Dear Clients,

In the 25+ years that I have been in the investment business, this past quarter has been the most news-dramatic that I can remember.  Events of political discord in the Middle East are making headlines everyday (i.e., Egypt, Libya, Yemen, Bahrain, Saudi Arabia, and more countries waiting in the winds...).  Earthquakes in New Zealand and Japan have shaken everyone’s nerves.  Then, most particularly, the damage from Japan’s quake on nuclear reactors that are emitting radiation which is creating an extreme threat to crops, livestock and people.  Even at the beginning of the year there were devastating typhoons that struck Australia and destroyed thousands of acres of farmland causing wholesale prices to rise world-wide.

With all this world news you would think the markets would be heading downward.  Instead, they are showing great resiliency.  Why?

The two major themes that drive the markets are fiscal policy (taxes) and accommodative monetary policy (interest rates) and they are both well-entrenched.  Accommodative monetary policy dictates the cost in which individuals and corporations borrow money. The government can help corporations with lower costs for borrowing which allows the extra savings to flow directly to the bottom line.  For individuals, it helps make large purchases with lower finance costs.  For example, with lower mortgage rates, automobile financing, and home improvement loans, it is easier to borrow money.  Accommodative fiscal policy leaves more money in the hands of the people. This allows us to invest the extra money or spend it.

When fiscal and accommodative monetary policies come together as in lower taxes and lower interest rates, it almost always drives the markets higher.  Of course, there will be setbacks and pullbacks along the way ? possibly a 10% drop or more.  These market declines should be seen as buying opportunities, even if a market correction seems unbearable.

In conclusion, we believe that until one or both of these major themes change, the markets will remain steady.

Please remember that we are always available for updates and meetings whenever you need them.

Sincerely,