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We are summarizing investment performance for the second quarter of 2010 and outlining our view of financial markets going forward. Overview The numbers for the second quarter of 2010 were as follows: The overall market, as measured by the S&P 500 was down 11.86%, the bond market, as measured by the Lehman Aggregate Bond Index was up 3.73%, and a balanced portfolio, based on an equal weighting of these indexes, was down 4.22%. The S&P 500 is down 7.57% year to date. The main question on our minds as asset managers is whether our economy will experience a double dip recession. Our last quarterly newsletter was not that cheery and you will be getting more of the same with this one. We continue to ask if there is ‘life after debt?’ An overwhelming amount of the recovery is attributed to government stimulus programs. However, we are at a loss as to how deficit spending can continue. With the private sector debt having shifted to public sector debt, we don’t know where the ‘debt baton’ can go now. We anticipate a first-rate ‘debt hangover’ in the coming few quarters as job growth continues to be anemic. The stock market had a dismal quarter, bonds continue to offer lackluster returns, and housing sales are flat to down again. The foreclosures have been running at a rate of over 300,000 filings a month for the last 15 months. It may take years to clear these existing inventories. We have 15 million Americans out of work. We believe that everything depends on the private sector, and not the public sector, to establish a real and sustainable recovery. For some slightly good news, the political winds have clearly shifted towards more fiscal restraint. Even China, the largest holder of US debt, has told us to reign in our existing debt. I know we are beginning to sound like a broken record but this environment is not offering a whole lot of opportunities especially in the traditional investment spectrum. While we continue to scour the stock and bond markets for value and attractive entry points, most of our success has come via the alternative investment. We feel that there is less volatility and more security in these investments and that they provide additional diversification in your portfolios. In volatile markets there are plenty of short-term fluctuations that can reap investors great rewards or great misfortunes. We hope to find a few of these gems but will search with great caution. Staying the course and staying diversified eliminates the need to make knee-jerk decisions based on the market’s direction. Our goal is to provide steady returns regardless of the economic environment. We will continue to make your financial security our first priority. We appreciate your continued confidence and look forward to another prosperous year! Sincerely, Chris Reedy, CFP
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