Outlook Newsletter - December, 2008
By James H. McBride, Registered Investment Advisor

Updating our November comments in light of the continuing “crisis of confidence” seems the appropriate step as the year-end approaches. We have learned over the past month that despite what our government has been promising, a $1 trillion dollar injection of treasury money has yet to calm the fears of both Wall Street and Main Street. Banks are still fearful of lending to each other and Main Street because they still do not know what their regulated capital requirements will be since much of their asset portfolios contain mortgage-backed securities whose values are still unknown.

Now we are dealing with the strong possibility that the automobile industry will fail without significant Treasury help, unemployment is rapidly rising (6.7% on its way to perhaps 10% or more) and, the American psyche is very damaged as a lame-duck administration prepares to leave office and a new administration prepares to take its place. The general consensus seems to be that “it will get worse before it gets better”.

I believe that things will soon get better for investors – the question is not if but when. First however we must begin to believe in ourselves, our financial system and finally the continuance of the American way of life. I have been in financial services since 1967 and have endured at least three other “crisis of confidence” periods that were at least as, if not more frightening, than our current panic-driven recession. I can say without enumerating all of the “causes” that the early 1970s, early 1980s and early 1990s were just as frightening as they were happening as is today’s crisis!

We may have seen the market bottom in the first 10 days of October. The markets tend to anticipate the future by at least 6 months, but we never know what “bad news” will send them tumbling downward once again. What all this experience has taught me is that when the news from Washington and the economy is at its worst, the markets often continue to strengthen as optimism for the future begins to grow. This gives the President-Elect an exceptional opportunity to get us “back on track”. No doubt tax-loss selling later this month will depress the market somewhat, but the buying of significantly oversold quality equities with sale proceeds should pretty much offset selling pressure.

The opportunity for significant progress is even now being recognized and I expect that 2009 will be better for investors than what is currently being projected by CNBC “experts”. No doubt we are still in for some rough days, but I feel confident America will recover from this latest crisis and continue to lead the world forward in the years to come. If your current “pain” is too much to overcome, I suggest calling your advisors and asking what you can do now to lessen that pain. I still believe that “staying the course” is the best course of action, but if your “pain” is too great, there are options available to you.

This time of year invokes holiday spirit and religious and family values. There can be no greater gift than the gift of hope for the future.

Merry Christmas and Happy Holidays!

The projections of returns for specific investment types are estimates and projections and therefore prone to error. Actual returns may differ significantly from projections. Your experience will differ from the performance of specific asset types to the extent that several types exist in your account, and to the extent that your specific investments perform differently than the average of that asset type. Whether any of the asset types mentioned above are suitable for your account must be determined individually, and your portfolio may not contain some of the asset types described. These views represent an appraisal of possible events. Outcomes and performance is not guaranteed. The investments listed may go up or down in value, and they are not suitable for all investors. Securities offered through Ensemble Financial Services. Member NASD, SIPC.