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January 17, 2008 Letter to Clients

Dear Clients and Friends,

 There has been a virtual torrent of bad economic news spilling forth from every media outlet. The sheer volume of the news and the accompanying volatility in the financial markets compel me to communicate some thoughts to you prior to the production of our 4th quarter newsletter.

Someone once said that a recession is when your neighbor has lost his or her job; a depression is when you lose yours. If you want to work and you have a job, be thankful. If you need something, buy it. If you are retired and withdrawing from your investments within the parameters we have recommended, relax. Don’t let the gloom and doom newsmakers get the best of you. Your portfolios are professionally diversified and include quality investments.

Prices fluctuate. That’s the way markets work. When investors allow themselves to be influenced by the news of the day, valuable investments move from weak hands to strong hands. The strong hands will hold temporarily depressed quality investments until prices recover, as they always do.

The current economic anxiety has its roots in the unrealistic escalation of residential real estate prices. Unlike the technology stock bubble of the 90’s, trouble in real estate affects more households. Problems in the housing industry have been compounded by the actions of many large banks and investment houses. These firms, who routinely tout their financial sophistication, managed to magnify the mess by making bad bets, securitizing loans and adding layer upon layer of leverage, collecting high fees along the way.

Should we care? We care because some investors and homeowners are going to be hurt. We care because more bad news will cause more anxiety and this is not good for consumer spending, which makes up 70% of our economy.

However, this is the important part. We don’t know where this will end, but end it will as all difficult financial times in the past. And when it does, you want to be among the investors with strong hands. It’s not easy to be patient when everywhere you turn there is a reason not to be. If it was easy, everyone would be a good investor.

We are confident in the long term performance of our recommended diversified investment portfolios of quality fixed income investments, domestic and foreign stocks, and special asset categories. Will they have periods of declining value? Yes. Will they continue to provide you with the cash flow you need to live on? Yes.

If you need to speak to us, please call. We are here to listen, advise and reassure.

Best regards,

Vincent A. Schiavi, CFP®, CPA/PFS



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