Commentary and Articles

3rd Qtr 2007 Interim Quarterly Synopsis

“For such a time as this”

Given the recent volatility in the markets and the news volume on the subject, we are issuing an interim commentary this quarter.

As we have discussed in our commentary over the last four quarters, this volatility was not unexpected. In fact, we directly addressed it in our 2007 Asset Management Outlook which we presented earlier this year. While the problems in the sub-prime mortgage market are taking center stage, we have been saying that higher fuel prices and a slowing housing market would at some point be problematic for a market that moved higher for over 50 straight months without a significant correction.

Our Outlook also quoted Albert Einstein, “In the middle of every difficulty lies opportunity.” We continue to see opportunity in spite of the recent difficulty.

Specifically, we have been ensuring for the last year that, although we can’t be immune to the difficulty, our portfolios are positioned to weather the storm. Our Focus List equities have strong balance sheets with relatively high levels of cash and low levels of debt. Thus, they are not as susceptible to tightening credit. Our movement to increased positions in Natural Resources and alternative equity strategies also make our portfolios less likely to be affected by large swings in the equity markets.

Our bond positions are sound. We recently examined our exposure to high-yield and mortgage related debt. We adjusted positions in those sectors prior to having any significant downward movement in accounts holding those sectors.


We believe that equity markets will rebound as companies release earnings over the next quarters and investors regain comfort that the global economy is still strong. The current unknowns feed the fear that seems to have gripped the markets over the last two weeks.

As of today, the Federal Reserve has cut the short term discount rate. In response, the markets are rebounding sharply. Historically speaking, the current movement in security prices is not unprecedented. We are reminded of the 4th Quarter of 2002, in which some accounts were down by over 4% only to rebound by more than 12% in the 1st Quarter of 2003.

There are no guarantees of what the markets will provide in terms of future returns. It is because of this very fact that we have built our portfolios for long-term durability and stability.