We almost made it through August before our first major storm of the season.  It seems that we have escaped another bullet {Tropical storm Fay}.  I have heard many times that the Indians from many centuries in the past would come here to avoid these storms.  Perhaps their ancestors knew something that is apparently not common knowledge in modern times.

During my more than 20 years of direct asset management, I have experienced four bear markets.  Even though the current one is not yet the largest in terms of dollar losses, it has certainly been the most difficult to analyze.  As you know, for the past year, we have had an amazing number of economic problems.  This has caused a greater amount of volatility in most investment portfolios; which, in turn, has caused many of us to feel a much greater level of discomfort than we expected.  This experience has also caused us to realize we should be more conservative in the level of management risk that we choose.  Recently, we sent you a “Risk Survey” to assist us in determining whether the current management level in your portfolio is correct and, if not, how best to modify our management of your assets to more closely match your comfort level.  If you have not already completed it and returned it to us, please do so immediately.

During the past year, I have been doing extensive research on additional management strategies that we can add to our techniques in an effort to better control the potential short-term downside market fluctuations.  Over the next few months, we are going to adjust our strategy to include a portion of the accounts in core funds and conduct the more active adjustments around those core positions.  I believe these modifications will be very effective in reducing the volatility, especially in our more conservative portfolios.

Having said all of that, I am very happy to report that in spite of the current short-term market frustrations, our management strategies continue to provide much better risk-adjusted returns for our clients.  We have just finished the reconciliation of our collective performance for the past 10 years ending June 30.  The S&P 500 Index for that period had a total return of 2.8% and our combined account average was approximately 40% greater with considerably less market volatility risk.  This analysis included all of the client accounts that have been under our “Active Asset Allocation Management” for the entire 10-year period.  This is, of course, another excellent example of how effective the “Active Management” approach can be.

Thank you for your confidence in us.  We continually strive to improve the level of our services for you.  If you have any questions, need assistance completing the survey, or just would like to talk with us, please do not hesitate to call or send an e-mail and we will respond with our usual promptness.