit sector, financials, now below their March lows are pulling down the S&P 500 and large cap value, where they have heavy weightings.
 
The broad based Market Environment Indicator remains bearish. As a result of this and many other indicators and analysis data we remain very cautious.  We have reduced our exposure to stocks again and have taken a conservative hedging position in most portfolios through the use of market shorting funds.  Even though everything is down right now (even bonds), your portfolio with us is in much better shape and only down a little!

We are working toward doing more corresponding via the internet and e-mail so that we can communicate much more rapidly and at the same time kill a few less trees by not sending paper copies.  If you have a regular e-mail address and use it consistently we would like to transition to sending as much data as possible through this medium.  Please let us know if you would like to participate in this endeavor with us.

Please e-mail Lance at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or Phil at This e-mail address is being protected from spambots. You need JavaScript enabled to view it and provide your preferred e-mail address information.

As always please do not hesitate to contact me if you have any questions or would just like to talk to me. Until next time have a great day!