Letter to Our Clients - May 2014

Dear Clients and Friends:


We have news, brief market commentary, and then a reflection.


A.  News. 


Ted and Lindsey will be flying to Spain on May 5th to attend a Morningstar investment conference in Madrid.  In June Ted and Traci will attend the Morningstar conference in Chicago, so we will have an opportunity to learn how the European outlook corresponds with the US outlook.  Ted and Lindsey are very fluent in Spanish and so this opportunity seemed quite appealing to us. 


After the Morningstar conference in Madrid they will visit clients in Germany, and then take a week’s vacation to tour Austria and Hungary.  Bon voyage, Ted and Lindsey!


B.  Market Commentary.


Despite a constant stream of pessimistic forecasts, the stock market continues to increase in value and hit or flirt with record highs.  There is no doubt in our minds that at some point the stock market will drop, and probably drop dramatically.  The danger is that there is no way to predict accurately when that will happen, when it will hit bottom, and when it will come back up.  Since no one knows whether the drop will happen next week, next year, or in the next decade, we remain convinced it is prudent to maintain an investment strategy designed to take advantage of up markets, yet not be financially threatened by down markets.


C.  Reflection and Questions for you.


March of 2014 was an interesting anniversary.  It was on March 9, 2009, that the worst Bear Market since the 1930’s hit its low. 


Can you remember how you felt in September, 2008, when Lehman Brothers failed and both the stock and bond markets “fell off a cliff”?  Can you remember headlines from that time, and the outlook in early 2009?  There was a new president who was considered dangerous to the economy and financial markets.  Governments all over the world were bailing out banks and insurance companies.  Companies were slashing dividends and suffering huge drops in share price.  Unemployment skyrocketed.  “Experts” were predicting that the markets had not yet hit their lows and still had significant declines ahead.



Five years later the economy has recovered, not with the growth rates of previous recoveries, but still ahead of where it was in 2007.  Corporations now have the healthiest balance sheets in decades, if not in history, and year over year they have been generating record profits.  Inflation is so low many economists warn there is a realistic threat of deflation, and they believe deflation would have more negative consequences than inflation.  Finally, the stock market has eclipsed its highs of 2007, restoring and increasing wealth to those individuals with resources and wisdom (and/or courage) to invest in the stock market.


We are hoping you will take the time to write or e-mail us answers to these questions:


How did the Bear Market of 2007 to 2009 change your approach to investing?


Do you feel as though you learned anything from the period of the market highs of 2007, through the lows of March, 2009, to the current highs of 2014?  If so, what did you learn?


Look forward to an arbitrary date, say January 1, 2030, what do you think the investment history between now and then will be like?


We will summarize for you the answers we receive over the next month.  Hopefully our mailboxes will be filled when Ted and Lindsey return from Europe. 


As always, please contact us if you have any questions about your financial life, or if there are any topics you would like to discuss.  Thank you again for the opportunity to work with you.


Best Wishes,


Robert K. Haley, JD, CFP®, AIF®