September 21 Email Commentary to Clients: “Breaking News”

Let me start out by saying that during these troubling times on Wall Street, our services become more valuable to our clients so I have cleared my calendar of all non-essential meetings and/or activities in order to be available for any questions or concerns which you may have. I find that email is the quickest and most efficient way to communicate rather than mailing you a letter which could take a couple days to reach you. If you prefer not to receive emails, please let me know and I can mail you anything that I would have emailed you.

The normally rock-solid reputation of money funds-which typically invest in short-term debt such as government and corporate bonds- took a major hit Tuesday when the value of Primary Fund shares fell below the $1 benchmark for the funds. Money market funds aren’t like cash and usually maintain $1 net asset value price for the most part. I wanted to pass along information regarding Schwab’s funds and attached is a Q&A regarding Schwab’s Money Market Fund holdings, which continue to hold high quality securities. Schwab’s two priorities will continue to be maintaining the $1 net asset value and meeting the daily liquidity needs of their clients.

CNBC has been running “Breaking News” more times than we can count over the past several months and it is usually only bad news that they break in order to get viewers attention. When I turned on CNBC Monday morning at 5:00 am, it became apparent to me that the journalists have promoted the bad and ugly for so long that they were lost for words. Why don’t they run good stories like the fact that oil has dropped 40% and was near $90 the same way they let us know when oil was climbing to $147 from $60.

This global credit crisis has changed the financial world the way we knew it and I was thankful that we didn’t’ own any of the companies that were or are in jeopardy. I don’t’ take lightly when a client loses money and will continue to do my best to monitor the situation the best I can. Sometimes investors get caught up in the “noise” and they lose sight of their long-term goals and objectives. The stock market has seen its share of difficult times over the years and this event will be chalked up as one of the most volatile.

Recently, a client (Tommy) shared with me a story about funding an IRA which was the first investment he ever made on the Friday before Black Monday in October 1987. When Tommy came to work on Tuesday the day after Black Monday and was telling one of his peers who he worked with about how he lost over 20% of his investment in a day, the elder friend looked at him and said, “Tommy, now you know what investing is all about and today would be a good day to invest more money”.

I’m not saying that I think this market has hit bottom or that the volatility is over with, but I am hopeful that the market will recover as it always has. The question I have investors ask themselves when they want to sell their stock holdings is: If you had cash and didn’t own stocks, would you be buying at or near these levels and the answer is almost always yes. As hard as it may seem, long-term investors shouldn’t be selling at these levels either, the time to do that is when the Dow reaches 14,000 again which it will do, maybe not this year or next, but someday it will make a new record. Also attached is a piece from MarketWatch which I found pretty interesting and ironically along with statistics on Black Monday.

If your comfort level has reached a breaking point, then it doesn’t matter where the market is and you need to call me ASAP to talk about or change your strategy. I thank you for the confidence you have in my firm’s ability to help you navigate through these tough times. Please call me if you have any questions.

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