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!