| An eNews Update |
Special Issue -October 10, 2008
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Financial Crisis Special Newsletter Investors are caught up in a general feeling of panic and that is understandable. And in such a situation decisions must be made with a grasp of facts and probabilities, not irrational fear. Consider that all of the ten normal downturn years in the last 82 years have recovered in the year following and went on to higher profits. All of the three abnormal downturns of the early 1930s, the early 1970s and the early 2000s recovered in the two to four years following. This chart illustrates that.
While history is no guarantee of the future, we have no better guide from which to base our current decisions. Fear and panic should not be our motivations. Rather, reason and probabilities must be our guides. We realize that retired investors are concerned over portfolio value fluctuations. Consider that, while security values fluctuate, the dividends from stocks and interest from bonds continue to be paid and can be used for living expenses. No one can predict the course of markets and economics but, once again, history has proven that central bank intervention has brought us out of similar malaise. This time central banks worldwide are indicating a willingness to act in concert to address a global credit and monetary problem. The one-half point reduction in lending rates across the U.S. and Western Europe is an example. The rescue plan in the U.S. has not yet been implemented, but is in process. Its aim is to unclog the credit markets, restore confidence and allow capital to once again flow. This is similar in intent to the shoring up of the banking system during the 1930s that, along with lower interest rates, served that same end. We continue to manage our clients’ portfolios along proven, textbook lines and to dialogue with them to better understand the current state of capital markets. Please call your financial advisor here to discuss how the current situation impacts your portfolios and to better learn the steps that we took and continue to take on your behalf. We thank our clients for the confidence that they have placed in us and assure them that we are working full time to steer their portfolios through this unsettling period. Sincerely,
*Stocks are represented by the S&P 500, and bonds are represented by Lehman Brother. Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. This example assumes dividends are reinvested and taxes and sales charges are not included, which would lower the amount.This article is for informational purposes only and not intended as financial advice. Consult your financial advisor to determine what is appropriate for your situation. If you have any comments, questions or suggestions concerning this
electronic newsletter, please email us at fgi@fragassoadvisors.com.
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