Letter to Our Clients - October 2014

Dear Clients and Friends:


This letter was written on Monday, October 20th.  Last week was NOT a quiet week on Wall Street.


The US economy is positively healthy compared to the rest of the world.  Interest rates here, as low as they are, are still higher than most developed countries, which explains why so many people are still buying US Treasury bonds.  (Despite predictions of a bond catastrophe, the bond market has remained remarkably stable.)  Employment is back to pre-2007 levels and continues to improve.  So why did the stock market jerk so badly last week?


Well, it is amazing to us that the market has been going up as long as it has.  While headlines would lead one to think most investors went bankrupt last week, the reality is that it has been over 3 years since the stock markets have dropped 10%.  This is an exceptionally long period of market stability.  So, a “correction” (a 10% drop) is overdue, and the prospect of a “bear market” (a 20% or more drop) should be part of everyone’s expectation.  As we have said over and over again, if last week made you uncomfortable, please contact us now because major market declines occur without warning. 


We think there are three major causes of last week’s volatility.  None of them are news.  


Global events such as ISIS, the Ukraine crisis, Ebola and more are evidence of world-wide turmoil, and stock markets generally hate instability. 


In addition, Europe and much of Asia are suffering from struggling economies, with stubbornly high unemployment and reduced demand for many consumer goods and services.  To illustrate how serious this is, even global sales of alcoholic beverages are down!


Then there are oil prices.  For the first time in decades it is clear there is more oil (supply) than there is demand.  It is fundamental economics that low demand coupled with abundant supply leads to lower costs.  Most people think lower energy prices are a good thing.  However, some countries, and some parts of our economy, are dependent upon oil profits, so declining prices are not, in fact, helpful to all.


Thus we find ourselves in a very normal place, a world full of change and risk – and opportunity!

Please contact us if there is anything about your financial life we should be discussing, including your confidence in our current investment strategy.  We hope you stay healthy and prosperous, we hope we get to see or talk to you soon, and we thank you again for the opportunity to work with you. 


Best wishes,



Robert K. Haley, JD, CFP®, AIF®                                   Theodore R. Haley, CFP® AIF®

President                                                                     Vice President