September 2006

We’re enclosing a report on your investments with us.  We hope it’s of benefit to you.

It seems we’re in the doldrums of summer. Everything is flat, and in this part of the country, not only flat but hot. Sometimes it’s difficult to realize that markets and weather do make changes eventually.

The interest rates today are a big conversation item around many investment advisors’ offices. While one of the big topics of conversation is what’s happening to home prices and the housing market; the reality is that what drives spending in an economy is how fast peoples’ incomes are growing. Quite honestly they are still growing at a pretty decent rate here in this country, in spite of the difference in income classes.

This means we’ve seen a little bit of easing by the fed. We figure they’ll sit back and wait to see what happens as to how the economy responds.  From all indications the economy should keep contributing a reasonably decent growth rate. We could therefore see the fed go back to tightening mode perhaps towards the end of the year or early 2007. This calls for a pretty upbeat picture after all.

Many times we look at the past and don’t pay enough attention to the present.  Our friend Jim Dunton, 44 year veteran portfolio counselor at American Funds, points out that the markets and the economy really have changed a great deal over time. Says Jim:

We used to speak of four year cycles in the 60’s and then in the 70’s we plotted out six year cycles. In the 80’s it ran eight years and then in the 90’s the cycle ran 10 years  before it quit. Mr. Dunton points out that about 4 ¾ years into this one, there is no mathematical reason to suddenly expect this thing to suddenly roll over and die.

We believe if we stay well diversified and continue to be invested in global markets, that the people managing your money will find ample values on those days when the market begins to act like a late Texas day: hot and worn out!

August 2006

“The sky is falling!” “The sky is falling!”

If a person is to believe the Chicken Littles on CNBC, he’d sell all his long term investments and buy cans of Spam, bottles of water, flashlight batteries and a map showing the way to a mountain hide-away in Mexico. Our friend, Nick Murray, points out: “The S&P500, the largest most transparent, most reasonably valued - basket of stocks in the world – gave up – soaking wet – about 8% top to bottom during the last correction” This was a second longest correction free run in its history, around 850 days.
Off 8%? If a ring priced at $1000 suddenly and without warning went on sale for $920 and if history showed that ring might appreciate over the next 20 years (based on past history, not guaranteed) 8 to 9 % per year, do you suppose you would buy it? Are you kidding me? Most wives would sell their refrigerators to do it! This is where we are today. Opportunities are a terrible thing to waste.

While we covered this event in the market in our last letter we’re still happy that a very high percentage of our clients have learned that the price of a stock or mutual fund does not always reflect its value.

As most of you know by now our firm is not a “market watching” organization. We’ll not go into our story here, but be aware that there are more important things having to do with investing than “what the market is doing”.

Your comments and questions are always welcome, thank you for your business.

July 2006

At the end of April and the beginning of May, emerging markets around the world were soaring to new highs, the S&P 500 challenging a five year old peak, and even the old Dow Jones Industrials were closing in on their all time high that was set back in 2000.

And then, by mid June, we were smack dab in the middle of a global panic, widely reputed to be galloping heedlessly toward an inflationary Armageddon.

Happy days are here again! Omega had a great June because finally after all these years, many of our clients are recognizing that the time to buy is (a) when you have the money and (b) when prices are going down.

Long time monetary stimulus by the government and low interest rates for so long have urged global speculation by investors worldwide. The Fed, of course, has been behind in raising interest rates for too long. Finally, with an increase of the Fed rate to 5.25%, the elephant finally left the room. And what happened? The market skyrocketed upwards!

During this skid, we here at Omega received three phone calls from worried investors wanting to know what changes should be made in their portfolio. We’ve received scores of other communications from clients wondering if now was a good time to add money to their portfolio. Finally, after forty-two years, a majority of our clients have figured it out. The time to buy is when things look bleak. And those of you who have called and wondered what we should do to protect your portfolio, we gave you the same answer as we’ve given many other times when people become panicky. Do nothing!

Give us a call if you have any questions regarding your portfolio or any other things with which we may be of help.

P.S. Incidentally, I hope you’ve all read about Warren Buffet’s multi-billion dollar gift to The Gates Foundation. If any of you suddenly catch that fever and want to be generous to your favorite charity, church or school, don’t forget The Omega Foundation. It’s a donor-advised, tax exempt organization that can spread your tax deductible gift out over generations and help teach your children and grandchildren the beauty of giving. And it doesn’t cost a billion dollars. The enclosed brochure is one you’ve probably seen before. Give it a read. It might lead to a life time of generosity.

May 2006

I’m sure you’ve noticed that the market is continuing its move upward with very good momentum represented by excellent economic numbers coming from an excellent market tailwind and some good choices made by our money managers.

Many times, in the midst of up turnings such as this, we loose sight of long term goals and risk reward possibilities.  We try to never forget that there must be a purpose to attempt to assist you in making your money work.  The results are more important than performance.  This is because the money that you put away, the money that we’re helping to supervise, will be used to buy goods and services in the years to come.

Many people forget that management techniques and the culture in which our money managers work have been consistent over many, many years and that whether the end result will be for you or your heirs, we want those results to be as good as they have been over the last 70 years.

The Omega Financial Group