Is it possible that Mother Nature is mad at our regulators and politicians and is sending a message to express her displeasure with the incredible mess they have made of our economic circumstances again?  In just the past few days, she has sent an earthquake and a hurricane up the east coast right into New England and New York City.  Perhaps it is some kind of wake up call, but do not hold your breath expecting them to take heed and change their ways!

What a wild ride we are having this month in the markets!  Right about the beginning of August, stocks began dropping like a rock.  At one point, it looked like a repeat of 2008 during the financial crisis, when everything was falling off a cliff.  The overall volatility of being up or down 400 Dow points many times this month is a little too much to take and the end may not yet be in sight.  As I am writing this update, our broad stock market is down approximately 15% from its recent high on April 29, 2011.  In mid-June, we began reducing your exposure to stocks and by early August we moved completely out of stocks and currently have you primarily invested in short term bonds and cash while we wait for some rationality and a workable trend to return.

In recent economic reports, GDP numbers came in weaker than forecast.  At some point, with major firms lowering overall growth forecasts, they will have to revisit individual company earnings estimates.  So far, that has not occurred.  Some speculate that after Wall Street returns from their summer vacations, we will begin to see downward earnings revisions over the coming months.  Merrill Lynch, in one release, said that one of their economic models is now forecasting an 80% probability of recession, and ‘we may already be in it.’

As you have come to expect, we are diligently making adjustments in the allocation of assets in your portfolio with the objective of substantially reducing the downside risk to the value of your assets with excellent potential for long-term profits.  As of this writing, our “Active Portfolio Management” continues to provide greater performance with much less risk as compared to the S&P 500 stock market index as measured from January 1 1999.  Of course, you already know that past performance is no Guarantee of future profits and all investments can gain or loose value over time.

We are keeping a very close eye on what is happening in our markets and the economy and will re-enter the stock market when the data shows us that a workable trend is returning as mentioned above.

If you have any questions or would like to discuss matters with me don’t hesitate to pick up the phone and give me a call.