27 September 2011

Dear Friend:

The Fall Season of the year is upon us and the end of the third quarter of 2011 is rapidly approaching.  We who live here in Southwest Florida have been very fortunate so far this year as we have not had the severe weather that much of the rest of our great country is experiencing.  Two-thirds of Hurricane Season is over and we have not had a major storm, so keep your fingers crossed for our luck to continue!

We have not been as fortunate when we look at the tremendous volatility and severe losses in most investment markets around the world for the past few months.  Most of the economic news has been negative and may be getting worse, not better.  One of our technical analysts – STIR Research – recently made the following observation:

We believe it would be very premature to say the current decline is over. It would not be surprising to have some rally attempt from extremely oversold levels which we are at, but again the current decline in all probability is not over.
 
  The stock market is standing on a ‘broken’ or ‘very wobbly’ three legged stool.

• The first leg, and probably broken is Europe. In all probability they may be in an official recession. Greece is probably headed for default and contagion fears for banks and other nations real. While nations promise liquidity for the banks, so we do not have a repeat of 2008, but liquidity is one thing, banks going virtually bankrupt are another.
• The second wobbly leg is the U.S. Fed’s comments went from ‘risk of recession’ to ‘significant risk’ over the last two months. Legendary investor George Soros believes we are already in the second dip. Only fiscal efforts can give the markets an outside push, but finding common ground between an administration aiming for reelection and conservative republicans is probably not going to happen.
  
• The last leg, China is slowing.

Bottom line investors are fearful and stocks are selling off on fears of a global recession.   

As I am writing this update, a rally attempt as mentioned above is in process because we are at the end of the quarter and are experiencing what is commonly referred to as “Window Dressing” as fund managers try to improve their performance for reporting purposes even though it may only last a few days.

I am very pleased to inform you we have been able to miss most or the volatility and market losses of the past few months as we moved our portfolios into a very conservative position of cash and short-term bonds in early August and are waiting for a usable trend to emerge.  The domestic stock market, as measured by the Dow Jones U.S. Total Stock Market Index, is down approximately 17% from its peak on July 7 through last Friday, September 23.  The rest of the world is having similar problems and their markets are down as much or more than ours are.  Of course, past performance is no guarantee of future profits.  All investments can gain or lose value over time.

I know this has been a very frustrating period, which tends to cause most of us to worry about the value of our investments.  The good news is that it will not last forever and eventually new opportunities will be available to us.  If you have any questions, as always, do not hesitate to give me a call.

Sincerely,

Phil Couture, President, CFP®

Couture Financial, Inc.