October 20, 2008
Dear Clients and Friends:
1. We are not sending out quarterly statements this month for the 3rd Quarter of 2008. The markets have changed so dramatically since September 30th that a report from a mere 3 weeks ago is now hopelessly outdated. If you would like some comparative performance review, I suggest waiting until the October 31st numbers are available about mid-November, and contacting us then. Otherwise we will send out the usual year-end reports. In the meantime, if you want to discuss anything about your accounts, such as performance year-to-date, the individual holdings, the overall allocations, etc., please feel free to call or e-mail.
2. I have returned from 2 days of meetings with portfolio managers and economists in NYC. What I did learn does not really add new information or perspective to my communication to you in my letter dated October 8th. I think the best summary of what I heard, and where I believe things stand at the moment, are the following.
a. The current crisis is being called a “credit crisis” because major banks and other corporations are reluctant to lend to each other because they do not have confidence that the borrowers will have the ability to repay their loans, even the very shortest term loans of overnight or just a few days.
b. The actions of the US and international governments, including the “bail-outs,” will eventually loosen this credit crunch and entities will begin lending to each other.
c. When this happens commerce will begin to return to normal – whatever that might be.
d. As a result of (a) above, the economies of the world have suffered, and are either in recession or likely to experience recession.
e. Because of (b), and because the world governments have the model of the 1930’s to guide them on what NOT to do, there is a very strong and relatively concerted effort to help economies regain profitable footing.
f. Because of (e), a 1930’s depression is extremely unlikely.
3. While I take pride in my authorship, I have found a written understanding of our current situation and a guide for individual investor behavior going forward which is absolutely exceptional. I urge everyone to read Warren Buffet’s op-ed piece from the NY Times on October 17, 2008. Here is a link to the article: http://www.nytimes.com/2008/10/17/opinion/17buffett.html?scp=1&sq=buffet&st=cse
Please contact us if there is anything you would like to discuss. Thanks again for the opportunity to work with you.
Robert K. Haley, JD, CFP®, AIF®