Our Quarterly Commentary Letters
Third Quarter 2008
Information on this site is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.
October 22, 2008
Mr. & Mrs. John Doe
123 Peachtree Street
Atlanta, GA 30033
Dear John and Kelly,
Please find enclosed your reports for the fourth quarter of 2008. We trust this commentary will provide you with some perspective for the economic environment in which we are currently planning and investing.
Quarterly Commentary
This has been one of the more difficult quarterly pieces to produce because of the speed with which changes have been occurring within the financial markets and related political spheres. As soon as we are ready to document our analysis and opinion, the situation seems to have a new element introduced to it. We trust that as this piece is written (Monday, October 20), we have enough stability in the news cycle to be able to make some timely comments on what has occurred.
What to Do?
Normally, we are wary of the comment – “it’s different this time,” because the cycle of boom and bust in financial markets is arguably timeless and never ending. But there is something “different” this time and that difference is the level of global government intervention which has been introduced to the financial markets. This involvement has been massive and will only increase over the next days, weeks, months, and years as new and already announced programs begin to take hold. With this new market element introduced, we believe no one is in a position to say when the markets will begin to recover. But history tells us that a recovery will happen. It is not a matter of if; it’s just a matter of when.
With that perspective, we believe it is helpful to consider a disciplined decision making protocol to use in making portfolio decisions in light of the market volatility that has occurred and which may continue to occur.
The following protocol forms the foundation for our evaluation of individual client situations:
1. Is a client's portfolio diversified? Are there any individual stock or sector exposures which are introducing unnecessary risk to a client's portfolio?
2. Does the client have enough cash and/or low volatility (nonstock) asets to wait out the stock market's decline and recovery?
3. Is the client's overal allocation consistent with the client's long-term financial objectives?
4. If the answers to questions 1-3 are appropriate, then a client should be comfortable with holding steady in the face of the volatility we are experiencing. If they are not comfortable, a logical response would be to remove oneself, as much as possible, from the incessant coverage coming from the news and financial media. Don't check market prices and values everyday. Traders and speculators have that level of focus, investors should not. Don't listen to Jim Cramer. Don't watch CNBC.
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